Enterprise and Culture Committee, 02 Nov 2004

Meeting date: Tuesday, November 2, 2004

Official Report 263KB pdf

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Further and Higher Education (Scotland) Bill: Stage 1

Item 1 on our agenda concerns the Further and Higher Education (Scotland) Bill. I welcome four very distinguished gentlemen to the committee: David Caldwell, the director of Universities Scotland; Professor John Archer, the chair of Universities Scotland; Tom Kelly, the chief executive of the Association of Scottish Colleges; and Professor John Little, who is also here on behalf of the Association of Scottish Colleges.

On behalf of Universities Scotland and the Association of Scottish Colleges, I would like to say that we have been grateful for the open and transparent manner in which the Scottish Executive has carried out its consultation on the bill. We feel that we are in a strong position to be able to endorse the bill as published. We are happy to answer any questions that you might have.

Our position is the same as that of Universities Scotland. The bill is much better than it was in its first draft. It is a good basis for future work.

I thank you for your joint submission, which was extremely helpful and clarified a number of issues.

I thank our guests for their ringing endorsement of the bill.

The National Union of Students has made its views clear to members of this committee and to other members of the Parliament apropos health, and however you term fees for people across the border. What views do each of you have on this issue?

Are you asking about the fees issue?

NUS Scotland has made it clear that it still has concerns about that section of the bill that gives ministers the power to vary fees. Jamie Stone is asking you to comment on that.

Thank you for that clarification, convener.

It is a pleasure.

We anticipate that the power of fee variation will be used extremely sparingly. We fully accept the fact that ministers do not wish to have variable top-up fees in Scotland. We support that position. As evidenced by issues around medical tuition fees, there might be some opportunity to change that, but we understand that that exercise would be undertaken sparingly.

It is important to say that our interpretation of the bill is that it does not permit the introduction of variable top-up fees in Scotland and that, instead, it means the possible reintroduction of banded fixed-level fees that might be different for various courses. It is only a few years since we had band 1 fees and band 2 fees that were different for various courses of study.

We understand that the specific circumstances in which the Executive is considering that move relate to medical education. Our Scottish medical schools train enough people to meet Scotland's needs, broadly speaking. However, a significant proportion of the intake comes from south of the border and there is a tendency for those people to return south of the border after they qualify. It is reasonable that the Scottish Executive should seek to ensure that Scotland gets good value for money for its investment in medical education. We would not want there to be a large increase in the proportion of medical places taken up by English medical students because the cost of studying medicine was much lower in Scotland than in England. Scotland should get value for money. However, it is important to reassure the NUS that the provisions in the bill do not amount to the reintroduction of top-up or variable fees. The bill addresses a very different matter.

I understand why the NUS might have been alarmed, because the power that the bill confers is wide. However, the power does not cause us great concern, because we are used to a regime under which tuition is paid for by a combination of fee and grant and the amount of the fee can be different. For example, currently in colleges the fee for advanced or higher education courses is different from the fee for non-advanced and further education courses. As David Caldwell said, we read the bill as preserving the power that ministers have always had under the existing arrangements to stipulate a fee as part of the overall funding for tuition. It is obviously important that ministers have a handle on that, because they must also consider the other side of the matter, by which I mean the student's contribution to tuition as against other forms of support for the student such as maintenance and other expenses.

The NUS made the point to me, almost in passing, that whatever the rights and wrongs of the matter, we are not tackling the problem of the bright potential science or medical student who comes from a disadvantaged background and does not want to go into medicine because the course is longer. Do you agree that there remains a built-in problem because potential medical professionals from less wealthy backgrounds choose shorter science degrees rather than medicine?

It is important to make the point that that scenario would not apply to Scotland-domiciled students. The fees of Scotland-domiciled students studying medicine would be paid by the Student Awards Agency for Scotland on the students' behalf, as is currently the case. There would be no disincentive to such students, whatever their social class, to study medicine.

We are considering students who come from other parts of the United Kingdom to study medicine, the majority of whom tend to return to the areas that they came from—I stress the word "tend" because such students do not all leave Scotland after graduation. It is a legitimate concern that Scotland should receive value for money in terms of doctors to provide health services in Scotland for its public investment in medical education.

Are you happy with that answer, Mr Stone?

Yes, thank you.

First, I pick up on the point that Tom Kelly made about the differential in funding for students following HE courses in FE institutions. Will the witnesses comment further on that?

Secondly, paragraph 4.3 of the joint submission from the Association of Scottish Colleges and Universities Scotland says that there is a need for clarification on, first,

"The power of the new funding council (rather than Scottish Ministers) to propose and approve the addition of new fundable bodies",

and secondly,

"The power for the new funding council … to decide on the adoption of a credit and qualifications framework".

What amendment or clarification do the witnesses seek?

