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Stage 1 Report on the Graduate Endowment Abolition (Scotland) Bill
7 November (8th Meeting, 2007 (Session 3))
Supplementary Written Evidence
14 November (9th Meeting, 2007 (Session 3))
Supplementary Written Evidence
28 November (11th Meeting, 2007 (Session 3))
To consider and report on (a) further and higher education, lifelong learning, schools, pre-school care, skills and other matters falling within the responsibility of the Cabinet Secretary for Education and Lifelong Learning; and (b) matters relating to culture and the arts falling within the responsibility of the Minister for Europe, External Affairs and Culture.
Karen Whitefield (Convener)
Committee Clerking Team:
Clerk to the Committee
Senior Assistant Clerk
1. The graduate endowment (“GE”) was introduced by the Education (Graduate Endowment and Student Support) (Scotland) Act 20011, (“the Act”) which came into effect on 3 May 2001. It came into force for the academic year 2001-2002, and is payable by Scottish domiciled and European Union students who started their first full-time degree course at a Scottish institution on or after 1 August 2001. There are a number of exemptions to this, including lone parents; part-time students; those in receipt of the Disabled Students’ Allowance at some point during their course; those who are aged 25 or above, are married or in a civil partnership or who have been self-supporting out of their earnings for periods aggregating 3 years or more, before the first academic year of their course. The amount to be paid is fixed at the time a student begins his or her degree course and is currently set at £2,289. The graduate endowment is payable by students in the April following the successful completion of their course.
2. The Graduate Endowment Abolition (Scotland) Bill (SP Bill 2, Session 32) (“the Bill”) was introduced in the Scottish Parliament on 22 October 2007 by Fiona Hyslop, Cabinet Secretary for Education and Lifelong Learning. The Bill is accompanied by Explanatory Notes (SP Bill 2-EN, Session 33) which include a Financial Memorandum, and by a Policy Memorandum (SP Bill 2-PM, Session 34) as required by the Parliament’s Standing Orders. On 23 October 2007, under rule 9.6 of Standing Orders, the Parliamentary Bureau referred the Bill to the Education, Lifelong Learning and Culture Committee (“the Committee”) to consider and report on the general principles of the Bill.
3. As the Bill does not contain any provisions for making subordinate legislation, there is no report from the Subordinate Legislation Committee. The Finance Committee report on the Financial Memorandum is attached at Annexe A.
Purpose of the Bill
4. According to the Explanatory Notes, the Bill—
The Explanatory Notes go on to explain that—
5. Giving evidence to the Committee on 7 November 2007, Alex Young, Learning Support Policy Officer in the Lifelong Learning Directorate of the Scottish Government, and the Bill Team Leader, explained the policy intention of the Bill as being—
6. In addition, the Policy Memorandum indicates that widening access to higher education is a policy intention of the Bill—
“The abolition of the GE should therefore be a contributing factor in opening up access to higher education on a more equitable basis. Young people from areas of multiple deprivation should have wider access to higher education and although efforts on this have increased recently, the proportion of entrants from deprived areas of Scotland has not changed significantly over the past five years.”6
Scottish Government consultation
7. The Scottish Government launched its consultation on the proposed Bill on 13 July 2007, with a closing date for responses of 7 September 2007. There were 44 responses to this consultation, of which 29 gave permission for their response to be published in full7. These were subsequently published on the Scottish Government’s website, on 11 October 2007.
8. At its meeting of 24 October 2007, the Committee agreed its approach to its Stage 1 consideration of the Bill8. The Committee subsequently issued a call for written evidence9 on 25 October 2007, with a deadline for responses set for 23 November 2007. The Committee invited views from interested parties on the general principles of the Bill. In addition it asked:
10. The Committee considered the written evidence received at its meeting of 28 November 2007, and noted that a sizeable majority of the responses supported the basic principle of abolishing the GE. The Committee also noted that one of the remaining submissions stated “no specific objection to the over-riding principle behind the abolition”10, and one other made no comment on the Bill as the submitting organisation believed that the Bill did not cover specific areas which fell within its remit11.
11. In general, the submissions expressed support for the general principles of the Bill. However, a significant number of responses attached a number of caveats to that support, particularly with regard to higher education and student support funding. A number of submissions also raised related issues of levels of student debt, widening access to higher education, and part time students. One submission12 argued that abolishing the GE would “close off a debate on university funding,” leading to a “decline” in Scottish higher education.
The Committee took oral evidence on the Bill over the course of three meetings as follows:
13. Extracts from the Minutes of all the meetings at which the Bill was considered are attached at Annexe B. Where written submissions were made in support of oral evidence, these are reproduced, together with the extracts of the Official Reports of each of the relevant meetings, at Annexe C. All other written submissions are detailed at Annexe D.
14. The Committee would like to thank all those who submitted written evidence or gave oral evidence.
15. Following the evidence session on 7 November, the Committee wrote to the Cabinet Secretary, Fiona Hyslop MSP, to seek clarification on a number of points. A copy of this letter and the Cabinet Secretary’s reply can be found at Annexe C.
