Colleges’ financial challenges continuing to increase, auditors find

Scotland’s colleges need more clarity from ministers on what parts of their role to prioritise as the sector’s financial challenges continue to rise, according to the head of Audit Scotland.

The body found 11 out of 14 colleges reported deficits in 2022/23 as it audited their latest accounts, three more than the previous year, while six more colleges have yet to reveal their accounts.

Colleges facing reduced Scottish Government funding have used voluntary severance schemes to cut costs in recent times, with nearly 500 staff leaving colleges under such schemes in 2022/23.

Staffing makes up around 70% of colleges’ costs, however, and Audit Scotland says the sector expects to have to make further reductions in staff numbers in the coming years.

The financial challenges and reduction in staff means colleges may not be able to offer the same learning experience to students as in the past, which will have an impact on the learning they provide, the Auditor General said.

In its report, Audit Scotland said a lack of reform of the post-school sector is also causing continuing uncertainty for colleges, making it difficult for them to plan effectively for the future.

The body has recommended the Scottish Government engages with colleges and the Scottish Funding Council to set out its priorities for the future and increase the pace of reform by ensuring all groups involved are clear about what is expected of them.

Scottish Government funding for colleges has remained static for the past three years at £675.7 million but has been reduced to £643 million in cash terms for 2024/25, according to the report.

Stephen Boyle, Auditor General for Scotland, said: “The college sector is facing huge challenges. But to plan effectively for the future, colleges need a much stronger steer from the Scottish Government on what parts of their role to prioritise.

“The Scottish Government also needs to respond quickly to the results of its consultations on post-school reforms to provide the college sector with more certainty.”

Shona Struthers, chief executive of Colleges Scotland, said: “An increasing number of colleges are reporting financial deficits. College leaders are under enormous pressure to keep colleges solvent as well as performing successfully.

“Colleges are public bodies and could play a bigger part in helping the Scottish Government deliver its top priority of eradicating child poverty, but there hasn’t been sustainable funding available to do this fully – a missed opportunity.

“College education gives people opportunities to gain qualifications, progress to university, and supports industry with upskilling and retraining, so clearly reducing funding at this scale can only harm that prospect.

“We agree with Audit Scotland that the reform of parts of the tertiary system should be moving at a faster pace, and that priorities for colleges should be clearly articulated by ministers.

“The report also highlights a range of infrastructure issues, including Raac (reinforced autoclaved aerated concrete), and the slow delivery of an estates and digital plan from the Scottish Funding Council.

“An urgent funding solution has to come forward for Raac repairs and more broadly to address the poor conditions of estates to benefit students and staff.”

Scottish Conservative education spokesman Liam Kerr said: “This is a damning verdict from Audit Scotland on the SNP Government’s funding cuts to Scotland’s colleges.

“While colleges have seen a huge reduction in their budgets and staff, ministers have dithered over post-school reforms, and failed to spell out the priorities they expect them to deliver.

“The SNP’s under-funding of our college sector, which has the potential to contribute billions to economic growth, has left many institutions with an uncertain future – and Audit Scotland predict the situation is going to get worse with further job losses and rising financial deficits.

“These repeated failings also impact the level of opportunities provided for our young people coming through the school system, as well as to older learners.

“The SNP Government must respond to this justified criticism by upping the pace of reform, and providing clarity to Scotland’s colleges to allow them to plan for the future.”

A Scottish Government spokesperson said: “While the 2024-25 Budget is the most challenging to be delivered under devolution, we have protected investment in the college sector as far as possible, with more than £750 million to support their delivery of high quality education and training.

“The Scottish Government is already taking forward work to improve the current funding model, including delivering greater flexibility through the work of the colleges tripartite group.

“As outlined in the Programme for Government, we have also committed to introducing a bill to deliver the simplification of the funding body landscape for universities, colleges, apprenticeships and student support.

“We are currently consulting on proposals to deliver this, with the consultation due to close this week.”