The key to the stable funding of colleges is the unit of resource, on which we focus in the spending reviews. Over the years there has been a gradual reduction in the unit of resource, but that has now levelled off and, to be fair, we expect the unit of resource to increase somewhat in the spending review for the period up to 2007. The unit of resource had been an area of great difficulty for us. The Executive makes plans for funds to be allocated to the funding council, and the funding council then allocates those funds. Those are two separate stages and we are concerned about both. We believe that the bill does not have to address how ministers decide the quantum of resources available for all the purposes that the funding council has to address. It is for the funding council to work out, with the institutions, how best to allocate funds. We are concerned that the unit of resource for our sector has been squeezed sharply. That is an inhibition—especially on pay and reward for staff.

On new fundable bodies, we are concerned that, if ministers want to broaden the scope of what the new funding council is to fund, they should provide the resources and the means to allow that. Those who join the club, as it were, should meet the same standards and fulfil the same expectations as those who are already members. The existing arrangements have not prevented additions. Under the previous arrangements, only incorporated colleges were funded; today, of course, Sabhal Mòr Ostaig, Newbattle Abbey College and others have been added. We would have expected that to continue, but the question arises of the criteria that must be met.

I would like you to clarify a point that, I think, lies behind Christine May's question. Are you suggesting that sections 7 and 14 have got things the wrong way round? Do you think that ministers should approve a body before the issue goes to the new funding council, as opposed to a decision of the new funding council going to ministers? That is what you are hinting.

Alternatively, the new funding council would propose to ministers, who would then formally approve—

That is what is in the bill at present.

Well, no, because paragraph 4.3 talks about

"The power of the new funding council (rather than Scottish Ministers) to propose and approve".

Yes, but the bill says that the funding council proposes.

And approves. The question is whether the minister should have the final approval.

We feel that the decision ought to be a political one taken by ministers—because it is ministers who decide the quantum of resources available to the funding body.

That applies both to funding bodies, in section 7, and to the qualifications framework, in section 14.

This sounds like a technical point, but what we were driving at in our point on the qualifications framework is that the funding body is just that—a funding body. It is not an educational body or an awarding body. The decision on what is an appropriate qualifications framework really ought to be taken by the universities, as the degree-awarding bodies, and by the awarding bodies that we use—in particular, the Scottish Qualifications Authority—under the directional co-ordination of ministers. There is a simple oddity in the wording of the bill and we feel that it can easily be tidied up.

Paragraph 4.3 of our submission is more about a desire for clarification than about a deep-seated worry. We wanted to understand better what lay behind the wording in the bill, but we did not start with the view that there was a problem. We would expect any new fundable body—whether it is a university, college or whatever—to meet criteria that are understood in that sector.

I am sure that members are aware that the situation on the adoption of a credit and qualifications framework is dynamic. The framework influences how we do things in Scotland—which many regard as being ahead of the game in the European and international context. We want to ensure that what happens here lines up nicely with what happens in Europe so that students can understand the situation and can flow backwards and forwards.

It is important that advice on the qualifications framework should largely come from the sector, which works at the sharp end of the issue. We would expect the funding council to be in the middle of those conversations, from where it can transmit views to ministers and receive, one hopes, approvals for proposals. The sector should participate in shaping what comes out of the qualifications frameworks so that people can understand where they are. We seek clarification, rather than any fundamental change.

Would I put it too crudely if, in reference to the first point in paragraph 4.3, I were to say that the university sector is considerably more relaxed about the proposed powers to add new fundable bodies than the colleges are, given that the colleges might have concern about the greater stretching of resources that might result?

I guess that we were not making the assumption that resources would not be available to accommodate any increases in numbers. One would not imagine that this was being done in order to prejudice units of resource. That does not sound like a very good way to do it.

It is encouraging that the ASC and Universities Scotland have provided a joint submission. I am sure that all members welcome that. It is clear that the two organisations share common ground on the major issues in the bill.

Section 20 will require the funding council to have regard to skills needs. Paragraph 4.4 of the joint submission states:

"There is also a need for more discussion on how best to develop further … the role of the new funding body in meeting the skills needs of Scotland".

Will you elaborate a little on that? How should that be fleshed out? Is there any difference of opinion between Universities Scotland and the ASC on how that might be done?

The colleges serve the needs predominantly—in fact, overwhelmingly—of people who live and who will probably work in Scotland. We address needs of a particular kind. Our concern is about the wide span that the single funding body will cover, which will range from high-level research to the part-time vocational and even pre-vocational education that is characteristic of the colleges. The funding body should be appropriately equipped to deal with both ends of that task.

As members will know, "skills" is a shorthand word that covers many things, from practical competencies to specific requirements for licences to practise a range of things. The word "skills" is just a shorthand way of saying that the funding council should have a good balance. However, it should have the capacity to address those areas.