Operation of the GE
16. The GE was established to provide funds for future student support, payable by graduates to recognise the benefits they had received from their higher education.
17. The Student Awards Agency for Scotland, in a written submission, told the Committee that the majority of students liable to pay the graduate endowment add the sum owed to their student loan. In 2007, 60.3% of those liable added the fee to their loan, whilst 29.6% paid the fee in full.13
18. During oral evidence given to the Committee on 7 November 2007, Scottish Government officials stated that they had not asked the Student Loans Company how many people are currently repaying the GE out of the 21,000 who are liable to date14. The Committee believes that the answer to this question would have aided its scrutiny of the Bill by helping to build a picture of how the GE had been operating to date.
19. In evidence to the Committee on 28 November 2007, the Cabinet Secretary for Education and Lifelong learning argued that because as a majority of graduating students simply added it to their student loan debt, the GE was not a particularly effective way of funding student support—
20. The Bill extinguishes liabilities for all those who will become liable on 1 April 2008 onwards. Those who are already liable to pay the fee, or who have already repaid it, will not have their debt extinguished or repaid. The National Union of Students Scotland supported this position, stating that—
21. In giving evidence to the Committee on 28 November 2007, the Cabinet Secretary for Education and Lifelong Learning stated that—
22. The Committee notes that there was no evidence given in support of those who graduated before 1 April 2007, who are liable to pay the fee, within the provision of the Bill.
23. The issue of widening access to higher education emerged as a key theme in both the oral and written submissions the Committee received. As indicated earlier, the Committee heard some evidence that the prospect of debt may act as a disincentive for many wishing to participate in higher education. However, the Committee also believes that decisions on whether or not to enter higher education are complex, and there may be well other significant disincentives faced by sections of the community.
24. The Policy Memorandum for the Bill states, in paragraphs 9 and 10, that—
and goes on to add in paragraph 12—
25. When questioned on these claims, Scottish Government officials were not able to offer specific evidence in support of them. Officials argued that the age participation index and the data on “average student debt” provided the evidence. However, the age participation index indicated that total participation rates had risen between 1999-00 and 2001-02 and 2004-05 and 2005-06. The Committee wrote to the Cabinet Secretary, Fiona Hyslop MSP, to seek clarification, and her response stated that—
26. Scottish Government officials also wrote to the Committee to clarify evidence given on 7 November 2007, stating that—
27. Some organisations questioned the extent to which the graduate endowment acts as a disincentive to those seeking to participate in higher education. In its written submission to the Committee the Scottish Funding Council stated that—
28. The British Medical Association Scotland stated that—
29. The Committee notes that liability for the GE is an element of overall student debt and that abolishing the endowment will, to some extent, reduce overall levels of debt faced by graduates. However, the Committee is not convinced that abolition of the GE will, in itself, achieve the aim of widening access.
30. The Scottish Domiciled Entrants from Deprived Areas to Higher Education in the UK figures show that the percentage of entrants from deprived areas has risen from 14% in 2002-03 to 15% in 2005-06, which covers the period in which the GE came into effect. This suggests that the number of entrants to higher education from deprived areas has remained largely static since the GE was introduced. It is therefore not clear that abolition of the GE will necessarily help to widen access to higher education, other than by reducing a proportion of the overall potential level of debt incurred by students.
31. In its written submission to the Committee the Royal Society of Edinburgh stated that—
“Whilst this society strongly supports measures that encourage students from disadvantaged communities to go to university, the relief proposed in the graduate endowment abolition bill is undiscriminating. A more targeted approach would be preferable, for example, a graduate tax supplemented by means-tested grants for disadvantaged applicants.”22
32. In giving oral evidence to the Committee on the 28 November 2007, the Cabinet Secretary for Education and Lifelong Learning stated that—
The Committee agrees with this principle. However, there may be other factors, aside from financial concerns, which contribute towards the numbers of entrants to higher education from deprived areas, and the Committee would welcome further analysis of these factors by the Scottish Government.
33. A significant number of written submissions the Committee received expressed concerns about current levels of student debt. In her letter to the Committee on 13 November 2007, the Cabinet Secretary for Education and Lifelong Learning told the Committee that, “Debt, and the fear of debt, is a real and growing concern for many prospective students.”24 Evidence from NUS Scotland supported this view, describing levels of debt faced by students as “crippling”25, and adding—
The British Medical Association Scotland added that—
34. In 2003, research carried out in Scotland by Alasdair Forsyth and Professor Andy Furlong of the University of Glasgow, for the Joseph Rowntree Foundation, also supported this view, finding that—
35. The Committee notes that this research, whilst highlighting the effects fear of debt had on students from disadvantaged backgrounds entering higher education, looked specifically at all money and debt issues that such students may face. It was not specific to the GE, which becomes liable after a student has graduated, and (if added to a student loan) once they are employed, rather than being a debt faced while they are studying or before they enter into study.
