Public Audit and Post-legislative Scrutiny Committee

Meeting date: Thursday, November 17, 2016

Official Report 620KB pdf

---

Section 23 Report

---

“Scotland’s colleges 2016”

Item 2 is an evidence-taking session on the Auditor General for Scotland’s report “Scotland’s colleges 2016”. I welcome to the meeting Paul Johnston, director general for learning and justice at the Scottish Government; and Dr John Kemp, interim chief executive of the Scottish Further and Higher Education Funding Council.

Good morning. I invite Paul Johnston to make a brief opening statement. He will be followed by Dr Kemp, and then I will open up the session to questions from members.

Thank you, convener. I appreciate the opportunity to provide evidence in response to the Auditor General for Scotland’s report on Scotland’s colleges.

As the director general for learning and justice, I am the accountable officer for the education and skills portfolio. As such, I am responsible for ensuring that the funding council’s strategic direction aligns with the Scottish Government’s priorities and that it has the necessary controls in place to safeguard public funds. Dr Kemp is the accountable officer for the funding council, which is accountable for the delivery of the Scottish Government’s policy objectives and for the deployment of resources to deliver them.

The Scottish Government accepts the recommendations in the report that are for the Government to implement, and we will work with the funding council to ensure that those recommendations are implemented. We will seek to learn lessons from the matters that the report raises and to apply them to our work on colleges and to other areas of public service reform.

Since the Auditor General’s report, progress has been made on a number of the recommendations, particularly through the publication of the funding council document “Impact and success of the programme of college mergers in Scotland”, which I am sure we will have the opportunity to discuss. I welcome the fact that that document sets out further detail about the annual savings that college reform is achieving. It also confirms that the programme of reform has created colleges that are more resilient and sustainable, better suited to the delivery of skills, better suited to engagement with employers and universities and better able to improve provision for learners.

I am not surprised by that because, in preparing for today, I looked again at Sir Ian Wood’s conclusions in his report on developing Scotland’s young workforce. Even in 2014, he found the colleges with which he had engaged to be

“re-energised and ... re-inventing themselves as larger units with regional status and greater potential to develop and influence.”

The committee will have seen, certainly in my submission, some of our evidence and figures to demonstrate some of the success that we can point to for those newly reinvigorated colleges.

Moving forward, we recognise that colleges are still adjusting to substantial changes, and we will use the findings of the Auditor General’s report to secure further progress. Good governance is crucial, and I welcome the Auditor General’s recognition of the likely positive impact of implementing the good governance task group’s recommendations. The enterprise and skills review also allows us to ensure that the Scottish funding council’s functions are clearly defined, with a focus on securing continued performance improvements in the college and university sectors.

I look forward to discussing these matters further.

Thank you for the opportunity to discuss the Auditor General’s report, which covers the latter part of a period of great change in the college sector. As well as the merger programme, there was the related regionalisation of funding, including the introduction of outcome agreements; a revised funding method; the inclusion of colleges in public sector accounting; and the introduction of national bargaining.

As the Auditor General’s report makes clear, the sector has continued to meet activity targets and maintain financial stability through the period. In the summary of the post-merger evaluations that we published in August, we concluded that they had largely been a success and had created colleges that are better suited to responding to their regions’ needs and interacting with local authorities and universities. That success has been a tribute to the staff in colleges who have implemented the mergers.

We recognise that there have been challenges. In some colleges, the success rate for full-time further education courses has dropped, and there were a small number of very significant governance difficulties, which the committee’s predecessor examined.

As the committee will have seen from my organisation’s letter of 29 September, we have accepted the recommendations of the Auditor General’s report. We have substantially addressed some of the recommendations, such as those on the costs of the mergers and on the publication of leaver destinations. We will continue to work with the college sector and the Government to address the other recommendations. I am happy to answer the committee’s questions on how we will do so.

Thank you, Dr Kemp.

Can I start with a general question? I recognise that some of what the Auditor General’s report covers predates Dr Kemp’s appointment. The first conclusion that we would reach from the report is that what was done was not how to go about a major reform programme. There is a lack of baseline information against which progress can be measured. There was a lack of comprehensive financial planning. Probably one of the single biggest costs will be from harmonising pay rates across the college sector, but that was not included in the original costs. We have had a decline in the attainment rate—at the end of the day, this is primarily about attainment. No proper equality impact assessment was done and we still do not know what impact the changes have had on inclusiveness and equality.

We have seen some of the governance issues, and there is a question mark over the added value and competence of the funding council. We now have a funding council that is looking at a much smaller number of colleges, but we also have a layer of regional management between the national management and the local management, and I am not clear what added value that brings to the table. It really has been a bit of a fiasco, has it not?

That is a very big question. My response to the final point, on whether the process has been a fiasco, is that it has not been. As I said in my opening statement, there are aspects of the merger process that could have been done better but, by and large, the merger programme has been a success. It was implemented fairly quickly and, I think, fairly effectively by the colleges that were involved. I accept that there were governance issues in some areas and that the Auditor General has pointed out that it might have been better to have baselines on some areas.

However, by and large, the mergers set out to achieve a purpose, which was to create large regional colleges that could interact with employers, local authorities and universities in their region far better than the previous colleges could. We were clear about that at the outset, and I think that that purpose has been achieved. I accept the point that some things could have been done better but, by and large, the process has been good.

