Financial sustainability of colleges at risk, warns watchdog

Funding for Scotland’s colleges has dropped by 8.5% in real terms since 2021-22 while costs have risen, leading to warnings from Audit Scotland over financial sustainability.

A report from the watchdog released on Thursday urges the Scottish Government and the Scottish Funding Council (SFC) to accelerate efforts to protect the sector.

The SFC receives funding from the Government which it then provide to colleges in grants, with around 75% of revenue in the sector coming in this way in the 2021-22 academic year.

But funding for colleges is forecast to remain at the same level – £675.7 million annually – until at least 2023-24, representing a drop of 8.5% in real terms since 2021-22.

Rising staffing costs, the report said, are the biggest financial pressures, with increased pay deals straining budgets.

But it also pointed out the importance of colleges to people from more deprived backgrounds, saying a drop in the standards of teaching would disproportionately impact those who are less well off.

Auditor General Stephen Boyle
Auditor General Stephen Boyle said risks to colleges’ financial sustainability have increased (PA)

Auditor General Stephen Boyle said: “Scotland’s colleges are vital to learners and local communities. But the risks to the sector’s financial sustainability have increased in the last year.

“Colleges are facing uncertainty about how the sector will operate in the future and they need more help from the Scottish Government and Scottish Funding Council to plan for change.”

Scottish Conservative deputy education spokeswoman Roz McCall said the report is a “stark reminder” that colleges are being “short-changed” by Government.

“Their funding for colleges has been cut by 8.5% in the last year, making a mockery of SNP claims that education is a top priority,” she added.

“Our colleges have warned us for years that they have been stretched beyond breaking point and that this situation is unsustainable. They desperately need a healthy injection of funding and a multi-year settlement to prevent managed, structural decline.

“Without Government backing, these once-renowned Scottish institutions will struggle to compete internationally. Instead of SNP underfunding, we need to see radical investment in our higher education sector.”

Scottish Liberal Democrat education spokesman Willie Rennie said: “Once again nationalist ministers are cutting off their nose to spite their face.

“It’s this kind of short-term thinking which shows that it’s time for a change of government.”

Shona Struthers, chief executive of Colleges Scotland, said the report was “stark”, adding: “The signals from Scottish Government are that helping people out of poverty is the top priority for all public bodies, and for colleges to continue to do this there has to be sustainable investment.

“Funding for the sector has reduced by 8.5 per cent in real terms between 2021/22 and 2023/24 which puts huge pressure on colleges to maintain delivery of education and training in an increasingly unsustainable environment.

“I want colleges to thrive as education providers, as community anchors, as great training hubs – but there has to be the investment available to unleash the potential which colleges have.”

A Scottish Government spokesperson said: “Ministers recognise the crucial role that our colleges play and the Audit Scotland report recognises the opportunities coming from reform.

“Colleges Scotland have also welcomed the proposals in the Programme for Government this week around reform of skills planning and qualifications for post-school education, skills and research.

“Right now, we are operating in the most difficult public spending environment since devolution.

“We have committed to provide greater flexibility for institutions in how they use the investment that is available and autonomy to set ambitious, stretch targets for delivery.

“As we progress with reform, we will work closely with colleges and other stakeholders to develop a new model of public funding for all forms of post-school education provision and investigate the options to deliver a single funding body.”

Karen Watt, chief executive of the Scottish Funding Council, said: “This is a tough environment for colleges and students.

“We recognised the need for system-wide change in our comprehensive review of tertiary education and research.

“We have subsequently increased our support to colleges in their financial management, introduced more flexibility into our funding model and encouraged forward planning to safeguard quality and outcomes for students.”