36. The Committee notes that the abolition of the GE may remove an element of the debt potentially faced by many full time students. The Committee also notes evidence that states the possibility of accruing debt, may act as a one of a number of disincentives for potential participants in higher education.
37. However, the Committee also notes a number of comments in the written submissions it received which seek further assurances on the Scottish Government’s intention to further relieve student debt. NUS Scotland stated that—
38. In his speech to the Parliament on 14 November 2007, presenting the strategic spending review, the Cabinet Secretary for Finance and Sustainable Growth, announced plans to consult on further student support and graduate debt proposals in 2008.
39. The Committee acknowledges that the question of student debt is not one specifically to be addressed as part of the consideration of the general principles of the Bill. Nevertheless, the Committee will await the Scottish Government’s further proposals with interest.
Higher education and student support funding
40. The Committee notes the statement30 in the Policy Memorandum that—
41. This statement was welcomed by many of those who submitted evidence to the Committee, including the Scottish Trades Union Congress, which stated that—
42. However, concerns were expressed by others, including NUS Scotland, which commented that—
43. The written submission by The Robert Gordon University highlighted another related concern that—
44. Skill Scotland: National Bureau for Students with Disabilities highlighted several concerns with regard to higher education and student support funding and possible effects on students with disabilities. In its written submission to the Committee, Skill Scotland said —
45. Finally, the Committee noted comments given in oral evidence on the budget process 2008-09 by Universities Scotland, in relation to possible relationships between the funding settlement for the university sector, the abolition of the GE, the resultant income forgone, and its possible impact on end year flexibility—
46. The Committee questioned Scottish Government officials on the impact repeal of section 2 of the 2001 act could have on student support, and specifically on whether there would remain any statutory provision for funding to be raised for student support. Officials told the Committee—
47. The concerns expressed in relation to student support were put by the Committee to the Cabinet Secretary who responded that—
48. Issues relating to the situation faced by part-time students were brought to the Committee’s attention in evidence given by The Open University in Scotland. The written submission stated—
49. The Committee is concerned that a consequence of the Bill could be an increase in the gap between full-time and part-time students in terms of the cost of tuition fees and the subsequent impact on debt. The Committee therefore welcomes the statement in the Scottish Government’s Economic Strategy which includes, in the Key Strategic Approaches and Policies for the Learning, Skills and Well-Being priority, a commitment to—
50. The Committee also notes the statement made by the Cabinet Secretary for Finance and Economic Growth, when presenting the Scottish Government’s Scottish Budget Spending Review to Parliament on 14 November 2007 that—
51. The Bill contains no provision for subordinate legislation therefore the Subordinate Legislation Committee has made no report.
52. The Policy Memorandum states that, “no options other than abolishing the GE have been considered”. In giving oral evidence to the Committee on 28 November 2007, the Cabinet Secretary for Education and Lifelong Learning explained the rationale behind this as being—
53. The Committee believes that it may have been helpful to examine other possible approaches to achieve the aims of the Bill with regard to widening access to, and participation in, higher education. This may have resulted in the presentation of a more substantial and convincing evidence base that the policy outlined in the Bill was the most appropriate one.
54. A number of concerns surrounding the contents of the Policy Memorandum came to light in the oral evidence given by Scottish Government officials on 7 November 2007. The Committee believes that the Rationale section of the Policy Memorandum contains some misleading or unsubstantiated statements.
55. The Committee welcomes the subsequent clarifications from the Cabinet Secretary and Scottish Government officials regarding statements made in the Policy Memorandum and feels it would have been helpful for these to have been included in the memorandum in the first instance rather than the Committee having to request the information subsequently.
56. The Finance Committee reported to the Committee on the Financial Memorandum on 21 November 2007. A copy of its report is attached at Annexe A.
57. The Edinburgh College of Art stated in its written submission to the Finance Committee that—
58. The Finance Committee draws the attention of the Committee to a number of concerns about the contents of the Financial Memorandum. The Finance Committee’s concerns centre on the level of detail contained in the Financial Memorandum, and the clarity of information that was presented in it. The Finance Committee report states that—
59. This Bill is abolishing a fee that was established to fund specific purposes. In abolishing the fee, an established source of revenue and designated funding is therefore being abolished. The Financial Memorandum could have been more helpful and transparent in its explanation of the implications of the Bill.
60. The Committee fully endorses the conclusions of the Finance Committee.
61. The Committee would also like to draw the comments made in the written submission by Skill Scotland: National Bureau for Students with Disabilities to the attention of the Scottish Government. Skill Scotland raises a number of concerns regarding funding and support for students with disabilities which the Scottish Government may like to address.
62. The Committee notes that the intention of the 2001 Act, with respect to the GE, was that it should fund future student support. The Committee also notes that a majority of GE liability has been added to student loans rather than repaid.