Some of the other things that Mr Neil referred to that were going on at the same time as the merger process were not part of it, but they made it more complex. For example, we do not yet know the full costs of national bargaining, which is a process that is still being gone through. Colleges Scotland has been supported throughout by its employers association to help to ensure that the process is effective and efficient, but the process is an unknown. However, I suspect that if we had waited until all the unknowns about the other things that were happening in the sector were out of the way and there were no other complications before undertaking the merger process, we would have ended up never having the process and would therefore have lost the benefits of creating the bigger, more effective colleges.

Mr Neil is right that in some areas there is another layer between the funding council and the colleges, but I stress that that is very much the minority of areas. The legislation created the opportunity for some regions to have a regional board only when the colleges did not choose to merge to form one regional college.

Of the 13 regions, 10 are single-college regions, where the colleges merged to form one regional college. There are three exceptions; of them, Lanarkshire could have gone either way. Glasgow is a very big city that has 20 per cent of college provision, and because having only one college there was not going to happen immediately, a regional board was the outcome. In the Highlands, we are dealing with a very disparate area. There is a different layer there, in that the University of the Highlands and Islands is the regional board. I contend that, in those areas, we wanted to fund a region, which the legislation allowed for, rather than individual colleges.

The regional bodies—some of which are fully operational and some of which are not yet fully operational—will bring the region together so that it has one voice and there is coherence from within it on how money to the colleges is allocated. That value did not exist before.

I accept that there were a lot of complexities about the merger process, but I do not accept that it was a fiasco.

09:15  

I, too, do not accept that the merger process should be seen as a fiasco, to use that language. Many aspects of the process have been successful. We have a lot of figures that point to that success, some of which were set out in the note that I provided to the committee.

There is a lot in the question that we might develop during the session, but at this stage I will pick up the point about baseline data. In particular, we should be clear that there was and is a significant amount of baseline data that we can point to that shows an improving trend from before, during and after the merger process. If, for example, we look at the increase in the number of full-time students or the overall trend in attainment, we see real increases. I absolutely accept that there was no baseline data in some areas, such as for college destinations, but that data is now being gathered.

The college merger process, which has meant a smaller number of bodies that are larger and more strategic, has enabled us to gather a much richer picture of data on the performance of the sector as a whole and to build on and drive improvement through having that richer picture.

You both started off by saying that the process has been a success. For somebody such as me, measures of success are improvements in attainment and in the educational chances of people at the lower end of the income scale. Obviously, destinations are an important measure, as well. However, attainment is down and the drop-out rate is still quite significant. I recognise that, historically, the college sector has been far better at achieving improvements in the abilities of people with low incomes than the university sector has been, but where is the evidence to link any of the improvement to which you have referred to the process? Might improvement in many of those areas have taken place anyway? Where is the added value of the merger process, the reorganisation and the other reforms that you have mentioned? I do not think that it is convincing to say that improvements, where there have been improvements, have been the result of the process.

In the post-merger evaluations that we did with each of the colleges, we spoke to the colleges; we also spoke to stakeholders about how they interacted with the colleges. There is a lot of evidence of how the mergers have affected colleges’ interaction with universities on articulation, for example. That is fairly clearly attributable to the mergers.

With all due respect, that is not an outcome. Outcomes are things such as achievements, or attainment levels.

I think that the improvements that have been happening in the numbers of people who articulate from college to university, for example, are part of what leads to those outcomes.

You say that you think that that is the case, but where is the proof? Where is your evidence? You have just said that the improvements result from the process. Where is your evidence? If you have it, that is fine, but so far I have not seen the evidence that they are due to the process.

We have published a lot of the evidence that leads us to that conclusion in the post-merger evaluations and in the summary of the evaluations.

You mentioned attainment, which has been on an upwards trend. There has been a drop of 2 per cent in further education full-time success rates, but that was not entirely found in the merging colleges. Some of the colleges whose figures dropped were merging colleges, and some were not, and some of the merging colleges continued the upward trend.

Does that not reinforce my point that there is no correlation?

My point is that the correlation between the mergers and the drop in attainment is not made, because that happened in some of the colleges that merged and some that did not. With the colleges, we looked at the detail of what led to that drop in attainment in FE. It is worth stressing that attainment did not drop in HE—the figure went down by 0.1 per cent, so it was broadly flat. There was a variety of reasons. In some cases, colleges said that the reason was related to systems issues related to the mergers but, in the vast majority of cases, it was down to other issues. For example, there were concerns about bursaries and a sustained period of strikes. There was no one single reason—there was a variety of reasons. We have been working with the colleges through the outcome agreements to ensure that those reasons do not recur. The colleges are confident that they are on track to resume the upward trend in success rates. There is no link that leads us to say that the drop is in any way a consequence of the merger programme.

Well, that is very much an open question, given the evidence that we have seen. Obviously, we need to look to the future and learn the lessons. To be fair, you have said that you will learn the lessons and implement the Auditor General’s recommendations.

I have a wider question about the role of the funding council, the level of competence in the funding council and the added value of the funding council. There is a proposal on the table for the funding council to become part of a broader organisation incorporating Scottish Enterprise and Highlands and Islands Enterprise. How will that impact on the role, function and efficiency of the Scottish funding council? Where are the benefits of that proposed reorganisation?

