Post-school funding body landscape simplification: outline business aase

2. Strategic Case

2.1 Introduction

The Strategic Case outlines the strategic context for the Project and the case for change for simplifying the post-school funding body landscape in Scotland.

The Independent Review of the Skills Delivery Landscape^[6] and the Purpose and Principles for Post-School Education, Research and Skills^[7] reports, that were published in 2023, identified a range of issues within the current post-school funding body landscape.

To address these issues, James Withers recommended that:

• “Scottish Ministers should identify and establish a single national funding body to have responsibility for administering and overseeing the delivery of all publicly funded post-school learning and training provision. This would bring together the responsibility for funding of apprenticeships and training currently remaining in Skills Development Scotland with the functions for dispensing funding to colleges and universities currently carried out by the Scottish Funding Council. Ministers should consider whether this new body should also include responsibilities currently undertaken by the Students Awards Agency for Scotland, which sat outside the remit of this Review.”

Accepting the premise of this recommendation, the Purpose and Principles Initial Priorities, published in June 2023 committed Scottish Ministers to:

• “…investigate the options to deliver a single funding body, including tuition and living cost support, paying regard to issues such as the status and scope of the body’s responsibilities”.

The simplification of the post-school funding body landscape is one of the first and most important workstreams in the overarching reform and continuous improvement of Scotland’s Education and Skills System.

The Project will enable the delivery of many of the other post-school priorities including improvements to approaches to student support, creating the conditions for parity of esteem across different pathways of provision and greater transparency, flexibility and prioritisation of public investment in people and provision, including enabling the delivery of any future funding models.

2.2 Wider Scottish Government Policies and Strategies

The purpose of post-school education, research and skills was set out in the Purpose and Principles as:

• “To develop new thinking, products and systems through research and to ensure that people, at every stage in life, have the opportunity and means to develop the skills, knowledge, values and attributes to fulfil their potential and to make a meaningful contribution to society.”

Given the far-reaching impacts of the system and its purpose to serve wider society, there are a number of Scottish Government strategies and priorities that align with the work to simplify the post-school funding body landscape.

2.2.1 National Performance Framework

The National Performance Framework^[8] measures the overall performance of Scotland against a number of national outcomes. It has an overarching ambition to provide equality and opportunity for everyone, including through post-school education, research and skills.

As a nation, we aim to:

• Create a more successful country.
• Give opportunities to all people living in Scotland.
• Increase the wellbeing of people living in Scotland.
• Create sustainable and inclusive growth.
• Reduce inequalities and give equal importance to economic, environmental and social progress.

A reformed post-school funding body landscape will contribute to the delivery of the following national outcomes^[9]:

• Education: We are well educated, skilled and able to contribute to society
  • Enables targeted and equitable distribution of funding that places children, young people and adult learners at the core.
  • Less investment goes on administering the system, duplication is reduced, the quality of data is enhanced which enables more informed decision making and supports a national approach to skills planning.
• Economy: We have a globally competitive, entrepreneurial, inclusive and sustainable economy
  • Improved quality and availability of data supporting national and regional skills planning.
  • More flexible models of funding are enabled within a streamlined system.
  • Clear responsibility for funding innovation, research and knowledge exchange within institutions, underpinning Scotland’s globally competitive economy.
• Fair Work and Business: We have thriving and innovative businesses, with quality jobs and fair work for everyone
  • The way that funding flows through the system is clear; there is confidence across Scotland’s economy that the system delivers and clarity on the return on investment.
• International: We are open, connected and make a positive contribution internationally
  • Maintaining Scotland’s internationally renowned research base.
• Poverty: We tackle poverty by sharing opportunities, wealth and power more equally
  • Simplifying the funding body landscape, clarifying roles and responsibilities and removing duplication will enable more innovative and person-centred approaches to student support to be developed and delivered. This will enable learners, no matter their background, to access support to take up learning opportunities enhancing their career and life prospects.

2.2.2 Public Service Reform

While the challenging fiscal context was not the primary driver for beginning reform of the Education and Skills system, consideration of how best to improve the funding body landscape is necessarily informed by this context and by the drive for public service reform committed to by Scottish Ministers in the Policy Prospectus in 2023 and reiterated in the Programme for Government 2024/25^[10].

In the Policy Prospectus^[11] and the 23/24 Programme for Government (PfG), Scottish Ministers committed to establishing a 10-year programme of Public Service Reform (PSR) that will:

• Ensure public services remain fiscally sustainable by reducing costs and reducing long-term demand through investment in prevention.
• Improve outcomes, which will improve lives and reduce failure demand.
• Reduce inequalities of outcome among communities in Scotland, recognising the need not just for improved outcomes, but a focus in policy and delivery on those most disadvantaged.

The 24/25 Programme for Government committed Scottish Ministers to taking the next steps of the 10-year Public Service Reform programme and set out plans to introduce 14 Bills over the course of the parliamentary year, including that of post-school Education Reform.

As part of the PfG, the post-school Education Reform (Scotland) Bill will enable this Project to simplify the post-school funding body landscape. This will reform the education and skills funding system so it is easier to navigate and responsive to learners and skills priorities – breaking down silos and reducing bureaucracy.

The result of simplifying the post-school funding body landscape will bring funding for learner support into one place, and funding for publicly funded post-school provision together into one place, for the benefit of learners, employers, the economy and wider society.

This commitment is a core part of Government’s response to the challenges laid out in the Medium Term Financial Strategy (MTFS)^[12], as well as addressing specific commitments on efficiency measures laid out in the Resource Spending Review (RSR)^[13].

Simplification of the post-school funding body landscape supports these objectives of the MTFS and RSR in the following ways:

• Fiscal sustainability – simplified funding body landscape would be expected to reduce the costs of administering funding across the system, enabling more of the total investment made to be directed towards institutions, research, learners and employers.
• Improved outcomes - Education and skills development are important areas of preventative spend with clear evidence that participation improves social and economic outcomes for the individual.^[14]
• Reduce inequalities – simplification of the funding body landscape will enable more innovative approaches to targeting both student support and policies like widening access and approaches to articulation between further and higher education as well as other learner pathways – supporting parity of esteem.

2.2.3 National Strategy for Economic Transformation (NSET) and Growing the Economy

In 2022, the Scottish Government published the National Strategy for Economic Transformation (NSET)^[15]. As outlined above, a well-functioning education and skills system underpins many of the programmes outlined in the NSET, linked to the national outcomes.