63. The Committee understands that backdating the extinguishing of liabilities to include all those who have repaid or are currently liable for the GE would have significant budgetary implications for the Scottish Government.
64. The Committee also notes that a key intention of the Bill is to widen access to higher education, particularly in relation to people from deprived backgrounds. The Committee believes there may be a variety of factors underlying the numbers of people from deprived areas who participate in higher education and notes that there has been no significant decrease in the numbers of people from such areas entering higher education since the inception of the GE.
65. The Committee therefore does not believe there is sufficient evidence to demonstrate that the abolition of the GE will, in itself, contribute to widening access to higher education. Neither, however, did the Committee find sufficient evidence that the GE element of the 2001 Act had fully achieved its aims of widening access to higher education, particularly in respect of those from deprived backgrounds.
66. The Committee notes the potential reduction of overall levels of student debt likely to be brought about by the abolition of the GE, should the Bill be passed. The Committee also notes the Scottish Government’s stated intention that this Bill would be the first in a number of measures aimed at extinguishing all student debt. However, the Committee recognises that some witnesses held views that the abolition of the GE is not the most important measure that could have been taken. The Scottish Government could have used the legislative opportunity to introduce a more wide ranging bill to address the wider issue of student debt and financing of higher education and student support.
67. It is difficult to determine what specific overall affect the abolition of the GE may have on widening access or participation levels. The Committee considers that it has insufficient evidence to determine whether the existence of the GE would be a significant factor in a student deciding they were no longer able to continue with their study for financial reasons. The Committee notes, however, that the GE is a debt liable after graduation, rather than before or during study.
68. Statements made to the Committee by the Scottish Government indicated that student support and higher education funding would not be adversely affected as a consequence of this Bill. The Committee notes these and considers that it is essential that this is indeed the case.
69. Evidence which states that part-time higher education students will not receive any benefit as a result of this Bill as they are not currently liable to pay the GE, is also noted by the Committee. This will create a situation in which part-time students will continue to pay tuition fees, whilst full-time students will effectively receive their education free of charge. The Committee acknowledges that the Scottish Government has signalled its intention to examine the issues faced by part-time students and the Committee looks forward to considering its proposals in due course.
70. Overall, while Committee agrees with the intention of the Bill to remove barriers to access to higher education, it does not agree that abolishing the GE is the most effective way of achieving that goal. Stage 1 scrutiny has pointed up a number of significant criticisms of the Bill and highlighted a lack of alternative approaches to widening access to higher education. The Committee believes that the funding required to be foregone so that the GE can be abolished would be better invested in other methods to retain a competitive edge in the delivery of high quality higher education and to widen access, including for example more funding directly for universities and in the current system of bursaries.
The Committee reports to the Education, Lifelong Learning and Culture Committee as follows—
1. The Graduate Endowment Abolition (Scotland) Bill (“the Bill”) was introduced in the Parliament on 23 October 2007. The Education, Lifelong Learning and Culture Committee has been designated by the Parliamentary Bureau as the lead committee for consideration of the Bill at Stage 1. Under Standing Orders Rule 9.6, the lead committee at Stage 1 is required, among other things, to consider and report on the Bill’s Financial Memorandum. In doing so, it is required to consider any views submitted to it by the Finance Committee.
2. Although the provisions in the Bill do not introduce any significant new expenditure to the Scottish Consolidated Fund, given the complexity of the financial arrangements involved in delivering the Graduate Endowment (GE) and the level of income that the Scottish Government stands to forego, the Committee agreed to adopt level two scrutiny in relation to the Bill. Level two scrutiny typically involves taking oral evidence from Scottish Government officials and seeking written evidence from any organisations financially affected by the Bill. In this case, since it appeared that there was no financial impact on other organisations, the Committee did not seek additional written evidence.
3. The Committee took oral evidence from Scottish Government Officials at its meeting on 6 November 200745 and received written evidence from officials following the oral evidence session. The written evidence is attached as an annexe to this report.
4. The Bill seeks to abolish the GE for those students who successfully completed their course on or after 1 April 2007.
5. The GE was introduced by the Education (Graduate Endowment and Student Support) (Scotland) Act 2001. Graduates are not obliged to pay the GE until 1 April after successful completion of their course. The amount to be paid is set at the beginning of students’ degree courses – for entrants in academic year 2006-07, the fee payable would be £2,289.
6. The GE applies to Scottish domiciled and non-UK EU students (subject to various exceptions), but not to non-EU overseas students or students from elsewhere in the UK who study in Scotland. The Policy Memorandum states that overall the GE does not apply to “almost 50% of graduates”.46
7. Income from the GE was originally intended to fund student support in such a way as to widen access and participation in higher education, through increased bursaries and student loans. However, in practice, GE fee income has not been used for this purpose but has been applied specifically to the costs of providing student loans. The Financial Memorandum states that GE income is—
8. The Financial Memorandum explains that using this income for the costs of providing student loans means that existing budget can be released from what was previously the Enterprise and Lifelong Learning Department’s budget to fund additional financial pressures which arise from year to year, i.e. for end-year flexibility. The SPICe Briefing on the Bill48 explains the accounting procedure employed—
9. Therefore, as income from the GE came in, it was seen as “additional”, and used to fund the cost of student loan subsidy. In turn, this released budget that had been attributable to the student loan subsidy to be used elsewhere with the lifelong learning budget.