I will pick up the broad point about the enterprise and skills review and then I will hand over to John Kemp for any specific comment on the funding council.

As the committee will probably be aware, we have now completed phase 1 of the enterprise and skills review. The conclusion of that emphasises the need for close strategic alignment between the funding council, Skills Development Scotland, Scottish Enterprise and Highlands and Islands Enterprise. It recognises that that alignment cannot be delivered without our looking carefully at the overarching governance arrangements. We are now looking in detail at the implementation of the overarching recommendations, under phase 2 of the enterprise and skills review, which has not been concluded. As part of phase 2, we will look carefully at the role of the Scottish funding council. We will reflect on the Auditor General’s recommendations in her report about the role of the Scottish funding council as regards colleges and we will report on that in due course.

Can I ask who “we” means?

When I refer to “we”, I am referring to the Scottish Government. The review is being led by Government ministers and I and other civil servants are of course supporting ministers in that work.

Are any external independent people involved in the review?

Yes. We have been working closely with a panel that includes a wide range of external participants. I can provide the committee with full details of the membership of the panel, but it certainly includes representatives from the college and university sectors.

Okay. That is all I have just now, convener, but I might come back in.

The submission from Colleges Scotland contains a lot of positive stuff, such as the 10 per cent increase in attainment and the 5 per cent increase in retention over the past six years, but one thing that stares out at me is the issue of depreciation, which was discussed at yesterday’s Education and Skills Committee meeting. It is mentioned on page 2, in the second paragraph under the heading “Reclassification”. It might be helpful for this committee if we had the same document that the SFC circulated to the Education and Skills Committee as a result of a visit that Liz Smith and I made to Queen Margaret University. That explains the depreciation process well.

We would be happy to do that—that is not a problem.

The report highlights again that the issue of depreciation causes technical deficits at the colleges, which makes it very difficult for the Public Audit and Post-legislative Scrutiny Committee to see whether the colleges are in good financial health, because it looks as though the bottom line is a problem. How are we going to address that in the future?

As the Auditor General suggests in the report, depreciation needs to be made clearer in the colleges’ annual accounts. In our guidance to colleges on their annual accounts, we have asked them to make that far clearer in their published accounts so that it is clear when a technical deficit has been caused by the spending of the depreciation cash and when there is an underlying real deficit. We have put that in guidance for the colleges relatively recently, and the situation should be far clearer in future accounts than it has been in the past.

If memory serves me correctly, the figure is in the region of £27 million or £29 million.

It is a bit less than that. From memory, I think that it is just under £20 million. It is in that region.

Colleges Scotland is asking for colleges to have flexibility in using the money arising from depreciation so that they do not have to seek prior permission from the Scottish Government—which they have to do every year, I presume. Is there any prospect of the current position changing?

We recognise that there is an issue around the use of the depreciation cash. I cannot give the committee a definitive answer today, because discussions are still going on, but I know that those with expertise in the area—including officials in the Scottish Government and colleagues in the funding council and Colleges Scotland—have been meeting to actively work through the issue. It is a relatively new issue that has been brought about through reclassification, and we recognise that it requires to be resolved. We will keep the committee updated on the progress of those discussions.

I particularly take the point about the need for colleges to have certainty—at the outset of the financial year or in advance of it, if possible—about the use that they can make of the totality of their resource. We are working together to achieve that.

Depreciation is treated according to current accounting principles, but I understand that college sector accounting is different from accounting in the rest of the public sector, which makes it difficult to draw comparisons. Is that correct?

When we were asked that question yesterday, I had the benefit of having my director of finance sitting next to me, who explained how different parts of the public sector have different statements of recommended practice for accounting. Accounts are done in different ways in different parts of the public sector, and you are correct in saying that colleges and universities operate in a particular way, which is what causes the issue.

I am looking at a written submission from the Educational Institute of Scotland. In section 4 on pages 1 and 2, it seems to question the accuracy of SFC reporting. Indeed, it says that

“the SFC reports on college mergers”

are

“excessively rosy, and contrast unfavourably with Audit Scotland’s overview”.

What are your thoughts on that criticism?

We have discussed with the EIS the issue of its view of the mergers being different from ours. When we were doing the post-merger evaluations, we were careful to speak to groups of staff across the various campuses of the merging colleges. On many occasions, we also spoke to groups that were organised by the EIS, and it is fair to say that there was sometimes a difference of view between the groups that had been organised by us and those that had been organised by the EIS. That is a real issue.

However, I do not think that we have been “excessively rosy” in the reports. In some reports, we have said that, by and large, the mergers have worked, but we have not said that in every case. In the case of Edinburgh College, which we will discuss later, we did a third post-merger evaluation that still indicated that there were significant problems. Where there have been significant problems, we have reported that in our post-merger evaluations.

Nevertheless, I accept that, when we have discussed the matter with the EIS, there have been differences of view between how the EIS has felt things have gone and how we have felt. We often based the evaluation on what we heard from staff in the colleges. It is always difficult to get the right balance.

09:30  

Sticking with that theme, Unison’s submission says on page 2, under the heading “Further education”:

“Currently, we are in a position where the government and the SFC claim not to have responsibility/powers over how colleges are run.”

