Audit Scotland has taken a look at Scotland's higher education sector. It finds that it is financially healthy but faces future challenges, and tough choices are likely if public funding is to deliver government policy ambitions.
Scotland has more world-class universities per head of population than any other country in the world except Luxembourg. There are 19 universities in four groupings:
- the ‘Ancient’ universities – Aberdeen, Edinburgh, Glasgow, St Andrews
- the ‘Chartered’ (1960s) universities – Dundee, Heriot-Watt, Stirling, Strathclyde
- the ‘Modern’ universities – Abertay, Edinburgh Napier, Glasgow Caledonian, Highlands and Islands, - Queen Margaret, Robert Gordon, West of Scotland
- the Small Specialist Institutions (the ‘SSIs’) and Other – Glasgow School of Art, Royal Conservatoire of Scotland, Scotland’s Rural College, the Open University in Scotland.
The report finds that Scottish universities play an important role economically and socially and have a strong international reputation. The Scottish Government budget includes £1.1 billion funding for universities in 2014/15, and £623 million funding for individual university students. Scottish Funding Council (SFC) funding to universities has reduced by six per cent in real terms since 2010/11 while funding for university student support increased by approximately 37 per cent in real terms over the same period.
The sector supported 144,549 jobs and contributed an estimated £7.2 billion to the Scottish Economy in 2013/14. The report argues that the SFC needs to do more to ensure that its funding to universities makes the maximum contribution to achieving government policy ambitions. It should review its strategies for key areas, such as research and innovation, to ensure funding is used to best effect. Never the less, in the most recent UK-wide assessment of research quality, 77% of the research submitted by Scottish universities was judged to be either world-leading or internationally excellent.
The Scottish higher education sector is currently in good financial health with an income of £3.5 billion that generated a surplus of £146 million. However the report says this masks underlying risks within the sector. Surpluses and reserves are concentrated in a small number of universities and some are heavily reliant on Scottish Government funding at a time when it is reducing.
Universities need to continue generating surpluses and reserves and making efficiency savings to fund capital costs and subsidise some of their activities. They are placing increasing reliance on generating income from fee-paying students from the rest of the UK, which may not be there post-Brexit, and outside the European Union (EU). For example, the SFC assesses the cost of providing teaching for Scottish and EU students and pays on average, £5,179 in 2014/15, and £6,999 when the tuition fee element is included. This appears to be well below the actual cost.
A good example of cost pressures is the estate - 22% of the overall higher education estate in Scotland is in poor or very poor condition. The report concludes that there are risks that universities with lower surpluses and reserves will not be able to continue to fund capital improvements at the level they require. In addition, from 2015/16, the actuarial deficit in the USS pension scheme (£8.2bn) will be placed on university balance sheets.
In 2014/15, there were 232,570 students studying at Scottish universities, 66 per cent of whom were Scottish. Overall student numbers have increased by 5% over the last ten years and the student population is becoming increasingly international. It has become more difficult in recent years for Scottish and EU students to gain a place at a Scottish university as applications have increased at a greater rate than increases in the number of places that the SFC funds for Scottish and EU students. The report also finds that the current funding approach to improving access to university for students from college and deprived backgrounds is under pressure. The Scottish Government's support for widening access needs to be backed up with cash.
The media headlines focused on the finding that it has become more difficult in recent years for Scottish and EU undergraduate students to gain a place at a Scottish university. However, the future funding challenges highlighted in the report are significant and will need to be addressed if the Scottish model is to survive.