Audit Scotland: Colleges need urgent action to protect finances

Urgent action is required to prevent funding cuts and rising staff costs from putting the college sector’s financial sustainability at risk, a report from Audit Scotland has found.

In its latest briefing on the sector, Audit Scotland says that Scottish Government funding for colleges dropped by 8.5 per cent in real terms between 2021-22 and 2023-24, while rising staffing costs are putting pressure on institutions.

Audit Scotland noted that when it reported last year it found it would be “difficult for colleges to balance delivering high-quality learning at the volume expected while contributing to other Scottish Government priorities”.

At the time it recommended that the Scottish Government and Scottish Funding Council (SFC) – the non-departmental public body responsible for funding Scotland’s universities and colleges via government grants – “should support colleges to plan for change now to make best use of available funding and ensure the sector is financially sustainable in the long term”.

In this year’s report it said risks to the sector have increased since then and that the government and SFC “urgently need to build on their ongoing work to help colleges plan for change now, and make best use of available funding so that they are sustainable for the future”.

Although Audit Scotland expects the sector to report a surplus for the 2021-22 financial year, it said the figure is “likely to be considerably less” than the £19.3m reported the previous year “due to increases in staff costs, reflecting the impact of the sector’s pay award in 2021-22, and some additional recruitment as well as rising inflation, fuel costs and other pressures”.

While the Scottish Government committed to providing funding of £675.7m in each of 2021-22, 2022-23 and 2023-24, Audit Scotland said that represents a real-terms reduction of 8.5 per cent over the period.

The government has taken some steps towards ensuring the sector remains viable, including announcing that a new national model of public funding for all colleges, universities, apprenticeships and training will be put in place.

The SFC, meanwhile, has introduced a new funding distribution model for the current academic year to “provide colleges with enhanced flexibility and greater opportunity to decide how best to respond to local, regional and national needs”.

“The Scottish Government and the SFC urgently need to build on their ongoing work with colleges and help them become sustainable now, while structural arrangements at a national level evolve,” the report states.

Commenting on the findings, Auditor General for Scotland 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.”

Shona Struthers, chief executive of the sector's representative body Colleges Scotland, said the report is "stark" and highlights that "sustainable investment" is need to ensure Scotland's colleges remain viable.

“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," she said.

"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.

“Not every college is the same, but in common is the vital role colleges play in their local economies, in communities and with employers.

"Students going to college should have a great experience with fantastic resources and world-class learning opportunities – but this only comes with sustainable investment."

Scottish Conservative deputy education spokesperson Roz McCall also called the report “stark”, saying it highlights that the sector is being “short-changed by the SNP Government”.

“Our colleges have warned us for years that they have been stretched beyond breaking point and that this situation is unsustainable,” she said.

“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 Labour education spokesperson Pam Duncan-Glancy said: “This damning report lays bare the damage the SNP has inflicted on Scotland’s colleges.

“Further education has been cut to the bone by the SNP, robbing young people of opportunities and weakening our economy.

“The SNP must put an end to their record of neglect and provide greater security for this essential sector.”

Scottish Liberal Democrat education spokesperson Willie Rennie said: "Cutting Scotland's colleges will contribute to our wider economic malaise for years to come.

"Colleges have a key role to play in providing people with the skills they need to flourish in key sectors like insulating homes, food and drink, tourism, social care and nursery education.

"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."