Ministers have been clear about the delivery of NSET rather than refreshing the strategy itself. In line with this aim the 2024/25 Programme for Government outlines the actions that will be taken forward to deliver NSET and grow Scotland’s economy. The Programme for Government (PfG) therefore contains the actions related to NSET between now and 2026.

In relation to skills funding the relevant action is to:

• Reform the education and skills funding system so it is easier to navigate and responsive to learners and skills priorities – breaking down silos and reducing bureaucracy – introducing a Bill to simplify the post-school funding body landscape.

This action is part of the People Pillar which replaces the previous internal governance for delivery of NSET. The aim of the People Pillar is to:

• “grow the labour supply by reducing inactivity and supporting inward migration, and to help people get into, stay in and progress in work through employability, skills and health support.”

As part of the People Pillar, the Skills System reform element covers both the National approach to Skills Planning and the Reform of the education and skills funding system. The outcomes set for the People Pillar are:

• Work provides sustainable standard of living and a route out of poverty.
• Lifelong training to ensure employers have the skills they need.

A simplified post-school education and skills funding body landscape is a key enabler in supporting the achievement of the vision of the skilled workforce programme and People Pillar. This work, alongside multiple other projects being taken forward by the Scottish Government and public bodies, is vital to contributing to successful delivery of these outcomes.

Simplification of the post-school funding body landscape will help provide the foundations for an agile and responsive system which meets the needs of Scotland’s employers, in particular supporting implementation of a national approach to skills planning and strengthening of regional approaches as well as ensuring that it is possible to assess the social and economic return on investment from the money spent on post-school provision and student support.

2.3 Lifelong Learning and Skills Directorate Policies and Strategies

Scotland’s post-school education and skills system has been the focus of numerous independent reviews over recent years. These reviews have demonstrated a compelling case for change for the system to be fit for the opportunities and challenges ahead of us. These reviews have included SFC’s review of coherent and sustainable provision,^[16]the Cumberford-Little Report,^[17] and the Independent Review of Student Financial Support in Scotland^[18]. Many of these reviews focus on the need to change the funding system to ensure that the significant investment being made in Scotland is put to optimal use and advocate for the development of common systems and consolidated budgets.

There is a large-scale programme of reform and continuous improvement of the post-school education, research and skills landscape being led by the Directorate for Lifelong Learning and Skills in the Scottish Government. The recommendations of previous reviews, as well as the Initial Priorities for the Purpose and Principles document, form the basis for many of the outcomes and benefits due to be delivered through the programme.

2.3.1 Independent Review of the Skills Delivery Landscape

The most recent independent review was undertaken by James Withers. James Withers was asked by the Scottish Government to conduct an Independent Review of the Skills Delivery Landscape which reported in June 2023. As part of that review, and to address these issues, one of the recommendations was:

“To establish a new single funding body, which brings together responsibility for all post-school learning and training funding functions from SFC, SDS and, potentially, the Student Awards Agency for Scotland”.

While student support was not within scope of the review, this recommendation stemmed from one of the key themes of the final report being a ‘complex and fragmented funding environment’. This complex and fragmented funding landscape is, as previously mentioned, the key driver for this policy change.

2.3.2 Purpose and Principles

The Purpose and Principles were developed in response to the SFC Review of Coherent Provision and Sustainability^[19], in which it was recommended that the Scottish Government "sets out more clearly its overall strategic intent for tertiary education and research.”

Scottish Government accepted the SFC’s recommendation but broadened the scope that led to the development of the Purpose and Principles, recognising that the post-school education, research and skills landscape was a system broader than tertiary education and research.

The final Purpose and Principles document, as published in June 2023, serves to provide a constant in times of change and a clear set of ambitions to work towards as Scottish Government re-imagines and reforms the system. It acts as a framework that sets the policy direction and shapes delivery priorities.

The Purpose and Principles, alongside the accompanying documents, have been designed to bring a shared understanding of what the system is, how it functions and what it currently delivers to a common starting point and to set strategic outcomes for the system in the short, medium and longer terms. This framework will be added to over time as detailed delivery plans, and measurement and evaluation tools evolve, recognising the changing needs, and agility and responsiveness required not just of the system but of the policies directing it.

A series of short-term, medium and long term outcomes for the programme of post-school education reform were additionally published alongside the Purpose and Principles. These were developed through a logic modelling exercise with internal and external stakeholders. The outcomes most relevant to simplification of the funding body landscape are set out in Table 1 below.

Table 1: Selected long-term outcomes for the programme of post-school education reform

Principles	Long-term outcomes enabled by simplification of funding landscape
Transparent, Resilient and Trusted	Public funding models for education, skills and research are fair, transparent, and maximise value. All parts of the post-school system are trusted to deliver, environmentally and financially resilient, and held to account for their impacts on learners, practitioners, local communities, and the wellbeing economy. Collaboration across the post-school system is pursued proactively with shared values and a common purpose.
Supportive and Equitable	The public funding system for student support is perceived as fair, transparent and accessible by Learners, Providers and Employers. Learners have access to holistic, person-centred support, empowering them to access, sustain and complete their learning.

Full details of the Purpose and Principles, Programme level outcomes and Initial Priorities can be found in Annex A.

Alongside the Purpose and Principles, Initial Priorities for the system were published that included the commitment to:

“Investigate the options to deliver a single funding body, including tuition and living cost support, paying regard to issues such as the status and scope of the body’s responsibilities”

Following publication, the Minister for Higher Education, Further Education and Veterans expanded on this commitment in a statement to the Scottish Parliament on 5 December 2023 stating that:

“James Withers called for the creation of a single funding body, and we do not rule that out. As an initial step, I commit to bringing learner support funding together in one place, and funding for apprenticeship provision together in one place.”^[20]

While James Withers recommended a single funding body, he recognises in his report that his remit was focussed on the skills delivery landscape and not the entirety of the post-school funding landscape. For this reason, it was important that further consideration was given to the practicalities of implementation and delivery of a single funding body in this space. For this reason, development of the Strategic Outline Case has considered simplification of the funding landscape, up to and including a single funding body.