We do not run colleges; they are run by their boards and their principals. However, we have financial responsibilities—I am the accountable officer for the funding that goes into colleges and for how that money spent—and we have a series of responsibilities relating to governance and how programmes are taken forward. There is often an imbalance in relation to the expectation that everything in a college can be resolved by the Government or by the funding council. Some things are the responsibility of the principal and the board; some things, if matters are going way off track, are the responsibility of the funding council or the Government. It is about being clear about what those things are.

I suggest that, as in any system, there is a balance of roles, responsibilities and accountabilities. It is very clear that the Scottish Government has certain responsibilities in relation to colleges. In particular, the Government sets the strategic direction and tasks the funding council with the delivery of its overarching strategic objectives.

It is also important to note that, alongside the process of college mergers, we have seen a strengthening of the outcome agreement framework that exists between the funding council and the regional colleges. That is a crucial way in which, through the Government’s overall strategy and the detail of the outcome agreements, there can be clarity about our expectations of colleges, as well as a clear reporting mechanism for the outcomes that individual colleges deliver.

I will stick with the Unison submission, which says that

“the SFC does not appear to feel it should look at how colleges are spending money other than round issues like gross misconduct and fraud.”

In the same vein, it also says that

“the role of the SFC in monitoring and engagement has not improved.”

It is fairly critical.

Yes, that is what it says. I contend that we are interested in how colleges spend money and not just interested in areas where there has been gross misconduct. It is public money, and through the outcome agreements we have a fairly extensive system to ensure that it is spent on the right things and achieves the intended aims.

I am not quite sure what Unison means when it says that we are only interested in gross misconduct or fraud. We quite often claw back money that is not achieving the ends that we want it to achieve. There is no hint of gross misconduct or fraud in those cases.

We are happy to engage with Unison to take that further. Again, I stress that colleges are run by their boards and their principals. Our job is to fund them and to support them to achieve the aims of the funding council, the Government and the wider Parliament; our job is not to micromanage colleges. We need to get that balance.

Is Unison perhaps referring to SFC’s regulatory role, which does not seem to be well defined?

We will take up the issue with Unison to see exactly what it meant. Its comment could also refer to intervention in pay and so on, because there are periodic calls for us to be more involved in that.

The college good governance task group has recently sought to ensure clarity over the SFC’s governance role. It was helpful to see the Auditor General’s view that that group’s recommendations were likely to improve the overall governance arrangements and clarify the funding council’s role in important governance issues. The task group will meet again to ensure that the recommendations are on track.

Page 11 of “Scotland’s colleges 2016” says:

“The Scottish Government expected college mergers to lead to a number of benefits”.

It goes on to say:

“Last year, we reported that the Scottish Government and SFC had not specified how they would measure the expected benefits of mergers”

and notes that

“the Scottish Government and the SFC have still not publicly set out when the benefits will be achieved and how they will measure them.”

How will the benefits be measured or demonstrated, and when will we know about that?

I think that things have already moved on since the Auditor General reported. As I said, I accept the recommendations in her report.

The document, “Impact and success of the programme of college mergers in Scotland”, which was published by the SFC, is important. It sets out the range of evidence—I emphasise that there is a lot of detailed evidence in the report, all drawn from individual post-merger evaluations—about the progress that the programme of merger has secured, and contains the details of the costs and savings.

You mentioned the fact that there is an absence of baseline data in some areas. Is it therefore impossible to measure certain of the outcomes?

What I sought to emphasise earlier was the fact that we have baseline data in quite a number of areas and are able to chart the year-on-year progress that colleges have made. I acknowledge that, in two particular areas—positive destinations and student satisfaction—there was not consistent Scotland-wide baseline data when we embarked upon the reform process. However, there is an interesting issue about whether reform should have been delayed in order to gather that data. I would argue that it should not have been. The Scottish Government documentation that set out the case for reform set out the urgent need to undertake college reform in order to secure a greater prevalence of colleges of scale. Thanks to the presence of those colleges of scale, we are now better able to gather a rich picture of data and ensure that future policy decisions are absolutely informed by that data.

Page 9 of the document concerns one of the outcomes that I want to explore. It was estimated that, by 2015-16, the sector would deliver efficiency savings of £50 million as a result of reform. In January 2016, the SFC said that the sector was on track to achieve those savings. How can you be so sure?

The post-merger evaluations identified savings of around £52 million from nine of the mergers. We excluded one college—Edinburgh—from that because it was in a deficit position. As is referred to elsewhere in the report, there is some criticism that we had not included the full costs of the harmonisation of the pay of the staff in the colleges. Since the publication of the report, we have arrived at that figure, which is £6.2 million of recurrent cost. I stress that, although that is probably largely attributable to merger, it is not exclusively so, because national bargaining is a process that had been happening throughout this period—at least, there had been a move towards it—and it is possible that some of the decisions that were made about how to harmonise were made with an eye to national bargaining as well as the merger process. However, if you take the £52 million of recurrent savings and net off that £6.2 million, it takes you to a figure of around £46 million.

I might return to that point in a second, but first I want to address another issue. I am concerned about part-time courses and female participation in particular. A section about students and staff starts on page 17 of the report. There is a suggestion that, as a result of a funding change in 2009, which resulted from a Scottish Government intervention at the time, there has been a steep decline in part-time courses, which has had a disproportionate negative effect on female students in particular and on older students. What are your thoughts on that?