10. Given the somewhat unusual and complex financial arrangements involved in processing income from the GE, the Committee is concerned that the level of detail present in the SPICe Briefing was missing from the Financial Memorandum.
Costs on the Scottish Government
11. The Financial Memorandum states that the Scottish Government will forego around £17m per annum in net income from the GE.
12. The calculations in the Financial Memorandum base this figure on an expected gross income of £21.7m from the 11,558 graduates who became liable to pay the GE on 1 April 2007. The Financial Memorandum explains that around two thirds of liable graduates will opt to pay the GE by taking out a loan through the Student Loans Company. Therefore, of the £21.7m, loans will have a value of around £14.6m, with £7.1m being paid in cash.
13. However, the cost of providing student loans is 31% of every £1 borrowed. As such, the full amount of £21.7m will not be received by the Scottish Government; loans with a value of £14.6m will cost around £4.7m. Taking the cost of £4.7m from the gross income of £21.7m gives the final figure of £17m.
Costs on the Scottish Government – Student Awards Agency for Scotland and Student Loans Company
14. The Student Award Agency for Scotland (SAAS)50, the agency responsible for collection of the GE, will incur a one-off cost of £225,000 for writing off the costs for the IT system that is used to record and administer GE liabilities. This will be written off in financial year 2007-08 and will be met from the Scottish Consolidated Fund.
15. The Student Loans Company will also require one-off funding of £54,000 to remove GE functionality from its systems and processes. On top of this, the Financial Memorandum states that a further amount of £9,000 will need to be paid once the scheme is fully decommissioned and all outstanding liabilities have been processed.
16. The Financial Memorandum states that abolishing the GE should save the Student Loans Company £30,000 per annum in running costs in future years, from financial year 2008-09. SAAS will also save around £30-35,000 per annum as a result of abolishing the GE. These savings will be redeployed to other parts of the agency.
Amount of income
Graduates in debt recovery
17. As explained above, the Financial Memorandum states that the Scottish Government stands to forego around £17m of income per annum from the GE. However, the figures given in the Financial Memorandum do not include those graduates in, or facing, debt recovery. The SPICe Briefing states that (based on figures from SAAS) the total amount of GE income awaiting debt recovery on 1 April 2007 was approximately £1.95m.51 Officials explained that because the level of liability has not yet been confirmed by SAAS, those in debt recovery were not included in the overall figures.52
18. The Committee appreciates this explanation from officials, but questions why this information was not included in the Financial Memorandum.
Costs of collecting loans
19. The Financial Memorandum states that the cost of collecting student loans is 31% of every £1 borrowed. Officials explained how the figure of 31% was arrived at—
20. Officials explained the subsidy as follows—
21. The Committee is satisfied with this explanation, but suggests that this information could have been included in the Financial Memorandum.
22. As detailed above, the Policy Memorandum states that, due to various exemptions, the GE does not apply to “almost 50% of graduates”. However, the Policy Memorandum does not make clear that, of those who are not liable, only a small proportion are formally exempt from payment. The majority of those who are not liable have decided to continue their course of education. The SPICe Briefing on the Bill (using SAAS figures) shows that, for those who became liable to pay on 1 April 2007, only 1,551 (6%) out of 24,340 graduates were exempt from payment, but 9,653 graduates (40%) were not liable because they had decided to continue their course of education.55
23. The SAAS figures quoted in the SPICe Briefing also show that the proportion of graduates continuing in education has fallen since the first cohort of graduates became liable. In April 2005, the figure was around 82%; in April 2006 it had fallen to around 50% and in April 2007 it was around 40%. The large drop between 2005 and 2006 can be explained by the majority of Scottish students completing four-year, rather than three-year, honours degrees. However, the Committee is concerned that, if the GE continues, the number of those liable could increase in the future, meaning that the Scottish Government is potentially forgoing more than £17m per annum. In response to these concerns, officials stated—
24. In written evidence following the Committee meeting, officials confirmed that those students who started a five-year course in 2001 are included in the £17m figure but that there are currently 580 first degree students who are studying for six years or longer.57 This includes those students who have had to repeat one or more years of their course. The written submission states that—
25. The Committee is grateful for the clarification provided by officials and understands that there is no guarantee that any of these students will become liable. However, the Committee is of the view that this information should have been included in the Financial Memorandum, as it again lends a margin of uncertainty to the figure of £17m.