There is no fundamental difference of opinion between the universities and the further education sector on the issue. We regard skills needs as very important, but we also think that those needs are quite diverse. Skills needs range from those that the further education sector meets, as Tom Kelly described, to the high-level creative and enterprise skills that are developed by the higher education sector. Those skills are perhaps slightly less specific but they are absolutely vital to the country's future economic success. Neither of us is highlighting a problem with section 20 of the bill; we are simply drawing attention to the fact that those are complex issues that will need to be worked through. The new funding council will have to give close attention to those issues when it comes into existence.

Given what you have said, is there a need for ministerial guidance on skills needs, or are you happy to leave the matter to the funding council?

On whether guidance from ministers is required, my broad view, on this as on many other issues, is that it is absolutely right that ministers should issue guidance to the funding body on policy priorities. That should not exclude guidance on meeting the skills needs of Scotland. It strikes me that, since devolution, we have worked out a pretty good system whereby ministers identify the policy priorities, which they indicate in an annual letter of guidance to the funding council, and which the funding council then seeks to operationalise by encouraging behaviours in institutions that help to meet the policy priorities that have been identified. It is entirely appropriate that the skills needs should be treated in that way. It is absolutely right that politicians and ministers should have a role in specifying what the priorities are, and expecting the funding council to play its part in assisting to deliver them.

We wondered whether an opportunity had been missed in drafting the bill, in terms of recognising the importance of delivering on the agenda of "A Smart, Successful Scotland", and in terms of achieving all that we hope that the bill will achieve with regard to parity of esteem once the funding councils are merged—or at least parity of perception of esteem. Given that there is already a statutory requirement for a research committee, which it is proposed will continue, perhaps there should be a complementary skills committee with a parallel position and agenda, to provide and connect people with skills, and to provide businesses with ideas. Such a committee is not proposed at the moment, but Inverness College suggested one in its submission. The ASC response also mentioned it.

We also have to bear in mind the responsibilities of Scottish Enterprise, Highlands and Islands Enterprise, and now the Sector Skills Development Agency and the sector skills councils. You are flagging up that there needs to be an overarching discussion and agreement among the various bodies on what the skills strategy is. Perhaps the committee should consider that further.

I am pleased to note that the project board of the SSDA, which is just being established, has the funding council represented on it as one of four stakeholder groups.

I will focus on three areas. The first is section 20, on the broader remit of the exercise of functions of the council. We have just talked about skills. Economic, social and cultural issues were added to the draft bill. When we spoke to the civil servants about that, I asked them where those issues had come from, and they stated that they came primarily from the university sector. I suppose that my questions are aimed at Professor Archer or Mr Caldwell. Could you expand on what you see those issues relating to, particularly the social and cultural aspects? Do you see them extending as far as influencing admissions policy?

Universities have a role to play in delivering on a number of fronts within the scope of the higher education with which they are involved. We look at our contributions in terms of the economic, social and cultural agendas. The things that happen in universities have an impact on educational provision and on the delivery of all those agendas, and they all add to the richness of life in Scotland.

It is about remembering that in addition to the hugely important area of economic development, social and cultural engagement are equally important within higher education. We recognise that delivering that in relationship with the Parliament and ministers can happen in a variety of ways. It does not mean that they come entirely through one particular relationship. It is a cross-sector area.

I have little to add. We simply wanted to make the point—and this goes for further as well as higher education—that the contribution of post-compulsory education, while of crucial importance to the economy, is not limited to the economy. There are huge social benefits in terms of all sorts of indicators. The population that has experienced post-compulsory education has better health, much lower levels of criminality and longer life expectancy. A whole variety of indicators are favourable in social terms.

There is a huge role for cultural transmission, as well as there being an economic benefit. We thought that it was important to draw attention to those factors. How the bill puts it—that the funding council should "have regard to" such factors—strikes the right balance. It is not suggested that those are the dominant considerations; rather, they should be borne in mind alongside the economic value of post-compulsory education.

There are always two views on such declaratory provisions. On the one hand, we might say, "It is obvious that that is what you are seeking to do, so why put it in the legislation?" From the point of view of colleges and, judging from what has been said, of universities, those are the things that we try to address. It is not just about the immediate employer requirement; it is about lifelong learning in the fullest sense.

Colleges already seek to do what the bill requires. The question is how appropriate it is, first, to declare that the funding council should take those factors into the reckoning, and second, to declare in what respects and to what extent it is to do so. At one level, it is helpful to have that included in the bill. That recognises that we do a broad range of things. Many colleges have a range of provision, not all of which addresses the traditions of technical skills and the like; it has stretched into other areas.

It is about reacting to structural changes in the economy, which the funding council will take into account in any case. That was a helpful answer.

Another area that I touched on during our evidence-taking session with the civil servants concerned the Scottish public services ombudsman. There was no proposal for accountability to the Scottish public services ombudsman in the draft bill, but it appeared in the bill as introduced. I was struck by a comment in an explanatory document that the Executive provided to us on that occasion, in which it was stated that

"universities have also voiced some concerns"

about the introduction of accountability to the Scottish public services ombudsman. Universities were not hitherto within her ambit, although colleges were. I wonder if either Professor Archer or Mr Caldwell could say something about the universities' concerns in light of the civil servants' comments.

