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It is an interesting one, because the facts do not bear out some of the assertions that we hear about universities. Our universities are a massive success story: we have more Scottish young people going to university than ever before. We also have more young people from widening-access programmes attending university than ever before—that is another success story, credit for which belongs to the universities.

Yes, we have more international students—that is because the offer that we have in Scotland, thanks to our universities, is a very attractive one. We are not, by and large, in a situation where our young people are not able to access university because of the presence of international students.

What sometimes happens is that a university allocates a certain number of funded places, and it will make decisions about the size and scale of courses, which can, on occasion, mean that there is no place for an individual who wishes to go to that university. We have seen that in the past year. Over the piece, however, the opportunities for our young people to go to university are considerably better than they have been before.

That is an interesting point. We will take it away and think about it, and come back to the committee on that—if that is okay, convener.

If I may, convener, it is worth recognising, however, that there have been tuition fees in England for some time, and there are financial challenges there, too.

There has been a projection of the impact of the financial situation in both sectors. I have seen the figure of 20,000. Obviously, the SFC will be monitoring that closely. We do not want staff numbers to fall by that amount at all. The difficulty that we have is that, in the college sector, staff costs make up 70 per cent of colleges’ expenditure, which is extremely high.

Some of that has been addressed by voluntary redundancy schemes, although the problem with such schemes is that people leave from areas of the college that are quite important to the future of the institution. However, we want to avoid compulsory redundancies at all costs.

There is no doubt that there is an impact—that is unavoidable—but we are monitoring that through the SFC. I hope that, notwithstanding the point that Pam Duncan-Glancy made earlier, with the opportunities that arise around growth for the college sector, those levels of redundancies can be avoided. There is significant opportunity for the colleges to grow in relation to upskilling and reskilling. The demand and appetite from employers is there, and employers that I speak to understand the need for their sector to put funding in place to support that. There is an opportunity for growth that can help to address some of the financial challenges that the colleges have.

To be blunt, that is not for me to do. That is one of the issues that needs to be resolved in that setting. If we can get into a space where there is a better atmosphere and a better culture, all those things can be aired by the participants. It is not for the Government to take on that role. The point that you raise has been raised with me before, and it needs to be looked at, just as the employer side’s approach to negotiation and the mechanics of the process need to be looked at. The agenda that is taken forward, if there is an independent facilitator, can be agreed by both sides and explored in that context. What I have seen so far is that, without going into the specifics, both sides are prepared to look at such matters.

I accept that. I noticed that you were quiet on the issue of tuition fees, so you probably understand. However, in all seriousness, you are right to push me on this issue, because it is incredibly important.

The success of the pilot projects really encouraged me. I was blown away by what I saw. We are trying to learn from those. We are trying to encourage the colleges to get involved, which they did not do last time—to be fair, I think that that was just about the short notice that they got—and develop and build on those projects. Budget permitting, I would like to ramp this up pretty quickly. However, I stress that that is budget permitting.

I am glad that you raised that comment, because I read it and was slightly bemused by it. I will take a little time to explain why.

If the college sector is looking for clarity on the raft of asks that it has—historical asks and implicit asks—it is a fair point that we could clarify those in conversation with the colleges and consider the prioritisation of some of them. If that is what Shona Struthers means, I have some sympathy with her. However, if her comment is about the future direction of travel, I think that we have been clear with the colleges about what we are looking for. We are looking for better alignment with the needs of the local economies, where that is required—I stress those words—and improved interaction with employers, so that courses are better aligned with employers’ needs and therefore offer sustainable employment for students. We are also looking for colleges to be at the heart of skills planning, if they are not there already, and we want to exploit the potential for colleges to come together and become managing agents for a collective in certain disciplines of apprenticeship delivery.

Those issues have been discussed multiple times in multiple settings with the colleges. If the suggestion is that they are waiting for a steer from Government on how to operate in that regard, that flies in the face of what I see when I am out and about. I am a bit confused by that when I think about what Jackie Galbraith is doing at West Lothian College in a multitude of ways on employer engagement and innovative courses, about what Neil Cowie is doing at North East Scotland College, which is forging ahead and meeting the needs of the local economy and has great bilateral relationships with the two universities, or about what Dundee and Angus College is doing. In its written evidence to the committee, the Fraser of Allander Institute acknowledged that that work was going on but that it could be developed across the sector.

I make the point that I think that we have been clear. If we have not been clear, we will reiterate the position with the colleges. I have meetings with them in the next few weeks, at which I will take the opportunity to clarify matters in whatever way they feel is needed. However, my reading of the situation is that a number of colleges absolutely understand what they are doing and are getting on with it, so the challenge is to bring the sector into that space.

I am not aware of any discussions of potential mergers between colleges or universities, and merging institutions is not on our agenda. However, I am aware of—and encourage—the development of a more collaborative working approach between universities and colleges, not just in the sense of articulation. The University of the West of Scotland is a good example of that, as it is particularly active in that regard and has a close working relationship with Dumfries and Galloway College. Similarly, Queen Margaret University is doing some stuff in Fife and, as I mentioned earlier, NESCol is closely engaged with the two universities in Aberdeen. That is the kind of space in which we will see growth—in sensible, co-operative working rather than mergers.

If two colleges came to the SFC and said that they thought that it would be in their best interests to merge, and if they had a robust business case, the SFC would look to facilitate that—it did something similar with the University of the Highlands and Islands just last year. However, I am not aware that that is on the agenda.

The subject of shared services is interesting. We all hear talk about shared services being the way forward but, in my experience, those proposals rarely come to fruition, sometimes because of certain impediments. I am not entirely sighted on this, but a university said to me at the weekend that one impediment to having shared services is VAT—I will interrogate that a bit more to see what lies behind it.

It is obvious that having shared services would be a good way to go forward, but it does not happen often. Any institutions that are thinking about it are responsible for making progress on that but, if there were impediments that we could be part of helping to remove, we would look to accommodate that.

One of the difficulties in trying to answer a question as honestly and openly as you can is that you might set hares running. I read the article in question and it was accurate. That is what I said. I was simply trying—and I will do the same today—to weigh up why it is not possible to be definitive at this stage. To give a current example that is relevant to the education budget, the Educational Institute of Scotland recommended a teachers’ pay settlement offer just yesterday. We await the outcome of that, which has financial implications. We are also waiting to learn what consequentials relevant to teachers’ pay might be coming from the United Kingdom Government and when they might come. We do not have those numbers or that outcome, so there is a degree of uncertainty.

Of course, unexpected issues can arise in-year. I cannot sit today and categorically rule out the possibility of in-year savings having to be made. However, I am not saying that that will or might be necessary. It is difficult to tell at this stage.

Where and when we are confronted by such a situation, we focus, as you have indicated, on budget lines that are demand led. As I did when we last engaged on this issue, I undertake to keep the committee updated on any changes that occur. I cannot be any more definitive on that, partly because of the example that I have given you.

We will bear that in mind.