Impact of lost income
26. Budget released by GE income as end-year flexibility is not returned to the Central Unallocated Provision (CUP) but, as stated in the Financial Memorandum, is used “to fund in-year, non-baseline pressures”.59 During oral evidence, officials gave examples of what the money is used for—
27. These projects were identified as being non-baseline for the current spending review period. Officials explained that the forthcoming spending review will determine the status of these projects.61 In the absence of GE income, decisions will have to be made as to whether such projects are a priority to become baseline spending.
28. The Financial Memorandum states that the Student Loans Company will save around £30,000 per year in running costs from 2008-09 and that SAAS will also save £30,000-£35,000 per year. However, in a written answer to a Parliamentary question in 2006,62 the then Scottish Executive stated that the annual cost to the Executive of operating the legislation was £156,739. Government officials explained this disparity in written evidence—
29. The Committee is not yet fully satisfied with this explanation and therefore agreed to seek further details from the Scottish Government through correspondence. The response received will be forwarded to the lead committee.
30. When questioned on the level of detail and explanation provided in the Financial Memorandum, officials responded—
31. The Committee appreciates the potential problem for officials in deciding how much detail to include in a Financial Memorandum, especially when dealing with complex financial matters. However, the previous Finance Committee often raised concerns about the quality of Financial Memoranda and regularly wrote to the Scottish Executive throughout Session 2 detailing its concerns with regard to, among other things, the level of detail given in Financial Memoranda.
32. The Committee has significant concerns over the level of detail provided in the Financial Memorandum and its clarity on the financial implications of the policy. Indeed, the Committee found the SPICe Briefing more useful than the Financial Memorandum in understanding the financial implications of the Bill.
33. For example, the Financial Memorandum does not give an adequate explanation of the accounting practice used that resulted in the nil net impact on budget baselines or of why the cost of providing student loans is 31% of every pound borrowed. While the Committee appreciates the information given by officials during oral evidence, it is of the view that such important background information should have been included in the Financial Memorandum.
34. The Committee is also concerned that the Financial Memorandum only states that the amount of income to be foregone is “around £17m” and does not give a range of possible figures or a margin of uncertainty, based on either those in debt recovery or those continuing in education. The Committee accepts that the purpose of a Financial Memorandum is to give a best estimate, but wishes to make clear that the Financial Memorandum should have explained any assumptions and uncertainties surrounding the estimates given.
35. The Committee recommends to the lead committee that it takes account of the issues highlighted in this report. The Committee expresses particular concern in relation to the quality of the Financial Memorandum. The lead committee may wish to raise this issue with the Scottish Government.
SUBMISSION FROM THE SCOTTISH GOVERNMENT LIFELONG LEARNING DIRECTORATE
Correspondence dated 14 November 2007
At the Finance Committee meeting on Tuesday 6 November, officials gave evidence on the Financial Memorandum of the above Bill. This letter seeks to address the points on which the Committee have requested further clarification.
Number of students in higher education for more than four years
As the Committee may recall, the lost income to the Scottish Government as a result of the Bill is estimated at £17m per annum. Liable graduates who entered university in 2001 and who undertook a course of 5 years would have completed their course in 2006 and would have been liable to pay the GE fee on 1 April 2007. These students will therefore be captured in the £17m figure.
To establish any additional liability we need to consider how many students are on a course of 6 years or more. Our analysts have confirmed that there are currently 580 first degree students who fall into the category of personally studying for 6 years or longer. This figure includes, for example, students who have had to repeat at least one or more years of their course.
If all of these students eventually became liable for the GE fee then we could be foregoing approximately £1m of additional income. However, we have no way of telling if any of these students will eventually graduate (and therefore become liable). Of those that do graduate, some of them may not become liable because they fall within one of the categories exempted from the obligation to pay the GE fee. These categories are set out in Education (Graduate Endowment and Student Support) (Scotland) Act 2001. The relevant accounting principles state that we cannot include this figure as possible income because the liability has not yet been definitively confirmed as being due and the income may therefore never be realisable.
In summary, the £17m figure is based on the number of graduates whose liability has been definitively ascertained by SAAS. This is the figure we are required to use.
Reconciliation of the annual costs of the Education (Graduate Endowment and Student Support (Scotland) Act 2001 and the savings in the financial memorandum (S2W-29550)
Derek Brownlee MSP asked for reconciliation on the information provided in the parliamentary question S2W- 29550 on the cost to the Government of operating under the above legislation and the savings that are stated in the financial memorandum.
Mr Brownlee received a response which stated that in 2005-06 the total cost to the Government of operating under this legislation was £156,739. The financial memorandum states that the savings SAAS running costs are about £30,000 to £35,000 a year from SAAS. Mr Brownlee has asked for clarification as to why these figures do not reconcile.
The figure provided for the Government operating under this legislation in the response was made up of four elements: salaries; maintenance costs for IT systems; administration costs; and the depreciation costs.