2.4 Case for Change

The evidence outlined within the Strategic Case suggests that the current post-school education, skills and research system lacks a coherent vision, shared values and a common purpose. It features complexity and confusion around overlapping roles, functions and funding models between and across government and public bodies, alongside insufficient collaboration, trust and flexibility that would allow the system to deliver better outcomes.

Reflecting on the evidence, it is acknowledged that the current system is not as efficient or effective as it could be, and that an approach to simplify processes and systems, whilst reflecting on future long-term benefits, could be achieved to deliver a more effective funding system for the future.

The aims of this Project are to enable the delivery of improvements to approaches to student support, creating the conditions for parity of esteem across different pathways of provision and greater transparency, flexibility and prioritisation of public investment in people and provision; including enabling the delivery of any future funding models.

2.4.1 Spending Objectives

The purpose of Scotland’s post-school education, skills and research system is:

To develop new thinking, products and systems through research and to ensure that people, at every stage in life, have the opportunity and means to develop the skills, knowledge, values and attributes to fulfil their potential and to make a meaningful contribution to society.

The development of the Purpose and Principles was informed by existing evidence and was built out following extensive engagement over the course of a year across the post-school education, skills and research system.

Table 2 shows the logic model that was developed for the simplification of the post-school funding body landscape Project. This model reflects the wider programme level outcomes articulated in section 2.3.

This logic model has been developed from a comprehensive set of logic models for the post-school education, skills and research system, aligned to the Purpose and Principles document and intended for use as part of our approach to monitoring progress against delivery with partners and stakeholders. The full set of Purpose and Principles logic models were developed with input from stakeholders and will continue to be refined with their input as we continue to work together to deliver reform and continuous improvement of the system.

Table 2: Logic model for the simplification of the post-school funding body landscape

Inputs	Actions	Short term outcomes (1-3 years)	Medium term outcomes (4-7 years)	Long term outcomes (8+ years)
Government funding Stakeholders Providers Delivery partners Funders Policymakers Practitioners Employees Trade Unions Regulators and Inspectors Learners Outputs from skills planning Other available evidence Governance and accountability structures.	Investigate the options to simplify the post-school education and skills funding body landscape, including tuition and living cost support, paying regard to issues such as the status and scope of the body or bodies’ responsibilities.	Policymakers, Providers, Delivery Partners and Learners have access to clear and transparent information about funding provision. The public funding body/(ies) landscape is easy for Providers, Learners and Employers to navigate with clearly defined roles and responsibilities. Public bodies and stakeholders take an informed approach to allocation of funding to specific areas of provision.	Providers can plan and manage activity for long term environmental and financial sustainability. Providers and Delivery Partners can explain activity, performance and spend through accountability and assurance processes and data systems. Policymakers, Providers and Delivery Partners have clear and robust data on funding provision. Funding is distributed by the public funding body(ies) efficiently, and with alignment to social and economic need. Learners can access the financial support they need to undertake learning opportunities, regardless of their background.	The public funding body/(ies)for education, skills and research maximise(s) value and impact. The public funding body/(ies) is perceived to act with fairness and transparency.

Informed by existing evidence of the system inefficiencies (set out in detail in the following sections) as well as by the logic model and programme level outcomes, four spending objectives were developed. These are:

1. To simplify operational responsibility across the post-school funding body landscape – ensuring fairness, transparency and maximising value for public investment.

2. To reduce costs and increase efficiencies in the operation of the system – enabling more of the investment made by the Scottish Government to flow directly to learners and employers by reducing the costs of administering the system.

3. To improve availability and quality of data collection to inform investment decisions, skills planning priorities and careers advice - ensuring the system is more responsive to the needs of learners, employers, the economy and society.

4. To enable targeted and equitable distribution of funding to support the learner - ensuring that people, at every stage in life, have the opportunity and means to develop the skills, knowledge, values and attributes to fulfil their potential and to make a meaningful contribution to society.

2.4.2 Existing Arrangements - Current funding system

The Scottish Government invests over £2 billion per year in provision through Scotland’s post-school education, skills and research system, including around £170 million for apprenticeship provision. This supports around 500,000 people in any given year to pursue opportunities to learn, develop their skills and fulfil their potential at Scotland’s colleges and universities and supports over 40,000 modern and graduate apprentices in training who can earn as they learn.

The Scottish Government also invests around £1 billion per year in Higher Education Student Support. In 2007 the Scottish Government proposed the Graduate Endowment Abolition (Scotland) Bill and this was approved in 2008. This Bill enabled free tuition for full-time students in higher education. Since 2012-13, free tuition has been provided to around 120,000 eligible students in full time higher education each year. Scotland has the lowest average student loan debt of any UK nation and Scottish students are provided with a generous support package comprised of bursaries and loans, targeting funding towards those who need it most.

This funding is primarily delivered through three public bodies.

Skills Development Scotland (SDS) delivers funding largely through public service contracts to independent training providers, colleges, employers and public sector organisations. This spans across funding for Foundation Apprenticeships (split 50/50 between SDS and SFC), Modern Apprenticeships and Graduate Apprenticeships (for those who are still in training as a result of historical funding arrangements). SDS plays a key role in quality assuring MA’s, which involves an extensive audit process. SDS also takes a rigorous approach to contract management and quality across all apprenticeship providers. In addition to this, His Majesty’s Inspectors of Education (HMIE) and Education Scotland are commissioned to undertake external reviews of MAs and FAs to quality assure this provision and to work with SDS to reduce duplication (except Graduate Apprenticeships). SDS has previously funded a range of other National Training Programmes^[21] (NTP), including Individual Training Accounts (ITA) and is also responsible for skills planning, employer engagement and delivery of Scotland’s national Careers, Information, Advice and Guidance Service. In addition to delivery of apprenticeships and NTP, SDS is also responsible for the national Careers Service which accounts for more than 800 of SDS headcount and delivers wider functions including; shared IT services on behalf of the enterprise agencies, as well as existing skills planning and employer support services.

Scottish Funding Council (SFC) as part of their remit, fund a specific list of post-16 education bodies, including colleges and universities, to secure coherent provision of high quality fundable further and higher education. SFC provides funding for teaching costs at colleges and universities. For colleges, SFC allocates funding to different institutions through its credit-based funding model. For universities funding is allocated to institutions on a full-time-equivalent funded place basis. Funding includes new and continuing Foundation (FAs) and Graduate Apprenticeships (GAs), which are delivered in part (FA) or wholly (GA) from within the SFC core grant in aid. College credit funding is also used by some colleges to support delivery of MAs. SFC also provides FE student support funding via colleges, as well as some childcare funding for HE students at college, and allocates capital funding to both the college and university sectors for capital maintenance activities. SFC also has a responsibility for delivering Scottish Government core investment in university research and knowledge exchange.