I can say something about that from the Government’s perspective. You are right to identify the fact that deliberate policy decisions were made, in 2009 and subsequently, to put an increased emphasis on the provision of full-time courses and courses that would lead to recognised qualifications. I should emphasise that it is not the case that there are no part-time courses; far from it, because a great deal of part-time education is carried out. However, the focus has been on courses that lead to recognised qualifications.

Overall, the figures that I have seen point to around 52 per cent of all college learners being female. I recognise that the figures that the Auditor General has set out are around where the drops have occurred in part-time learning. The Auditor General made some important points around getting an overall picture of the current demand for college places in Scotland. Again, I think that reform and a smaller number of colleges enable us to do work on what the overarching picture of demand looks like. We are taking forward that work with the funding council and Colleges Scotland.

It is important to preface any discussion of this area by acknowledging that there are still a very substantial number of part-time learners in the college sector, particularly at FE level. The drop in part-time enrolments came from a very deliberate decision by the funding council and the Government in 2009 to prioritise activity on full-time courses for young people at a time of fairly severe economic downturn. The courses that were squeezed out then tended to be very short—often less than 10 hours—and they often did not lead to a recognised qualification. Therefore, there has been a squeezing out of such courses, which has accounted for the vast majority of the drop in part-time enrolments.

The part-time side has not been squeezed out entirely—probably the majority of enrolments at FE level are part-time enrolments. Higher education tends to have more full-time enrolments. However, there are still quite a lot of part-time enrolments in the FE sector. The change seems to have flattened out, because the balance between full-time and part-time enrolments in the past two or three years has remained broadly static; it has not changed much at all.

As Paul Johnston said, we need to work with the colleges to understand whether the current balance is right and whether there are groups that are not getting the provision that they need. However, we are fairly confident that most of what happened in 2009 was done to squeeze out very short courses that did not have the vocational worth of the courses that we replaced them with.

On a quick historical point, was an equality impact assessment done at the time?

In 2009 we did not do an equality impact assessment, but we should have done.

Right. What learning outcome has there been from that? Someone dropped the ball quite significantly there, did they not?

The learning outcome from that is that, in 2011, when “Putting Learners at the Centre – Delivering our Ambitions for Post-16 Education” was being implemented, we did an equality impact assessment. We routinely do such assessments now, but we recognise that we did not do one in 2009. We looked at the impact, but we did not do anything that could properly be described as an equality impact assessment.

I am grateful to my colleague Gail Ross for raising this issue. You talked about restructuring to promote courses that have vocational outcomes and which are more likely to lead to employment. However, it would appear from the report that a reducing percentage of leavers are going into employment. Does that suggest that the policy has not been successful?

The college leaver destinations are quite complex. At university level, somebody goes in and comes out four years later and goes into either further levels of education or work. With colleges, people tend to go into college and do a one-year course, then perhaps do another one-year course that leads to a different qualification. You are right that the proportion leaving college and going into work has dropped slightly, but the number going to positive destinations, including both work and further levels of study, has gone up.

09:45  

We have only two years of data on that, so we should not necessarily assume that there is a trend. However, the issue is important and we need to look at it very carefully. In the most recent publication of figures, which was for last year, the overall figure for positive destinations had increased compared with the year before. However, there was a move towards more people going on to some form of further education and a slightly smaller number going directly into work.

We have only those two data sets and we need to build that up year by year, seeking to ensure that the policy outcome of greater positive destinations for those in college is secured.

I direct the committee’s attention to my entry in the register of members’ interests, which states that I am a board member of North Highland College.

We have covered a lot this morning and, as we have gone on, I have had to strike out question by question as they have been asked.

Colin Beattie touched on financing and deficits and, as we know from the report, eight colleges forecast a deficit in 2015-16 and a further 11 forecast a deficit in 2016-17. More recent forecasts indicate that 14 colleges now anticipate a deficit in 2016-17. Are there reasons for those forecast deficits? Are any common themes or patterns emerging? Given the reductions in capital funding to the sector, is the current approach to financing estate improvements sustainable?

Some of the deficits that have been forecast relate to the issue that we were discussing earlier with Colin Beattie—they are technical deficits relating to depreciation cash. Others, however, relate to real deficits. I am afraid that I do not have the figure in front of me for exactly how many are in each category.

As a result of the changes that were made to bring the colleges into the public sector, the way in which colleges used to finance estate development—through building up reserves, borrowing money or, sometimes, having a grant element—no longer works. The Government and the funding council now have far more interest in college estates, because any changes have to be financed externally by us.

We are working with the college sector—this is one of the recommendations in the Auditor General’s report—to better understand its estate needs. Our previous work did not cover the entire estate, because much of it is quite new. There are a set of modern buildings and we had focused on the parts that were not new. We are now doing a wider estate survey that covers the whole sector. There will be a quick, initial survey this year and a longer one next year, as we mentioned in our submission to the report. The Government and the funding council need to look more closely at that as, now that colleges are in the public sector, they cannot use some of the tools that they used in the past.