The figure provided for the savings in the financial memorandum account for the current salary and administration costs for the GE fee. The maintenance and depreciation costs are ongoing costs which will continue to be charged to SAAS’ operating systems (as they are continually developed). This is why maintenance and depreciation costs don’t form part of the saving.
EXTRACT FROM THE MINUTES
7th Meeting, 2007 (Session 3)
Wednesday 24th October 2007
1. Graduate Endowment Abolition (Scotland) Bill (in private): The Committee agreed its approach to the Bill at Stage 1.
EXTRACT FROM THE MINUTES
8th Meeting, 2007 (Session 3)
Wednesday 7th November 2007
Also present: Richard Baker, Ted Brocklebank and Malcolm Chisholm.
1. Graduate Endowment Abolition (Scotland) Bill: The Committee took evidence on the general principles of the Bill at Stage 1 from —
and then from—
EXTRACT FROM THE MINUTES
9th Meeting, 2007 (Session 3)
Wednesday 14th November 2007
Apologies were received from Ken Macintosh and Jeremy Purvis.
2. Graduate Endowment Abolition (Scotland) Bill: The Committee took evidence on the general principles of the Bill at Stage 1 from —
and then from—
EXTRACT FROM THE MINUTES
11th Meeting, 2007 (Session 3)
Wednesday 28 November 2007
Apologies were received from Ken Macintosh.
2. Graduate Endowment Abolition (Scotland) Bill: The Committee took evidence on the general principles of the Bill at Stage 1 from—
4. Graduate Endowment Abolition (Scotland) Bill (in private): The Committee considered written evidence received on the general principles of the Bill and agreed its approach to its draft Stage 1 Report.
EXTRACT FROM THE MINUTES
12th Meeting, 2007 (Session 3)
Wednesday 5th December 2007
Apologies were received from Ken Macintosh.
2. Graduate Endowment Abolition (Scotland) Bill (in private): The Committee considered a draft Stage 1 Report and agreed to consider a further draft at its next meeting.
EXTRACT FROM THE MINUTES
13th Meeting, 2007 (Session 3)
Wednesday 12th December 2007
Apologies were received from Ken Macintosh.
3. Graduate Endowment Abolition (Scotland) Bill (in private): The Committee considered a draft Stage 1 Report. Various changes were agreed to (2 by division). Subject to a number of minor changes, the report was then agreed to.
Record of divisions in private:
Richard Baker proposed an alternative of paragraph 69. The proposal was agreed to by division: For 4 (Richard Baker, Mary Mulligan, Elizabeth Smith and Karen Whitefield), Against 4 (Aileen Campbell, Rob Gibson, Christina McKelvie and Jeremy Purvis), Abstentions 0; proposal agreed to on casting vote. The original paragraph stated:
The Convener put the question that the Committee recommends to the Parliament that the general principles be approved. The proposal was disagreed to by division: For 4 (Aileen Campbell, Rob Gibson, Christina McKelvie and Jeremy Purvis), Against 4 (Richard Baker, Mary Mulligan, Elizabeth Smith and Karen Whitefield), Abstentions 0; the proposal was disagreed to on casting vote.
7 November (8th Meeting, 2007 (Session 3)) – Written Evidence
7 November (8th Meeting, 2007 (Session 3)) – Supplementary Written Evidence
Letter from the Cabinet Secretary for Education and Lifelong Learning
14 November (9th Meeting, 2007 (Session 3)) – Written Evidence
14 November (9th Meeting, 2007 (Session 3)) – Supplementary Written Evidence
Copies of the written evidence received by the Committee can be found on the Scottish Parliament website (www.scottish.parliament.uk) or can be provided, on request, by the Clerk to the Committee.
Submission from the Association of Teachers and Lecturers
1 Education (Graduate Endowment and Student Support) (Scotland) Act 2001. Available at: http://www.opsi.gov.uk/legislation/scotland/acts2001/20010006.htm
2 Graduate Endowment Abolition (Scotland) Bill http://www.scottish.parliament.uk/s3/bills/02-GraduateEndowAbolition/b2s3-introd.pdf
3 Graduate Endowment Abolition (Scotland) Bill. Explanatory Notes http://www.scottish.parliament.uk/s3/bills/02-GraduateEndowAbolition/b2s3-introd-en.pdf
4 Graduate Endowment Abolition (Scotland) Bill. Policy Memorandum http://www.scottish.parliament.uk/s3/bills/02-GraduateEndowAbolition/b2s3-introd-pm.pdf
6 Graduate Endowment Abolition (Scotland) Bill. Policy Memorandum http://www.scottish.parliament.uk/s3/bills/02-GraduateEndowAbolition/b2s3-introd-pm.pdf
7 Scottish Government. (2007) Consultation document, abolition of the graduate endowment fee. Available at: http://www.scotland.gov.uk/Publications/2007/07/geabolition
9 Scottish Parliament Education, Lifelong Learning and Culture Committee. Graduate Endowment Abolition (Scotland) Bill call for evidence. Available at: http://www.scottish.parliament.uk/nmCentre/news/news-comm-07/cellc07-s3-001.htm
10 The Open University. Written submission to the Education, Lifelong Learning and Culture Committee.
11 General Medical Council. Written submission to the Education, Lifelong Learning and Culture Committee.
12 University of St Andrews. Written submission to Education, Lifelong Learning and Culture Committee.
13 Student Awards Agency for Scotland. Written submission to the Education, Lifelong Learning and Culture Committee.
16 National Union of Students Scotland. Supplementary written submission to the Education, Lifelong Learning and Culture Committee.