The SFC also has statutory responsibility for ensuring that there are processes in place to measure, assess and enhance the quality of fundable provision. It uses quality assurance frameworks to deliver this. The SFC’s implementation of the new Outcomes Framework and Assurance Model will enhance the focus on colleges and universities contribution to development of a skilled workforce and high quality learning and teaching as well as bringing a focus to institutional sustainability. This work is complemented by the implementation of the Tertiary Quality Enhancement Framework and the Research Assurance and Accountability guidance. The SFC also provides guidance to Colleges and Universities on quality.

Further work on new funding models to support greater agility and responsiveness across further and higher education is being led by the SFC. This is part of the tripartite approach with Colleges and more recently Universities and Scottish Government and SFC. This approach also includes work to consider opportunities for co-investment in further and higher education.

Student Awards Agency Scotland (SAAS) is responsible for assessing eligibility for Higher Education funding for Scottish domiciled students studying annually in the UK. Specialist operations teams are in place to handle complex cases and applications from vulnerable student groups. Generally, SAAS assesses eligibility for tuition fees (incl. the processing and payment of tuition fee loans), living cost loans, bursaries and grants amounting to over 160,000 applications each year at a value of student support of around £1 billion per year.

Funding schemes administered by SAAS include undergraduate support, postgraduate support, Part-Time Fee Grant (PTFG), support for Graduate Apprenticeships. SAAS administer bespoke support packages for disabled students through the Disabled Students’ Allowance (DSA), Care Experienced Students (via the Care Experienced Bursary) and Estranged Students (via the Estranged Student Bursary). In addition, SAAS administers the Paramedic Science, Nursing and Midwifery Bursary (PNMSB), a bespoke funding scheme on behalf of the Scottish Government Chief Nursing Officer Directorate and funding for Educational Psychologists on behalf of the Directorate for Learning. SAAS also undertakes the recovery of overpayments of funding on behalf of that Directorate of Primary Care and NHS Education for Scotland (NES).

In addition, SAAS is responsible for the management and administration of the Higher Education Discretionary Funds to colleges and universities.

SAAS makes direct payments to all eligible students in line with regulations for student financial support and issues the payment of tuition fees in line with the Scottish Government’s commitment to free tuition to Higher Education institutions.

SAAS work closely with the Student Loans Company (SLC) to ensure the smooth administration of loan payments to Scottish students and work closely with Scottish Government Lifelong Learning and Skills Directorate on the development and direction of policy in relation to Higher Education Student Support including the development of underpinning legislation.

To ensure the protection of public funds, SAAS undertake recoveries functions in line with the Scottish Public Finance Manual and are a Specialist Reporting Agency for the purposes of fraud detection and prevention.

2.4.3 Public Bodies – Classification

Public bodies are organisations that are directly accountable to the Scottish Government or Scottish Parliament. They can be executive agencies or non-departmental public bodies and may or may not be established in legislation. Public bodies play an important role in the delivery of public services in Scotland. They make a significant contribution to delivering the Scottish Government's outcomes and objectives as set out in the National Performance Framework.

The classifications of public bodies have varying degrees of independence from central government. Each public body also has their own relationship with the Scottish Government.

For Non-Departmental Public Bodies (NDPBs), such as the Scottish Funding Council (SFC) and Skills Development Scotland (SDS), they are not part of the Scottish Government or the Scottish Administration. They carry out administrative, commercial, executive or regulatory functions on behalf of Government. They operate within a framework of governance and accountability set by Ministers which includes annual letters of guidance, framework documents and a dedicated sponsorship team within Scottish Government responsible for managing the relationship between the Scottish Government and the public body and providing assurance to the Principle Accountable Officer and Ministers.

Executive NDPBs such as the SFC are normally established by statute; they employ their own staff, who are not civil servants, and manage their own budgets; and are accountable to a board whose members are normally appointed by Ministers. The board is responsible for holding the executive to account for delivery of the body’s functions in alignment with Ministerial priorities.

SDS is a company limited by guarantee, of which Scottish Ministers are the sole member. While they are not established by statute, statutory authority for Scottish Ministers to pay grant in aid to SDS is given in the Employment and Training Act 1973. SDS also govern their board in line with legal duties set out in the Companies Act 2006.

For Executive Agencies, such as Student Awards Agency Scotland (SAAS), they are an integral part of the Scottish Government. They support Ministers in their work, focusing on delivering parts of Government business or providing a specialised function. They have well-defined remits which are aligned with and help deliver the Government's purpose and objectives. They generally have a strong focus on the management and direct delivery of public services.

However, Executive Agencies also, to one extent or another, provide strategic policy input. In some cases, Scotland’s Executive Agencies carry responsibility for a discrete area of Government policy and activity and thus work very closely with Ministers. Their staff are civil servants including the Chief Executive, who is directly accountable to Ministers.

Executive Agencies are not statutory bodies but operate in accordance with a Framework Document which is approved by Ministers and may be reviewed, amended or revoked at any time. Director Generals and Directors (depending on the seniority of the Chief Executive) are responsible for ensuring that agencies play a full part within portfolios in support of Ministers' policies and priorities.

More information about the classification of public bodies can be found here: National public bodies: directory - gov.scot (www.gov.scot).