Our concerns are fairly modest. Although the provision was not in the draft bill, we always expected it to be in the bill as introduced. The Executive had flagged up to us some time in advance that it was considering such a measure; I think that it was referred to in the partnership agreement. The measure was therefore not a surprise to us—it was not sprung on us in any sense.

I make one small correction: as I understand it, the powers of the Scottish public services ombudsman do not presently apply to either HE or FE. The bill would bring both sectors within the ambit of the ombudsman for the first time.

Our modest reservations are to do with the fact that we think that the independent system of review is more comprehensive in some ways than the system that will be available under the ombudsman. Let me explain. For just over two years now, we have had a system of independent review, which is available to complainants who are still dissatisfied after they have been through a higher education institution's full internal process. That independent review system is available to all students with respect to all services provided by higher education institutions in Scotland. We understand from the limits that are placed on the role of the Scottish public services ombudsman that she is limited to dealing with matters that are partly financed out of public funds. That would exclude any full-cost student from taking a complaint to the ombudsman and would also prevent a student from making a complaint about a service that was provided on a commercial, full-cost basis—for example, student residences. We think that our existing scheme is more comprehensive than the proposed replacement scheme. I hasten to say that the proposed role for the ombudsman would cause the institutions no particular problem. However, it would cause a diminution of opportunities for potential complainants.

I have a question about that before we come on to the colleges. You mentioned a diminution of the existing, self-regulatory regime. Do you intend to continue with the existing provision for the gaps that you identified and which are likely to be left by the ombudsman's arrival on the scene?

That is a decision for institutions within the sector. Clearly, there are many pros and cons. One of the disadvantages of continuing with the existing system is the unhelpful confusion that would be caused by having two separate systems, because it would often be unclear to potential complainants which system applied to them. However, although complex issues must be addressed, there is no fundamental problem. I am sure that there are solutions.

The most important point is to ensure that there is a good, robust internal process so that there will be few cases in which people still feel aggrieved and want to take a complaint further at the end of that process. An indication of the robustness of the internal process in our sector is that the total number of cases that were referred to the independent reviewer in the first year of operation was five. We are dealing with relatively small-scale problems that can be resolved satisfactorily. Our written submission simply states that some points need further clarification so that we can have a system that meets everybody's needs satisfactorily.

I understand that. The point about referring only five cases is interesting. I questioned civil servants a month ago about the basis of the financial memorandum and the cost of the bill's implementation. They said that, based on a notional 30 cases a year, the cost would be about £50,000. I was told that the figure of 30 cases had come from the institutions. I do not know whether that refers to 30 across both sectors, but there is certainly a difference between that figure and five cases. However, I accept that the ombudsman would be a last resort after all internal processes had been dispensed with.

The extension of the ombudsman's remit to include the colleges was discussed for some time on the separate track of the Government's accountability review. You may recall that the Audit Committee instigated that. For us, the bill is just a convenient legislative vehicle for ministers to deal with something that has been settled policy for the colleges for a while.

As David Caldwell said, the key point is that not only first-instance processes but review processes within colleges should be sound enough to deal with the majority of cases. We are working in that direction and our plan is to ensure that our complaints machinery accords with what the ombudsman expects to be in place. In fairness, we have a bit further to travel on that than the universities do. The present arrangement, in which the funding council acts informally on behalf of the department to review complaints, is not satisfactory. Therefore, we welcome the bill's provision in that area.

The public services ombudsman, who comes from the higher education sector, is well qualified to deal with that remit.

My final point, which may explain why I was confused about what the ombudsman covers, concerns the question of the financial accountability of the institutions. We have heard that regulations under the Public Finance and Accountability (Scotland) Act 2000 relate to the further education sector but do not relate to the higher education sector and are not designed to do so. Would the university representatives like to comment on that? The bill and the accompanying documents in particular leave the door open for such provision to be made at a later date. Further education colleges are subject to the Auditor General's scrutiny and lay their accounts before Parliament, but universities are not bound to do so. Do you envisage a situation in which the universities would feel that they were perfectly willing, even if not legally liable, to do that?

The legal liability is already quite strong. The bill makes it clear that Audit Scotland has the right to access the financial records of all higher education institutions. We have prepared a report, which we would be happy to make available to the committee, setting out the various rigorous and comprehensive forms of accountability to which the universities and other higher education institutions are subject. That process includes financial accountability. A range of methods are employed to ensure accountability in the use of public funds, including, as I said, the opportunity for Audit Scotland to review the financial records of any higher education institution in Scotland.

It is true that financial accountability is handled in a different way for higher education institutions through the appointment of external auditors, but it is no less rigorous than the method that applies to further education colleges. I reiterate that it might be helpful to the committee if we make available to it the detailed report that we have prepared on the various ways in which accountability works in our sector.

