Edinburgh University issues redundancies warning

One of Scotland's most prestigious universities has blamed the UK Government's National Insurance hike for looming job cuts.

In an official message to all staff, Sir Peter Mathieson, principal and vice-chancellor of the University of Edinburgh, says the change by the new Labour administration has created "a multi-million pound increase to our salary bill".

Student numbers are also down and Mathieson has warned staff it of "selective voluntary and, if unavoidable, compulsory redundancy" measures to come.

He wrote: "We will work with our unions and managers to ensure that the actions we will be taking are communicated clearly and to help colleagues through the changes.

 "I realise that this will be a difficult and unsettling message. However, it is important that we are honest about the scale of the challenges that we need to address, the reasons behind the course of action that we are taking, and the impact that this will have on our operations and on everyone in the university.

 "It is important to emphasise that our university remains a respected and capable organisation with the potential to continue to develop its world-leading research and teaching. Taking some tough decisions now will ensure that we retain this status into the future."

Chancellor Rachel Reeves announced an increase in employers' National Insurance contributions in her recent Budget.

The rate will rise by 1.2 percentage points to 15 per cent from April next year. A change in thresholds means employers will also begin to pay National Insurance contributions on staff earnings from £5,000, rather than the current £9,100 level.

Mathieson said monthly running costs for the Edinburgh institution, which was founded in 1583 and counts First Minister John Swinney and former prime minister Gordon Brown amongst its alumni, now stand at £120m per month.

Tuition fees make up 37 per cent of total income and the failure to hit targets for student recruitment in 2023-24, causing a shortfall in the projected tuition fee income.

Staff costs make up 60 per cent of annual outgoings - a level Mathieson says is higher than in "comparable universities".

He said the "small increase to tuition fees for students" is a "small step in addressing funding sustainability" but "the potential additional income this could generate falls far short of the significant increase in staff costs resulting from the NI increase". 

Mathieson, who with a packgage worth more than £400,000 is the best-paid university principal in the UK, went on: "Like many other universities, we were not able to recruit fully to target in 2023-24 and as a result we experienced a shortfall in our projected tuition fee income. We also now have a fee forecast for 2024-25, based on actual intakes, which shows a shortfall to target, this indicating a trend. These figures underline the fact that our outgoings are consistently growing faster than our income and that we require to change our operating model to ensure we remain financially sustainable."

In a statement to the press, Mathieson commented: "Throughout this year, I have been frank about the severe financial challenges our university and the sector are facing. Today, Monday 18 November, I have issued an update to all colleagues on the latest developments in terms of our costs and income, and our plans to address these serious issues.

"The university costs £120m each month to run. In the context of the recent sector challenges around international student recruitment, increasing staff costs since the pandemic, and the unsustainable levels of funding for Scottish and other UK students, our outgoings are consistently higher than our income. 

"In response to this situation and recent developments with regards to National Insurance, we have concluded that we need to take a series of actions, which will include selective voluntary and, if unavoidable, compulsory redundancies. We will be offering staff the opportunity to find out more through a variety of online and in-person meetings, and we will continue to work with our unions and managers to help colleagues through these changes.

"I don’t underestimate how unsettling this news will be, however, it is important that I am honest about the scale of the challenge we have and transparent about the actions we need to take to address it."

The comments come after Robert Gordon and Dundee universities warned of potential cuts and umbrella body Universities Scotland rang the alarm for the sector.

Responding to the news, the SNP, which is to begin redundancies at its headquarters in a restructuring process, repeated its call for the UK Government to "fully fund" the NI change.

Michelle Thomson MSP said: "My thoughts are with staff at the University of Edinburgh who are facing redundancy at this time, due to Labour's backdoor tax hikes.  

"We've known for some time now the destructive potential of Labour's National Insurance hikes, with Universities Scotland warning of a £45m bill if the cost of this policy was not met by the UK Government.  

"The impact won't just be felt by Scotland's universities either – Labour's NI tax hike could cost the Scottish Government £500m and Scotland's voluntary sector £75m.

"Today’s announcement from the University of Edinburgh is the tip of the iceberg as the impact of Labour's budget becomes clear. I again urge the UK Government to fully fund their National Insurance tax hike for Scotland's universities."