2.4.4 Budget Lines

While the Scottish Government Education and Skills portfolio budget^[22] accounts for the bulk of funding routed through SDS, the SFC and SAAS, there are other known sources of Scottish Government funding:

• Directorates for Health and Social Care and Learning Directorate transfer funding to the SFC for controlled places in subjects including medicine, dentistry and other health professions.
• Other government directorates may wish to commission and pay for specific skills development activities, for example initiatives to support upskilling and reskilling of health workers. This money is allocated to the SFC or SDS for onward distribution through providers and institutions, or in some instances for SFC or SDS to deliver specific pieces of work.
• Other individual pots of funding which will have specific purposes, timescales and conditions and are more likely to be subject to bidding processes with separate reporting by institutions, for example funding for skills development through City Deals.
• A number of Scottish Government directorates also provide small pots of funding for research, including Net Zero, Health and Social Care, Economy, External Affairs and Corporate. Unlike SFC funding, this is tied to specific Projects rather than institutions.
• SAAS have delegated authority from the Directorate of Lifelong Learning and Skills for the administration of the Higher Education Student Support budget.
• Scottish Government’s Chief Nursing Officer’s Directorate and Directorate for Learning provide funding to SAAS for the administration of bespoke funding schemes for their student cohorts.
• Directorate of Primary Care provide funding to SAAS to undertake recovery of overpayments on behalf of them and NHS Education for Scotland.
• Scottish Funding Council provide funding to SAAS for the maintenance of the Student Information Scotland website.

The Scottish Government continues to face the most challenging financial situation since devolution, as a result of unprecedented economic pressures following the pandemic and the cost-of-living crisis.

The Government is required to ensure that Scotland’s public finances remain on a sustainable trajectory, targeting funding and prioritising spending to support the Scottish Government’s key missions. This requires difficult choices to be made.

The focus of this Government is to eradicate child poverty, to protect Scotland’s public services, grow Scotland’s economy and tackle the climate emergency, while addressing the inequalities that many communities still face.

The 2025/26 draft Scottish Budget was presented to Parliament on Wednesday 4 December 2024. This detailed Scottish Ministers spend proposals for the year ahead and will be scrutinised by the Scottish Parliament through the Scottish Budget Bill process.

Within the Education and Skills portfolio, this budget allocation is used to prioritise excellence and equity in education and skills, including efforts to reduce the poverty-related attainment gap and to support the Scottish Government’s wider national mission to tackle child poverty.

2.4.5 Business Needs - Evidence of Existing Challenges in Funding Landscape

As part of the evidence gathering exercise for the Purpose and Principles of post-school reform, several challenges and opportunities were identified in relation to the funding landscape. These are summarised in the problem statement below.

Problem Statement – The current system lacks a coherent vision, shared values and a common purpose. It features complexity and confusion around overlapping roles, functions and funding models between and across government and agencies, alongside a lack of collaboration, trust and flexibility that would allow the system to deliver better outcomes. There is a lack of a comparable system-wide evidence base and regulatory framework which can describe the current successes and challenges, the desired outcomes and metrics and allow for accountability and assurance.

As such, several business needs were also identified that should be addressed in order to achieve the objectives identified in section 2.2 and 2.3. These are:

1. The need for a more coherent vision, shared values and common purpose to avoid confusion for learners and employers.

2. The need to remove overlapping roles, functions and responsibilities minimising duplication and maximising public value.

3. The need to address the lack of comparable system-wide data and evidence leading to difficulty in understanding the social and economic value of investment and making it challenging to plan for the future needs of Scotland’s economy and society.

4. The need to address the lack of system-wide measures of success, supporting enhanced accountability and assurance.

Business need 1 – the need for a more coherent vision, shared values and common purpose to avoid confusion for learners and employers.

The current funding body landscape for the Scottish post-school education system has been shown to be complex for both learners, employers and stakeholders - including institutions and learning providers - to navigate.

The fact that multiple agencies and bodies are involved in administering funds across the system adds to the complexity and leads to confusion – contributing to a lack of clarity on roles and responsibilities, complex lines of accountability and creates the conditions for duplication and inefficiency.

One of the consequences of this fragmentation is that parts of the system that should be working in concert can see themselves in competition for funds, or indeed for learners, and use the data that they gather to build and strengthen the case for “their part of the system” as opposed to working towards a shared vision and set of outcomes that serve the needs of Scotland’s economy and society in the round.

It also means that, while all parts of the system would say that they take a user-centred approach, the user accessing the service is still being served by multiple different elements of a single system, each with their own Strategic and Operational plan, which does not feel very holistic or user centred for the individual. Both of these points were made very effectively in the recent Independent Review of the Skills Delivery Landscape (2023).

Several reviews have pointed to a lack of a shared vision and values across the system, including the SFC Review in their review of Coherence and Sustainability of the Tertiary System (2021)^[23]. This followed Scottish Government Ministers ask of SFC, in 2020, to review how the SFC can best fulfil their mission of securing coherent, good quality, sustainable tertiary education and research in these changing times.

Similarly, Audit Scotland (2022)^[24] highlighted a need for Scottish Government to be leading and setting expectations, as well as better defining the roles and responsibilities of different agencies with a remit for administration of public funding – highlighting this as an area that had lacked focus.

The Scottish Government has taken action in response to these reviews and recommendations. First, establishing the Shared Outcomes Framework^[25] and Shared Outcomes Assurance Group^[26] in response to the Audit Scotland findings to support collaborative working across agency partners and, in June 2023 publishing the Purpose and Principles for post-school Education, Skills and Research.

The Purpose and Principles is a long-term framework for decision making which is designed to provide a common purpose and bring a greater sense of cohesion across the system, including to the strategic and operational plans of all public bodies that are part of the post-school funding body landscape.

Business need 2 – the need to remove overlapping roles, functions and responsibilities minimising duplication and maximising public value.

Figure 1 below provides a visual illustration of the funding landscape and shows how complex the system is, with fragmentation of funding streams that flow to providers (colleges, universities, training providers, third sector) and learners. Both SFC and SDS are responsible for provision of funding to institutions and employers, whilst SFC and SAAS both deliver student support to learners, either directly or through institutions.

There can be unintended consequences as a result of public bodies with responsibility for different elements of funding not necessarily being fully cognisant of the impact of change in one part of the system manifesting elsewhere.

Examples of this were shared during engagement on the Purpose and Principles where colleges spoke about the impact on their income from a reduction in HE tuition fees due to an increase in the number of school leavers going directly to university as a result of the SQA increase in grades during Covid and the impact of this loss on their finances overall. This was cited as something that had not been fully appreciated nor understood across the wider public bodies landscape, or within government, and is reflective of the fragmentation that exists in the system.

A further opportunity that would be enabled by simplification of the funding body landscape is a clearer view and streamlined process through which contributions from other government portfolios would flow to the post-school system. As outlined at section 2.4.2 the funding landscape is complex and simplifying this would help support consideration of issues like financial sustainability and value for money and would further contribute to strengthening the evidence base on which decisions are made.