I have some figures on investment in the college estate between 2007 and 2015. The total figure is around £550 million and, on top of that, there was an investment of £300 million through the non-profit distributing model pipeline. As we look round certain parts of Scotland, we can see fantastic new college buildings—two of them are in Glasgow. However, I accept the Auditor General’s point about our need to look across the board at the college estate and I welcome the work that is being undertaken on that matter by the funding council and Colleges Scotland. The Government will work closely with the funding council on future capital funding and revenue funding requirements of the college sector.

You touched on the issue of reserves and I want to ask about arm’s-length foundations, some of which hold significant sums of public money. Can colleges easily access that money, which they sometimes need for the college estate? Are the arm’s-length foundations working, or are there any alternatives that might work better?

Originally there was around £100 million in the ALFs. That figure has gone down significantly as money has flowed back into the college sector for estates developments and so on. On the question of whether they are working, by and large the answer is yes. The system is working, although we need to keep a constant eye on it. Part of the complication is that the foundations are arm’s length and, while they are set up with the purpose of assisting colleges, there can be other uses of the money.

We will keep a constant eye on that and if there are other, more efficient ways of achieving the ends that ALFs were set up to achieve, we would be happy, with the college sector and the Government, to consider whether that would be more appropriate. I am not aware of one at the moment, though.

My understanding is that the Auditor General has confirmed that arm’s-length foundations are operating as originally intended and supporting the purposes of each college.

May I come in on the issue of capital funding? Mr Johnston, you talked about the £300 million that is going in under a public-private partnership initiative. That is slightly disingenuous, is it not, given that capital funding has decreased by 77 per cent in the college sector since 2011-12? Is that acceptable?

I acknowledge that there have been significant reductions in the capital funding that has been available to the Scottish Government across the board. As part of that, it is absolutely the case that colleges have experienced a significant reduction in their core capital funding. However, the £300 million that has been allocated through the non-profit-distributing method is significant and we can see the results of that on the ground in Scotland. However, I would by no means be complacent about the issue. I absolutely agree that work needs to be done—work is being done—to look at the overall condition of the college estate in Scotland to be sure that we can provide for the necessary maintenance, and indeed for improvements and new builds where that is required, within the overall difficult financial climate that continues to exist.

I am reassured that you agree that 77 per cent is a significant reduction in funding, but why does the college sector need to take such a huge hit?

When there is a particular amount of money available for capital funding, it is important that consideration be given to the projects that should be given priority at particular points in time. That will vary. At certain points in time, there will be significant investment in some areas. We only need to look to the likes of the hospital in Glasgow or the bridge and we can see the amount of capital resource that is going into projects of that nature. These things will vary from year to year, hence the importance of being clear about the requirements of the college sector for capital funding going forward, and the priority that those have alongside other priorities, so that ministers can make the appropriate decisions about how to allocate resource.

My interpretation of page 26 of the Auditor General’s report slightly contradicts what you have just said. It says:

“The current method of allocating capital funding does not take account of—”

colleges’—

“need. This is due to the absence of a complete and up-to-date national condition survey of the college sector estate.”

I think that the Auditor General is saying that it is not because of the Queen Elizabeth hospital or the bridge; it is because your Government has not done an audit of the state of the college estate across the country and that is why capital money is being allocated. Do you agree with that?

We are talking about two elements of capital funding. One is the capital that is allocated out to each college each year as part of their capital maintenance. The issue is whether that should be focused towards colleges that have greater need, for example older buildings and so on, or spread equally across the sector to maintain the good buildings in as good a state so that they do not become bad buildings. That is one issue.

A separate issue is how major capital projects are focused on new estates, such as—most recently—the project that we have been working on in Falkirk, the City of Glasgow College project and so on. Those projects require major capital funding of many tens of millions of pounds, which is different from capital maintenance across the whole sector. We accept the Auditor General’s point that the way in which capital maintenance is used is an issue and that there is a need to look at how we focus on the big estate projects.

I must emphasise that, for many years, there has been a process of close engagement—which continues even now—between Government, the funding council and colleges on the capital requirements that exist, and funding decisions are made accordingly. That is not to detract from the Auditor General’s important point about the need to ensure that there is a comprehensive and clearly defined national picture of the college estate—I accept that point, and work is being done—but I emphasise that there has been a great deal of on-going engagement on the sector’s requirements within the difficult financial envelope overall.

So you are confident that the overall picture across Scotland will improve and that in future we will have a better idea of the requirements.

I am confident that the work is being done on the overall picture. As an official appearing before the committee today, I cannot make any statements about what the capital allocations will be. Ultimately, that will be a matter for the Parliament—

No—indeed. My question was on the data gathering.

The data gathering is being done and should lead to the improvements that the Auditor General recommends.

I apologise for arriving late—it is probably for the best that we are not scrutinising the train service this morning.

Abellio?

Yes. We will leave that for another day.

I missed some of the earlier questions and answers, but I will pick up some of the points that Liam Kerr raised. At a previous committee meeting, I asked specifically about the impact on part-time courses. Am I right that the reduction in part-time courses was a deliberate course of action? Was it an intended consequence?

Yes—it was.

I can say a little about that from a Government perspective. We might go over some ground that we have covered. As far back as 2009, a policy decision was made to focus more on courses that lead to recognised qualifications. The figures that I have seen indicate that approximately 97 per cent of activity now leads to a recognised qualification.