That is fine. I was not suggesting that your system was not sufficiently rigorous. I was simply saying that whereas college accounts are laid before Parliament, university accounts are not. I am aware that sufficient systems are in place. My question was about the two sectors having the same regime; in many ways, that is what the bill is about, but this is one area in which there are different regimes.

On that point, a response from the Scottish Executive to our query has been circulated. Paragraph 5 of annex B to the Scottish Executive's letter mentions that the two existing

"Councils are currently working to completely revise their financial memoranda with institutions in a move which will see the same basic template being used for all institutions."

I accept that, but I understand that the Public Finance and Accountability (Scotland) Act 2000 would have to be amended before universities would come within its ambit. There is a slight difference, but I take the point.

The position is straightforward. A college's audit is conducted by Audit Scotland or by an auditor it appoints. That has led to some complexities in the relationship with the funding council, which has to oversee the financial health of the sector. The policy of establishing and maintaining financial security that we are currently pursuing shows that that relationship can be made to work. That is the key to the issue. It is not possible to legislate on every detail for the various interested parties. There must be a willingness to make the relationship work and I hope that we are now achieving that.

Your remarks lead neatly to the issue that I want to explore more fully, which is about how you ensure that the maximum benefits arise from the changes. What can be provided for in legislation and what requires to be dealt with in other ways? The joint ASC and US submission states that the single funding body

"has the potential to lead to greater coherence and better provision of lifelong learning and research in Scotland."

That is the overarching objective that we would all like to see achieved. Can you say a little more about how you think that that potential can be fulfilled?

I also ask you to explore a little further the point that you touched on about relationships. The subsequent paragraph of the submission states:

"The best way to achieve that will be to ensure that the Bill establishes the right relationship between the Scottish Executive, the new funding body and institutions."

Can you unpick that and explore the extent to which you are talking about structural relationships and the extent to which your statement relates to some of the softer issues involved in the relationships between those different entities? In asking that question, I make reference to the history of the bill. I am sure that we are all delighted that people are once again round the table and singing from the same proverbial hymn sheet as they were at the beginning of the process. However, there was a period when that could not be said, and many of us are still trying to get our heads round why, when people agreed broadly on certain objectives, we ended up in a situation that, as far as some of our institutions were concerned, one would have thought was the end of the world as we knew it. The Scottish public were told, through certain media outlets, that it was the end of some of our institutions as we knew them.

I ask those questions in a genuine bid to tease out how we can ensure that, in a devolved Scotland, we use the structures and regulatory and legislative solutions that we are putting in place as effectively as possible to come together to work towards shared objectives. This is a tremendous opportunity for us to do that and I am sure that you will agree that the legislation should be a means to that end rather than an end in itself. Can you take us through that a little, please?

We see the bill as the start of a process. We talked about a smaller, smarter, more strategic body, but we were perhaps talking about better relationships. That seems right to me.

It is a combination of structures and softer issues. In terms of formal accountability, it is quite right that the Parliament should insist that it is clear who is responsible for what and to whom they are accountable. That is perfectly understandable. The funding body is an intermediary and does not deliver services; colleges and universities do that, and therefore we have to keep those responsibilities distinct. Engagement with employers, students and communities is, frankly, the job of the institutions. The job of the funding body is to see that the provision that Parliament and ministers make is put to best use.

We do not have a fundamental difficulty with the megastructure. You will see from the detail of the bill that we have gained in some respects, as some of the established lines in the sand to protect the autonomy of universities are being extended to us. That is good, as it is an acceptance of the fact that colleges are mature institutions and can be trusted to do more. There are things that colleges do and ways in which they do them that we want to continue, and we accept that they will be distinct from the way in which universities work. The centres of gravity of colleges and universities are recognisably different. We do not envisage the distinctness of universities and colleges being lost; what we were concerned about in some of the language of the bill was the fact that concepts were being introduced that suggested a requirement to join together things that were actually rather different. We were, therefore, glad that the term "tertiary" was dropped, for example.

Ordinary Scots are well aware of what universities and colleges are. They will not know about everything that they do or what potential they have for the future, but that is why we want to work with the grain of public perception. The bill as introduced does that better than the draft bill did and is a step towards better relationships for the longer term.

It is important to recognise the fact that, within the overall delivery of educational, research and other opportunities, it has been the role of the colleges and the universities to deliver things in rather distinct ways. However, there has also been an enormous amount of overlap because of the way in which we work together. That has not been a problem before the bill and it will not be a problem after the bill. Quite a lot of the world has been beating a path to Scotland to see how we have been doing that kind of work. The bill ensures that clarity remains regarding the things that the colleges and universities are trying to do to deliver the totality of education with choice and diversity.