While the funding models for the system are not in scope of this business case, there is an opportunity to review the costs of maintaining separation of funding functions across a number of public bodies. It makes improvement and simplification of funding models more difficult to achieve. For example, student support is currently split between SAAS and SFC. SAAS has responsibility for provision of the majority of higher education (HE) student support across both colleges and universities. Although these are both demand led, there are very different distribution models attached to this funding. In practice this means that a college student on an FE course in receipt of discretionary student support, provided by their college and drawn down from the SFC, will have a completely different experience of accessing that support than if they were studying a HE level course where they would apply to SAAS directly for their support. While there are important reasons for the different models being used, including demographics, personal circumstances and the nature of courses studied, these differences can represent a challenge in ensuring equity in the approach to student support and is not as person centred as it could be. It also means that there are two reporting mechanisms and systems of data capture providing information on outcomes associated with student support across two organisations that may not enable comparison on outcomes or value for money.

Similar issues are at play in the delivery of apprenticeships where, over time, as a result of the decline in the availability of European funding, responsibility for the funding of Foundation and Graduate apprenticeships has progressively shifted towards SFC and has been provided using core funds. The SFC took over funding of new GAs in 2021/22. While SDS and SFC both fund new and continuing FAs, the SFC has full responsibility for funding new GAs, with GAs applying to SAAS for tuition fee support. Additional structures and governance arrangements have had to be developed and put in place to enable collaboration and information sharing on development and delivery of apprenticeships where SDS and SFC now have shared responsibilities. This has added to the complexity of the existing system.

Business need 3 – the need to address the lack of comparable system-wide data and evidence leading to difficulty in understanding the social and economic value of investment and making it challenging to plan for the future needs of Scotland’s economy and society.

A further consequence of the examples above on student support and apprenticeships is the lack of comparable data that results from fragmentation of responsibility across the system and the fact that data flows are often tied to funding as opposed to being tied to the learner.

While in the context of Skills Planning, the January 2022 Audit Scotland – Planning for Skills^[27] report, highlights the challenges with the existing landscape. The report highlights a lack of consistency on the purpose for which data is captured and used by different organisations and the difficulty that presents in making adequate assessments of value for money at a system level and the challenge of being able to use that data to inform careers information and skills planning.

Attempts had been made to address this through work commissioned by the Enterprise and Skills Strategic Board^[28]. They commissioned the development of an Education and Skills Impact Framework (ESIF) to establish an evidence base that could help inform investment in post-school education and skills considering the return to public investment and the benefits to individual learners and employers.

This resulted in a one off piece of work, delivered by London Economics^[29], supported by three contextual summaries for modern apprenticeships^[30], college provision^[31] (both HE and FE) and university provision^[32] . This work predominantly reported on the economic impacts and, in part due to the Covid pandemic and in part due to the challenges of measuring social impact effectively, did not make as much progress on that part of the ask.

The outcome of this work is helpful and the experience of bringing analysts across multiple public bodies together to work collaboratively has led to positive working relationships being established and continuing. However, it has not fundamentally improved the landscape for data collection or improved comparability of data that is being collected by different organisations for different purposes. As the data tends to follow the flow of funding, structural change and simplification of the funding body landscape is more likely to enable a more consistent approach to be taken.

As well as a lack of comparability, there are also inefficiencies in the current system. This is especially true for providers, with colleges in particular having to comply with multiple data and reporting standards associated with the different funding streams they receive. This has an impact on front line services as it increases the “cost to serve” the system. During engagement in the development of the Purpose and Principles examples of additional finance managers being recruited in response to the complexity of the funding environment were given. These are highly paid roles, often in excess of the average salary for a college lecturer.

Business need 4 – the need to address the lack of system-wide measures of success, supporting enhanced accountability and assurance.

Linked to the points in previous sections, the fragmentation and overlap in responsibility for funding and for providing assurance that money has been spent effectively means there are currently no system-wide measures of success. Each body with responsibility for funding has its own strategic and operational plan and different measures of success.

Building on the logic models^[33] underpinning the Purpose and Principles, short, medium and long-term outcomes for the system have now been developed, with input from across the post-school education and skills landscape.

The next step will be to develop a measurement and benefits framework that will enable system-wide measures to be developed.

While this Outline Business Case only considers simplification of the funding body landscape, this is the key enabler to make different choices on future funding models and to ensure that they are delivered in a seamless and efficient way, with a shared purpose and single source of reporting and accountability. Simplification of the funding body landscape will play a key enabling role in achieving the Project level outcomes set out in section 2.3.

2.4.6 Example from Wales

The issues and challenges addressed here are not unique to Scotland. The Welsh Government recently passed the Tertiary Education and Research (Wales) Act^[34] to establish a new sponsored body responsible for the funding, oversight, strategic direction and leadership of the sector. Medr – the Commission for Tertiary Education and Research, was established in August 2024. This was a response to a review of the Welsh post-compulsory education system that highlighted challenges such as duplication of roles, lack of collaboration and difficulty in following learning pathways, amongst others. To note that in Wales, FE and HE student support continues to be funded separately by Student Finance Wales.

As part of their reform, the Welsh Government conducted a series of consultations and engagements with the sector and public that resulted in several key themes of interest for action^[35].

The following summary highlights some of the relevant Welsh review conclusions and which are comparable to the Scottish situation:

• The simplification of the funding landscape should offer cross-sector consistency with clear alignment with needs and policy focus, while at the same time avoiding duplication of roles and checks across the sector.
• The simplification should look to integrate into the system a level of flexibility that will enable a funding system and model that puts the emphasis on outcomes for, and employability of, learners.
• Consider the learner journey and that different experiences result in a variety of pathways. These should be integral when developing a strategic plan and new funding landscape.
• Overall need to improve agility and responsiveness of the sector and system as a whole.
• There needs to be appropriate monitoring in place that would offer the security, transparency and reassurance to the public, providers and learners that the aims of the simplification of the landscape are being achieved.

2.5 Business Scope and Key Service requirements

2.5.1 Business scope

Considering the underpinning evidence and the business needs identified in the previous section, the key issues within the system centre around the fragmentation, complexity and lack of consistency in data collection for student support and National Training Programme (particularly apprenticeships) funding. As such, addressing these challenges form the core scope of the Project, without which the Project would not be considered a success. This aligns with the Minister’s statement to the parliament on the 5 December 2023:

• “As an initial step, I commit to bringing learner support funding together in one place, and funding for apprenticeship provision together in one place.”