18 Scottish Government. Letter from the Cabinet Secretary for Education and Lifelong Learning to the Convener of the Education, Lifelong Learning and Culture Committee dated 13 November 2007.
19 Scottish Government. Letter from Stephen Kerr, Deputy Director, Lifelong Learning Directorate, to the Convener of the Education, Lifelong Learning and Culture Committee dated 21 November 2007.
20 Scottish Funding Council. Written submission to the Education, Lifelong Learning and Culture Committee.
21 British Medical Association Scotland. Written submission to the Education, Lifelong Learning and Culture Committee.
22 The Royal Society of Edinburgh. Written submission to the Education, Lifelong Learning and Culture Committee.
24 Scottish Government. Letter from the Cabinet Secretary for Education and Lifelong Learning to the Convener of the Education, Lifelong Learning and Culture Committee dated 13 November 2007.
25 NUS Scotland. Written submission to the Education, Lifelong Learning and Culture Committee.
26 NUS Scotland. Written submission to the Education, Lifelong Learning and Culture Committee.
27 British Medical Association Scotland. Written submission from the Education, Lifelong Learning and Culture Committee.
28 Joseph Rowntree Foundation. Losing out? Socio-economic disadvantage and experience in further and higher education. Press release available at: http://www.jrf.org.uk/pressroom/releases/160503.asp
29 NUS Scotland. Written evidence to the Education, Lifelong Learning and Culture Committee
31 STUC. Written submission to the Education, Lifelong Learning and Culture Committee.
32 NUS Scotland. Written submission to the Education, Lifelong Learning and Culture Committee.
33 The Robert Gordon University. Written submission to the Education, Lifelong Learning and Culture Committee.
34 Skill Scotland: National Bureau for Students with Disabilities. Written submission to the Education, Lifelong Learning and Culture Committee.
38 The Open University. Written submission to the Education, Lifelong Learning and Culture Committee.
39 Scottish Government. (2007) The Government Economic Strategy. Available at: http://www.scotland.gov.uk/Publications/2007/11/12115041/5
42 Edinburgh College of Art. Written submission to the Education, Lifelong Learning and Culture Committee.
43 Aileen Campbell, Rob Gibson and Christina McKelvie dissented and the Committee agreed that their dissent be recorded as follows: “The SNP committee members note the potential reduction of overall levels of student debt likely to be brought about by the abolition of the GE, should the Bill be passed. The SNP committee members also note the Scottish Government’s stated intention that this Bill would be the first in a number of measures aimed at extinguishing all student debt. Furthermore, the SNP committee members support the principles of the Bill based on the overwhelming evidence heard in the committee in favour of the Bill.”
44 Jeremy Purvis dissented and the Committee agreed that his dissent be recorded as follows: “Jeremy Purvis supported the overall reductions in student debt to be achieved by abolition of the GE and thus supported the general principles. However, the Committee’s scrutiny at Stage 1 highlighted significant criticisms of the Bill, including repealing the statutory duty of government to provide student support and that a wider student and higher education funding measure should have been brought forward.”
45 The oral evidence can be viewed on the Parliament’s website, at: http://www.scottish.parliament.uk/s3/committees/finance/or-07/fi07-0701.htm
46 Policy Memorandum, para. 5
47 Financial Memorandum, para. 23
48 SPICe Briefing 07/54 – Graduate Endowment Abolition (Scotland) Bill
49 Ibid, page 13
50 SAAS is an agency of the Scottish Government and their budget is part of the Government accounts. The Student Loans Company’s administration costs are met by the Scottish Government through the SAAS budget.
51 SPICe Briefing, page 12
52 Finance Committee Official Report, 7th Meeting, 2007 (Session 3), col. 96
53 Ibid, col. 101
54 Ibid, col. 101
55 SPICe Briefing, page 6
56 Finance Committee Official Report, 7th Meeting, 2007 (Session 3), col. 97
57 Written evidence from the Scottish Government
59 Financial Memorandum, para. 25
60 Finance Committee Official Report, 7th Meeting, 2007 (Session 3), col. 99
61 Ibid, col. 99
62 S2W-29550, lodged on 3 November 2006
63 Written evidence from the Scottish Government
64 Finance Committee Official Report, 7th Meeting, 2007 (Session 3), col. 102