Susan Deacon asked whether anything went wrong. In a funny kind of way, the robustness of the consultation process has allowed us to have conversations to correct and amend language, content and such things along the way. Having a very open conversation to produce a bill that we believe is good and can take us forward has been a strength of the process. I would not regard what has happened as a problem.

Do you want to say anything else, Susan?

I thought that others were itching to comment, so I was listening intently.

Perhaps I may add a little. I agree with John Archer that having a robust dialogue sometimes helps. As a consequence of that dialogue, we have ended up with a very good bill. I admit that I would prefer to do things differently if the same thing happened again. Things did not quite work out as I would ideally have liked them to. In particular, the initial publicity on the publication of the draft bill was not helpful. I sought to make it clear in a piece that I published a few days afterwards that our concern about the bill had nothing to do with worries about ministerial intentions, which we accepted were entirely benevolent, but that there was a question about the possible unintended consequences of the draft bill as it was then worded. We did not think that ministers intended those consequences, but there could have been such consequences nonetheless. Therefore, we had a robust dialogue. We ended up putting together a joint submission with our colleagues in the Association of Scottish Colleges in which we largely agreed about the things that we thought needed to be corrected.

The process has been an absolute model of a consultation exercise. It is inevitable that not everything that we asked for has been incorporated in the bill as introduced, but there has been intelligent listening and the sincere points that we made have been taken on board. A bill is now before members that still achieves exactly the objectives that were desired in bringing together the funding councils. One of the things that I think that the bill will achieve is greater coherence without any of the risks of the unintended consequences that might have arisen if some things in the draft bill had survived.

I would like to make a final brief point about greater coherence, which I believe is valuable. We already have greater coherence in further and higher education in Scotland than exists in other parts of the UK or in most other parts of Europe and the world, but we always want to work together better. One of the real gains from a merged funding council is that it will be able to facilitate working together a bit more effectively than two separate councils.

It is helpful for us, particularly in the relatively early days of the Parliament, to unpick experiences a little so that we can weave that into our learning process and practices for the future. Therefore, I am grateful for those replies and for the analysis that has been given.

I want to pick up from where David Caldwell left off and look more to the future. Are there any other opportunities that can be exploited through the creation of a single funding body? In particular, I am interested in what the differences will be—or at least, what they ought to be—for the Parliament. As Tom Kelly, for example, will know, the Parliament's Audit Committee, of which I am a member, has been involved in quite an in-depth piece of work with the Scottish Further Education Funding Council, and it had a number of concerns about a range of issues. I am trying to get a sense of the meaningful difference that we can expect to see, feel and touch in how we do business in Scotland once we have a single body in place. I would like to hear from Tom Kelly in particular, given that he is familiar with the exercise in which I was involved. What discernible improvements should we seek in the future that the bill might facilitate?

To be blunt, the degree of scrutiny to which the colleges were subjected by the Audit Committee was a relatively new experience, although the practice has now been in place for some time. We talk about learning experiences, but I think that the colleges learned considerable lessons from that experience that will be applied. From the colleges' perspective, the most important thing was that our message did not get through to the Audit Committee strongly enough about the seriousness with which we took comparability of performance measures, such as performance indicators and so on. That was one reason why we felt that a single funding council with a different philosophy would be a gain both for us and, if I may say so, for the Parliament.

We want the Parliament to understand what things it is appropriate to ask the funding body to account for and what things it is perfectly entitled to ask the colleges to account for. Quality of service is what colleges are about, so we are happy to account for that directly and in our own terms. We believe that having a more streamlined funding body that has a different sort of interaction with the institutions will be all gain.

I will let Fiona Hyslop ask her questions after I have asked a couple of my own.

Like its central proposal on the merger of the two funding councils, many of the bill's proposals, such as that the fundable bodies should be brought within the remit of the Scottish public services ombudsman, came from the recommendations of our lifelong learning inquiry, which was undertaken by our committee in its previous life as the Enterprise and Lifelong Learning Committee. Another committee recommendation was that quality assurance should be streamlined, given that some colleges were being quality assured on the same programmes up to 28 times. However, the bill does not address that issue. In the view of the Association of Scottish Colleges, should that omission be addressed or can such streamlining be achieved without legislation?

That alludes to the previous question on how we achieve coherence when the two funding councils are merged. You have drawn attention to the considerable audit burden that is currently placed on individual colleges and universities. As you will know, as part of the UHI Millennium Institute our college is trying to deliver a different type of higher and further education. We have tried to draw some coherence out of the two quite different funding and quality assurance systems that operate under the Scottish Higher Education Funding Council and the Scottish Further Education Funding Council.

Let me first deal with the quality audit burden. Within my college, I call 2003 the year of the audit. In that year, we underwent the college-wide quinquennial institutional review that Her Majesty's Inspectorate of Education carries out on different subjects. Also in that year, the UHI arm of our activity was subjected to a very rigorous institutional audit by the Quality Assurance Agency for Higher Education. However, 2004 is no different and 2005 will be the same again. To achieve that coherence, we can and should try to streamline the way in which we conduct audits, whether those be for quality assurance or the financial accountability that was discussed earlier.