Other areas, such as investigation of whether bringing all provision and student support under one body are also within scope, although this is considered an “optional” change – e.g. something that could potentially support the objectives identified in section 2.4.1 if value for money can be justified and it is considered affordable.

2.5.2 Key Service Requirements

The key service requirements to deliver on the core scope are:

1. Simplify operational responsibility across the post-school funding landscape by reducing the number of bodies responsible for administering funding to the system and reducing the overlap of responsibilities of funding bodies.

a. The Project must result in the consolidation of responsibility for funding of provision and funding for student support into fewer public bodies than is the case in the current landscape. This will also enable enhanced approaches to assurance and accountability to be developed.

2. Reduce duplication, enable understanding of the unit cost of delivery and maximise investment in provision of services and support to learners and employers.

a. The Project must deliver mapping of funding flows, systems and data across the system. Identify all functional groupings of staff and corporate functions associated with the administration, accountability and assurance of funding through the system and be able to develop robust assessments of where efficiencies can be gained and the likely cashable savings over time.

3. Improve the availability and comparability of data.

a. The Project must enable the mapping of current data reporting requirements and systems and develop options for how these can be improved in a new system.

4. Make the post-school funding body landscape more equitable, agile and responsive to the needs of users, the economy and society.

a. The Project must enable, through the consolidation of responsibility for operational delivery of funding into the system, different funding models for provision and student support to be developed and delivered, making the system more responsive to the needs of users and enabling support to be targeted to those who need it most.

2.5.3 Research

Scottish Universities, like Universities in England, Wales and Northern Ireland, receive funding to support their research through a combination of underpinning funding (provided by the respective governments) and Project specific funding from a range of other systems including UKRI - referred to as the dual support system.

Scottish Government’s underpinning core research funding, delivered via the SFC, provides a long-term, stable source of investment and enables universities to leverage research funding from a range of other sources (public and private) and exploit their research to improve Scotland’s economy.

Research funding structures and processes were not raised as significant issues during the Independent Review of the Skills Delivery Landscape or the development of the Purpose and Principles. Scotland already boasts a globally recognised research and knowledge exchange sector. The most recent Research Excellence Framework (REF) – a UK-wide peer assessment of research quality - found that all of Scotland’s universities are conducting world-leading research and that world-leading research is taking place across each of the 34 disciplines (Units of Assessment) assessed. In addition, Scotland’s research and innovation system is part of a broader, four nations system. The stable funding provided from the Scottish Government via the SFC reflects that research is a long-term endeavour, that necessitates year on year investment.

This existing strength of the sector, its interconnectedness in the broader UK-wide system, and the potential for creating long-term negative unintended consequences through short-term action, make it is essential that any change is underpinned by a strong rational and evidence base and that it considers the broader research and innovation system as a whole, both in the UK and internationally.

There is existing evidence of the value of SFC funded research and knowledge exchange. Further work is underway to develop a better understanding of the totality of the research funding landscape, which is a complex picture with multiple interactions across the UK and internationally.

Separating the funding for research from wider funding now would likely trigger radical reform of a part of the system where there isn’t a documented clear case for change. In addition, throughout the development of the Purpose and Principles, universities and unions both argued strongly for the mutually reinforcing connection between university research and learning and teaching to be maintained.

As such, at this stage, work is proceeding on the assumption that funding of research and knowledge exchange is within the scope of the simplified funding body landscape, but that any change must enable the continued operation of the existing funding model as well as being flexible enough to accommodate any future changes, if desirable. This will minimise disruption to how research funding is delivered and mitigate the risk of unintended consequences while reform is underway.

2.6 Benefits, Risks, Constraints and Dependencies

2.6.1 Benefits

As set out earlier in this section, and further elaborated on in the Socio-Economic Case (Section 3), this is an enabling project and brings significant opportunities in regard to efficiencies in the distribution of the over £2 billion invested annually in the post-school education and skills system as well as further economic and social benefits that could be unlocked for learners and employers as a result of changes facilitated by simplification. However, given that to realise these wider benefits, further changes to the system outside of the scope of this project need to be realised, these benefits have not been captured here and will be included in the Programme level benefits narrative for post-school Reform.

The benefits specified in table 3 below will result directly from simplification of the funding body landscape and have been derived from and are consistent with the logic model set out in Section 2.4.

Table 3: Benefits

Benefit	Beneficiary	Benefit classification	Objective alignment
Improved clarity and transparency of funding for provision across the system.	Policymakers Providers Delivery partners Learners	Qualitative	1, 2 & 3
Improved clarity in roles and responsibilities of the funding body/ies.	Policymakers Providers Employers Learners Public Bodies	Qualitative	1
Better informed and cost effective allocation of funding.	Policymakers Providers Learners Employers Public Bodies	Qualitative & Quantitative	2,3 & 4
Funding is allocated to where it’s needed the most.	Policymakers Delivery Partners Providers Learners	Qualitative & Quantitative	1, 3 & 4
Cost savings.	Policymakers	Cash-releasing	2

2.6.2 Risks

A Risk Management Strategy is in place for this Project and is monitored through the appropriate governance mechanisms, such as the Programme Board and the Project Board. Further details on the Project’s Risk Management approach can be found in the Management case. This approach will be further developed in subsequent phases of the Project both to manage risks to implementation but also to ensure that benefits are adequately captured.

The main risks associated with this Project are listed below in Table 4. These relate to service delivery risks, business risks and external risks. These are summarised below with counter measures for mitigation and management.