There was a deliberate decision, in light of the demand for places that existed and the financial context at the time, to focus on courses that lead to a recognised qualification. Aligned to that was a decision to focus significantly on the needs of young people in the 16-to-24 age category and to give priority to enabling them to access college places.

That was in response to a careful consideration of the overall economic picture and a recognition that youth unemployment had to be tackled. We can see from some of the figures that the decisions on prioritising recognised qualifications and young people have had a positive impact. However, I emphasise that it remains the case that colleges provide short courses and learning opportunities for older learners.

We are running a bit short of time, so I ask members and witnesses to keep their comments pithy.

John Kemp referred to a squeezing out of courses. Was the decision made with an awareness—indeed, in the full knowledge—that it would disproportionately squeeze out women, adult learners and those with caring responsibilities?

In one of the answers that I gave earlier—perhaps before you arrived—I said that we acknowledge that, as the Auditor General’s report highlights, we did not do a full equality impact assessment in 2009, although we did some modelling work. Our aim was to squeeze out courses that did not lead to a recognised qualification and were often very short—I am talking about courses of a couple of hours.

Just to be clear, why was the equality impact assessment not undertaken? Who made that decision?

That was an error. We should have done it and reported that to our council board, but we did not.

Was an assessment considered and dismissed, or was it just not considered at all?

10:00  

It was not considered. It was an error by the executive of the Scottish funding council; we should have put an equality impact assessment in the council paper. We did some analysis, but we did not report that to the council. That was simply an error.

I emphasise that equality impact assessments have subsequently been carried out. I have some in front of me, and I can share them with the committee if that would help. The assessments were carried out from 2011 onwards but, as John Kemp said, an assessment absolutely should have been carried out in 2009.

Is there a retrospective aspect to that work, or will it look just at the impact of future decisions?

The retrospective aspect is that we have looked at the data—for example, it was looked at as part of the 2011 work. It has been looked at many times since then but we accept that, when we made the decision in 2009, a full equality impact assessment was not done.

As of now, it is important that we get an overarching picture across Scotland of the demand for college places, and the funding council is doing that with Colleges Scotland.

In its submission, the National Union of Students Scotland tells us about

“a very real risk of excluding those students who most deserve a college place but simply aren’t able to study full-time”

and suggests that the Auditor General’s report highlights “a worrying trend”. Are you worried about that?

The trend of shifting between full-time and part-time education has flattened in the past couple of years and is not continuing. I stress that there is still a substantial amount of part-time provision in the college sector. The courses that were removed were very short and often did not lead to a recognised qualification. Looking back, I think that, had we carried out a full equality impact assessment, we probably would have reached the conclusion that we reached.

There is provision for part-time college courses of the valuable kind that the NUS is talking about. We need to work constantly with colleges to ensure that the balance is right, that the courses are available and that we have the right funding incentives in place. There is still considerable part-time capacity in colleges.

What about the computing and health courses in which, according to page 19 of the report, places have fallen by almost half?

Those courses would have been very short.

How are the people who would have gone on those courses acquiring those skills? Are you saying that they are now in full-time courses?

I imagine that the courses in those two subjects for which the drops have been highlighted would have been very short—almost leisure—courses in health, computing for the terrified-type courses and so on. Often such courses continue to exist, but they are paid for by the students.

I apologise if this issue has already been covered, but I was struck by the reference in Unison’s submission to its report “Learning the Hard Way”, which shows that

“staff are under pressure, morale is very low and trust in management is at rock bottom.”

The submission also makes the good point that

“Further education is all about people; education cannot be delivered by robots.”

Unison paints quite a dark picture about the atmosphere in colleges and what things are like for staff.

In my opening statement, I said that one of the reasons for the success of the mergers was the staff’s hard work. We have recognised, and the post-merger evaluations show, that the period of change in the college sector over the past few years has been demanding for staff. That is what staff told us when we spoke to them as part of the post-merger evaluation, but there are different perceptions of how bad it was and whether things have improved.

However, I take your point. We recognise the importance of ensuring that the staff in colleges are well motivated and supported because, as has been said, the work cannot be done by robots.

There is no doubt that staff are working hard, but the concern is that they are in danger of burning out. Do you share that concern?

Had the Colleges Scotland representative been available on the panel, she could have talked a bit more about its perception of pressures on staff. From our post-merger evaluations, I do not think that it would be fair to say that we perceived the situation to be as bad as you have suggested, but we recognise that those pressures are there.

Does Mr Johnston recognise those pressures?

I absolutely recognise that effective leadership is crucial. That is one of the lessons that the funding council brings out in its overarching report on the success of mergers. There are good case studies and examples of college leadership really engaging well with and supporting staff. I hope that lessons will be learned and that college leaders will support, develop and equip their staff to thrive.

Those same staff are currently in dispute over pay. Do you have any comment on that?

My comment is that work is on-going on pay. We are working with the funding council and Colleges Scotland in relation to the pay issues and we will ensure that the Parliament is kept updated as discussions continue. I do not know whether John Kemp wants to add anything more specific.

We have been supporting Colleges Scotland and the employers association with additional funding so that they have the capacity to take forward the negotiations in the best possible way. That is largely an issue between the employers and their staff, but we are supporting that from outside so that negotiations proceed smoothly.