At the moment, the FE sector is quality assured through HMIE, which deals with the primary and secondary education sectors. I take issue with what Tom Kelly said about the use of the term "tertiary". Given that everything post-secondary is quality assured by the QAA, it seems to me that there is an opportunity to provide for the primary and secondary sectors to be quality assured and audited by HMIE and for the tertiary sector—that is, everything that is post-secondary, which means both HE and FE—to be audited through the QAA.

I am not sure that the principle of intelligent regulation can be legislated for, but if I were asked what that means, I would say that it implies that a new body of evidence should not be required where evidence from previous regulatory or inspection activity can be used. That is fundamental. Those who are in the regulation business should schedule their activities so that not everybody arrives on the doorstep at the same time, and machinery should exist—we now have it—to allow those who are engaged in the activity to talk to one another to resolve and reduce differences. We are some way towards that. We were looking not for a specific provision in the bill, but for a philosophy and an approach that would generate those benefits.

In response to questions that we previously asked the Scottish Executive about the matter, we received a memorandum from the Scottish Further Education Funding Council. I would welcome your comments in writing about the progress that has or has not been made. It is about two years since the recommendation was made and progress seems to have been very slow. The subject was a major concern for several colleges—particularly those that do a lot of work for the enterprise networks, which imposed much of the quality audit, much of which was duplicated and overlapping.

We would be happy to supply a note on that.

The document to which David Caldwell referred and which we would like to give you concerns the various forms of accountability in the university sector and contains a section about the QAA and development beyond quality assurance. The theme at the moment is quality enhancement, on which Scotland has taken a lead that is influencing other places around the world to examine how we are doing. With quality enhancement, we are moving on and ensuring that we deliver the best education environment. The committee will see in the document that we have moved on from assurance to enhancement.

I would welcome your comments on what the funding council said and on whether progress needs to be a bit faster.

Sure.

My next question is primarily for Universities Scotland. What should be the division of labour between the proposed research committee and the Scottish Science Advisory Committee? Should the research committee incorporate the advisory committee's functions, or do we still need two bodies?

The committees are different beasts. In the funding council, the understanding of the research element and the way in which QR—that is quality research, to use the jargon—funding is distributed needs to involve a transparent process. A great deal of understanding is required of Scotland's competitive position in basic research as well as in applied research and the knowledge transfer elements. Delivering that rather specialised understanding to guide the allocation of funding is important in the funding council.

I make a distinction. The committee that is thinking about long-term future directions for Scotland and where Scotland's research strengths—delivered by a variety of processes—lie is complementary to but not the same as thinking about how resources will be divvied up.

A primary job of the Scottish Science Advisory Committee is to develop for Scotland the science strategy—

Priorities.

We are dividing the responsibility for strategy and priorities from that for funding. Is that wise?

If one element can inform the other, I suspect that that is helpful. In the funding council, it is important that those who are involved in the decisions that influence how higher and further education and suchlike are delivered understand Scotland's important strategic role in its research. I am sure that the funding council will be helped by understanding the deliberations of other committees that consider Scotland's strategic priorities.

I am not sure that I entirely agree with you, but that is helpful.

I make that distinction.

I gather that the witnesses have concerns about the administration of the new funding council and about policy making. The general duties would be quite light from a ministerial point of view but quite specific from the funding council's perspective. David Caldwell gave a diplomatic response to Susan Deacon when he outlined how the bill had been transformed during the consultation process. STEP—specified tertiary education provider—must be one of the shortest-lived acronyms in the history of public policy making. Everyone recognises that progress has been made and that good changes have been made to the bill.

How would the bill provide for policy making to ensure that the higher and further education sectors are fit for purpose for a European market in future, with reference in particular to the witnesses' concerns in relation to the Scottish credit and qualifications framework? From the strategic and policy-making perspectives, there must surely be an important role for the bill in that context. How should the bill be amended to ensure that policy making is for the minister, rather than for the funding council, as the witnesses imply? David Caldwell said that the bill does not include everything that he asked for. What is missing?

I am not sure that I can readily come up with many specific points. We would certainly have drafted provisions about the ombudsman in a slightly different way if we had had such an opportunity. There are a number of other, detailed points that we would have approached differently.

You ask a fundamental question about policy making, which is always a more complex process than we might expect. I have the greatest respect for Scottish Executive ministers, but I do not think that they could have devised the Scottish credit and qualifications framework; the sector was needed to do that. The only reason why we have such a framework in Scotland at all is because the sectors worked together to devise it, which was possible only because the higher education sector had done the prior work to establish the Scottish credit accumulation and transfer—SCOTCAT—system. Without that concept, we could not have made the leap to the credit and qualifications framework. On one hand, it is terribly important that ministers and senior officials should attend high-level European meetings to pursue interests in developing the framework; on the other hand, we are involved in a partnership and ministers are able to pursue that policy because of the work that went on in the sectors.