Table 4: Risks

Risk name	Risk description	Mitigations
Service Delivery Risks
Culture	IF: structural change is not matched with a programme of cultural change to develop systems leadership and to embed the flexibility and transparency these changes need to deliver THEN: planned reform will not deliver all of the intended benefits RESULTING IN: significant disruption to the system with reduced benefits to end users.	Specific focus on cultural change in next phase of detailed design and delivery work. Co-production of future approaches with public bodies Development of new vision, strategic and operational plans for bodies with new functions.
Financial	IF: there is a risk to the budget for implementing reform through the preferred approach THEN: we will have to reconsider our ambitions RESULTING IN: the inability to implement change to reduce duplication and secure efficiencies in the funding body landscape.	Ongoing discussions to clarify the budget available to deliver reform.
Strategic – Business Case	IF: we cannot secure appropriate information to develop an informed business case THEN: there is a risk that decisions may impact the public bodies delivering BAU or future reform benefits RESULTING IN: reduced benefits and, potentially, a more fragmented system that doesn't meet the needs for operational or service delivery.	To continually review and monitor risk to ensure steps are taken to access relevant information in a timely manner.
People – Strategic Reform	IF: we progress the work to complete staff transfers and then there are restrictions on costs THEN: there is a risk to staff transfers and the potential for staff leaving with vital knowledge and experience of delivery RESULTING IN: reduced options for reform and could impact the intended benefits.	To continually review and monitor risk; engage with staff and recognised trade unions and to ensure appropriate steps are taken when considering the impact of structural changes, with ongoing engagement within public bodies.
People – Strategic Reform	IF: we fail to support the public bodies to communicate change effectively and appropriately with their staff THEN: this will create uncertainty within the public bodies’ workforce RESULTING IN: less awareness of the impact of change and a reduced buy-in to new structures.	Ongoing engagement with recognised trade unions and to seek early advice from public bodies HR and legal teams, as well as external professional advice if required on appropriate processes. To set out a critical timeline of relevant consultations.
Technology	IF: we are unable to clarify the systems and data requirements of the public bodies THEN: we will be unable to ensure appropriate steps are in place for the change, implementation, migration or improvement of these systems and their data sets through the transformation programme RESULTING IN: incomplete or missing data with which to inform the outcomes of the transformation programme and funding through the system.	Ongoing engagement with Public Bodies to clarify data and system requirements as part of the Project. Detailed design group including technical expertise from all public bodies.
Business Risks
Resourcing	IF: we fail to resource the project sufficiently with the right skills and expertise THEN: we will not have capacity and expertise to deliver to the required quality standard. RESULTING IN: potential risk to the delivery of the project.	To utilise Project and Programme Boards to raise resourcing issues.
External Risks
Continued Inflation and Impact on Public Finances	IF the impact of inflation and increasing costs continue to have significant impacts on government budgets THEN continued pressures on budgets will impact the ability to deliver reform, both in scope and scale RESULTING IN significant impact on the financial sustainability of institutions, employers and independent training providers.	Ongoing discussions to clarify the budget available to deliver reform.
AI and other technological developments	IF significant technological change, including AI, has a material and immediate impact on the post-school education system THEN the system will have to focus any capacity and capability to quickly and radically change their processes or structures RESULTING in no or limited capacity for reform, a refocussing of funds to support meeting this challenge and a delay to the implementation of reform.	Ongoing engagement with Public Bodies to clarify data and system requirements as part of the Project. To utilise Project and Programme Boards to raise risks.

2.6.3 Constraints

The main constraints identified in respect to this Project relate to the availability of funding and resources, and the need for there to be internal Scottish Government assurance to proceed with the preferred way forward to simplify the post-school funding body landscape:

• Availability of funding – the upfront costs of delivering this change are as yet unquantified and there is currently no budget to deliver this change in projected future budget lines. As costs become clearer this case will be made. However, given the current and future financial pressures on public sector budgets, it may not be possible to secure sufficient funds to implement this change, even though it may represent a spend-to-save option.
• Resources – As with availability of funding, Government and public body resources are under pressure and the size of the public sector workforce is required to reduce – this places limitations on recruitment and availability of the people needed to take forward this critical piece of work.

Other constraints (or pre-set parameters) that should be considered when developing and assessing options include:

• Drawing on existing legal frameworks where possible.
• Being compatible with the Ministerial control framework in place on creation of new public bodies which includes a presumption against the establishment of new bodies.
• Enabling the ONS classification of universities and the principle of academic independence to be preserved.

This Government is committed to progressing with this Project and working with stakeholders to ensure a positive outcome.

The Project does rely on legislative changes through the post-school Education Reform (Scotland) Bill and the Bill being passed through Parliament. Subsequent Parliamentary scrutiny of the Bill may create additional requirements for the Project that have not been taken account of in this business case. Therefore, depending on the legislative process this may impact the timescales to achieve the aims of this Project, set out in this business case.

Any options to simplify the post-school funding body landscape must go through the Scottish Government’s Ministerial Control Framework assurance process, which includes the need to have a business case, approved by Executive Team in Investment Mode and approval from Cabinet.

2.6.4 Dependencies

The main dependencies for this Project are around the connection to Education Reform and capacity and capability. These dependencies are important to consider as they are important to the progress of the Project and ensuring that activities can be developed and operationalised. The following list provides more information:

• Connection to Education Reform – while there are no specific dependencies between the Project and other Projects progressing as part of the wider Education and Skills programme, connections must be maintained to ensure that the school and post-school public bodies landscapes are mutually reinforcing.
• Capacity and capability – successful delivery of the Project is dependent on people with specialist business analysis, HR, data and systems being available to support.
• Collaborative Working Arrangements – successful delivery of the Project is also dependent on collaborative working arrangements from all of the public bodies (SDS, SAAS, SFC), together with the Scottish Government, to deliver the Project and future benefits of reform.

2.6.5 – Controls and Mitigating Actions

The risks, constraints and dependencies outlined in this case will be mitigated and managed through:

• Establishing the right, collaborative governance and delivery structures, developing in partnership with public bodies once Ministers have made a decision on the preferred way forward.
• Maintaining and enhancing the portfolio approach to management of reform across the education and skills portfolio. This will include sharing lessons learned, resources and exploring further opportunities for alignment.
• Ensuring regular, relevant communications and engagement with staff in public bodies affected by the change, their recognised trade unions and wider stakeholders.
• Continuing to develop the evidence base as plans progress from development to delivery to provide increased certainty around likely costs and benefits.
• Making dedicated resource available to support transition in order to minimise disruption to Business as Usual activity which must continue to deliver for learners and employers across Scotland whilst reform is underway.

The risks, constraints and dependencies are managed by the various governance mechanisms, such as the Programme and Project Boards, who meet regularly to track and resolve issues. To make progress with the Project, and manage risks, constraints and dependencies, regular updates are reported to the various Project Governance Boards. Further details can be found in Section 6: Management Case.