There is an issue of equality between the pay rise for support staff and that for lecturers. I hope that an agreement is reached swiftly.

Monica Lennon and Liam Kerr raised points about equality impact assessments. Mr Johnston, is there a statutory duty on your Government to carry out such an assessment?

The statutory duties that I think that you are referring to are in the Equality Act 2010. Those duties are absolutely important. As Dr Kemp recognised, it is important that equality impact assessments are carried out whenever policy changes are made that could have an impact on—

So why did you not do one for the merger process?

We have recognised that, in 2009, an equality impact assessment should have been done but was not done. However, I emphasise that subsequent equality impact assessments have been carried out and that the funding council carries out on-going work with individual colleges on equalities. In some of the regular reporting from the funding council, I have been struck by the volume of information that is gathered, analysed and reported on the support that colleges provide to those who have a variety of protected characteristics.

It seems like a huge and significant omission on the part of your Government. Colleges provide education, training and skills for large parts of our population. We have all had people coming to our surgeries who are no longer able to access college courses because of the decision. Not doing such an assessment seems a serious oversight or omission, given that it is a statutory duty. Do you agree?

I emphasise that there was not one available in 2009, but a number of the duties that we now refer to are in the Equality Act 2010. However, I am not seeking to gloss over the fact that an equality impact assessment should have been produced in 2009. That is certainly in the territory of the need to ensure that, in the future, all policy changes that could have an equalities impact are fully assessed. I emphasise the on-going work that has been done since then to take full account of the equalities impacts of policies that are being pursued.

That includes work in 2011, in relation to “Putting Learners at the Centre—Delivering our Ambitions for Post-16 Education”, which was the key policy that led to the reform programme. It was equality impact assessed.

Does Mr Johnston expect a subsequent legal challenge on the absence of an equality impact assessment in 2009?

I do not want to comment on that issue. I have set out our position on the extent to which equalities issues have been considered thoroughly in recent years and will continue to be considered carefully.

I want to ask about workforce planning; I refer to paragraph 57 on page 25 of Audit Scotland’s report. When the committee conveners met the First Minister yesterday, I pointed out to her that many themes in Audit Scotland’s reports come up time and again. Workforce planning is an issue across the public sector. The report says:

“there is limited evidence of systematic workforce planning”

in our colleges. Do you know why that is?

My starting point is to emphasise that I accept the need for such workforce planning to be carried out, and I recognise that that recommendation is not limited to the college sector. I hope that the committee will see the evidence of that workforce planning taking place. I know that that work is being carried out between the funding council and Colleges Scotland.

We will take forward that recommendation with the colleges.

So that is being taken forward.

Yes.

Before I bring in Alison Harris for our final question, I will ask about student demand, which greatly concerns me. In autumn a couple of years ago, I raised in Parliament the issue that more than 800 young people—I think that the number was 818—were unable to get an engineering place at Dundee and Angus College, which is in my region. All those students were turned away. As you know, there is no data-gathering system to show what those young people went on to do and whether they took alternative routes. That concerns me on a number of levels. It concerns me for our economy and its skills needs that there is no system in place across the country that records student demand. How is that being tackled?

We are working with Colleges Scotland and the Government on a systematic way of understanding the applications to each college by subject so that we can compare them across Scotland and understand where there are disparities in demand. That kind of thing can be done easily in universities, because there is one application system. Doing it in colleges is more complex, because they have different systems. We have piloted work with some colleges, including Dundee and Angus College, on ways of doing that. We now need to roll that out to all the other colleges and ensure that that is done sector wide so that we understand who is applying to do what courses and what the outcomes are. That will tell us something about the demand for courses.

I stress that, as well as that, we will do work that looks at the demography of different areas, the proportions of people who go to universities and the proportions in work, for example, so that we understand what is happening and can compare that with the supply of places in order to understand which areas might need more activity and which might not. Over the past couple of years, we have moved activity from areas of lower demand to areas of higher demand, so our funding is increasingly needs based. We do not have the same kind of data as there is in the university sector, but we hope to move towards something like that.

The convener has raised an important point, which is being addressed. A smaller number of larger colleges of scale that operate with clarity on the requirements of a region can help to secure progress.

I do not think that there is any timescale for that work. Can you put a timescale on it?

We intend to have the system for recording all the students in place by the time that students make applications for 2017, as the 2016 period has now passed.

I apologise for being so late this morning, but that was totally outwith my control.

I hope that my question has not been asked; it is about an issue that concerns me. Are there indicators that the Scottish Government’s focus on courses that lead to employment has not been very successful, in light of the low and reducing percentage of leavers who go into employment?

We picked that up earlier, but I am happy to recap briefly. I emphasise that the most recent figures for positive destinations are up—overall, there is an increase. We have only two years of data, and the most recent year’s data shows a small drop in those who go into employment but an increase in those who go on to further courses. As we have discussed, the nature of further education is such that the learner is often on a journey that may involve a number of courses in a pathway that leads to employment. We also recognise that we need to keep a close eye on the positive destination figure. That data will now be gathered year on year.

I apologise for missing that and covering the subject again.

I thank both witnesses very much for their evidence and suspend the meeting for five minutes for the witnesses to change over and for a comfort break.

10:15 Meeting suspended.  

10:20 On resuming—