There will be occasions on which the initiative comes from ministers. That is entirely proper. As I said, the letter of guidance that is sent annually to the funding council is a tremendously powerful tool that is taken extremely seriously by the council. That is evident from the circular letters that the funding council sends us in the months following the receipt of the letter of guidance, which reflect the fact that the council is taking ministerial guidance on board.

I am not sure to what extent legislation can help policy making. The bill facilitates or inhibits policy making no more than any other piece of legislation does; it merely presents a framework. The making of policy stands aside from the legislation and depends on the political will and impetus—I am pretty positive about that. Tom Kelly alluded to the fact that since devolution we have witnessed an enormous increase in the interest that parliamentarians take in higher and further education. To be candid, that did not happen before devolution. We were a minuscule area of interest as far as the Westminster Parliament was concerned. One of the positive features of devolution is the great attention that higher and further education and other aspects of life in Scotland have received from parliamentarians. On the whole, there is a much better environment for the development of policy than there used to be.

On Fiona Hyslop's point about fitness for purpose for what could be an emerging European standard, the credit and qualifications framework has been built up from the bottom, and the processes would make whatever adjustments were needed in the future.

I pay tribute to the Scottish Qualifications Authority, which has got itself sorted out. Without the SQA, we could not achieve an SCQF for all the college provision that is now included within it, and we could not build it without the considerable efforts of staff. We need to keep making the point that staff in colleges have risen to every challenge that they have been faced with to adapt courses, structures and provision to modern needs. We are grateful that the Executive is putting substantial funding into the modernisation of higher national qualifications, which are the key to making our interaction with the universities work well in terms of credit and progression for students.

One of the best things about the SCQF in relation to European developments is that Scotland is largely leading the way in developing European qualifications frameworks. We do not simply react. We take something very substantial to the table and, on the whole, it is more substantial than what most people bring to the table.

I cannot envisage a European framework that is not based on units and levels, because units and levels just make sense. My analogy is Lego. If you want to see how Lego works, you have got to use it. Throw the bricks on the floor and children will show you that Lego works. It is actually quite difficult to prove that units and levels work, except by using them. We have done that and we are able to make a convincing case.

That is the point. Will the legislation work as a framework to inhibit or to encourage and facilitate? I hope that we will come back to that point.

I take your comments on fees, but section 8(10) refers to fees and excludes the training of teachers. That seems strange in a bill that you say will be used in a benevolent and non-destructive way. Why do you think that that provision is in the bill?

Secondly, on general principles, is it right that there should be a principle of deterrence, even if it is just for English medical students coming to Scotland? Is that the right policy position to take? It seems counter to some of the previous comments of Universities Scotland in particular about the use of fees to deter fee refugees from England. Is that not counter to the fresh talent initiative? In principle, is it not questionable?

The point, as you are probably aware, is that the universities do not get to keep the fees. The process is intended to be cost neutral. Any additional fee that is gained from an English student coming in, for example, is deducted from the block grant that is given by the funding council, such that there is no economic incentive for the university to admit an English student rather than any other kind of student. The money that is collected and kept by the funding council gets recycled to support the overall funding of education.

I accept that the question is very difficult indeed, but we are faced with a new situation. The position now is that an English student studying medicine pays exactly the same fee whether he or she studies in England or Scotland, which is currently £1,150 a year. When fees in England are increased—and it is fair to assume that in the case of medical courses they will all be increased to the £3,000 per year maximum—if nothing is done about the fee level in Scotland, the fees for an English student to study medicine in Scotland will become much lower than they would be for the same student to study in England. That is the change in the position. It will become significantly cheaper to study in Scotland. In those circumstances, the Executive has a legitimate concern that the number of English students who wish to study medicine in Scotland will rise to a higher level than is the case at present, thereby reducing the opportunities for Scottish students who want to study medicine. We have to remember that medicine is a controlled subject—the number of places is absolutely controlled. The Executive is also concerned about the increased likelihood that the number of doctors qualifying from Scottish medical schools who choose to remain in Scotland would decline.

However, that is not the only factor. In our response to the Executive, we made the point that the most compelling way of persuading doctors to remain in Scotland is to make a medical career in Scotland as attractive as possible. That would mean that, regardless of wherever medical students were previously domiciled, many of them would choose to remain in Scotland. Nonetheless, in fairness, one has to accept that there is a tendency for those who come from England to study medicine in Scotland to return to England. When the level of fees in England rises, we will be dealing with a different situation.

Although we recognise the dilemma, we think that there is a legitimate case for the Executive to answer. It has to try to ensure that it gets the best value for money for the investment that it makes in medical education in Scotland.

That completes our questions to the panel. I thank both organisations for their submissions and for the oral evidence that they gave today. The evidence was extremely helpful.