Eleven colleges face running out of money because of ‘chronic’ underinvestment

Eleven colleges could run out of money next year if “chronic” underfunding by the Scottish Government continues, the body representing the sector has warned.

Colleges Scotland said the country faces “significant job losses” and compulsory redundancies unless ministers take urgent action.

In a draft submission ahead of the Scottish Budget in January, Gavin Donoghue, chief executive of the body, warned that colleges are at a “fork in the road”.

He said the organisation’s findings were in line with recent reports from the Scottish Funding Council (SFC) and Audit Scotland, which highlighted the “dire” finances facing colleges.

Colleges Scotland said years of “chronic underinvestment” must be reversed before the end of the Parliament – in March – and called for a commitment to the sustainable funding of colleges in the coming budget.

In the worst-case scenario in the group’s paper, it sets out the “likely consequences” of continued flat-cash funding next year.

If the current funding arrangement continues, 11 out of Scotland’s 24 colleges could become insolvent, it warned.

It found that with a forecasted reduction of £37.9m in the amount of money held by colleges, the sector would be saddled with a deficit of £5.5m in 2026/27.

It warned of “significant job” losses next year, including potential compulsory redundancies.

Colleges Scotland said the sector has suffered a 20% real-terms fall in Government investment since 2021.

The paper outlines four possible funding scenarios for the 2026/27 budget — ranging from “decline” to “sustainable” and warns that a flat-cash settlement would lead to shrinking student numbers.

Under the “sustainable” option, the sector is calling for £819 million in revenue funding and £131.6 million in capital spending.

Colleges Scotland said this would bring the sector to “a much more sustainable level of investment which would allow colleges to thrive, offer more opportunities to more students, and secure jobs and campuses”.

Mr Donoghue said: “Scotland’s colleges are at a fork in the road. Chronic underinvestment over a number of years, as evidenced by the recent Audit Scotland report, has left institutions struggling to meet the needs of learners and local employers.

“If flat-cash funding continues, 11 colleges may be at risk of effective insolvency in the next academic year.

“That is why colleges are calling on government and parliament to ensure the 2026/27 budget restores funding, supports staff and students, and unlocks the full potential of these valued community anchor institutions.

“Colleges are the skills engines of our economy and are already widely engaged in the collaborative effort to eradicate poverty. Any additional money would not just be an investment in college education – it would be an investment in Scotland’s sustainable economic future.

“The Independent Review of the Skills Delivery Landscape in Scotland, led by James Withers, showed the clear need to reform Scotland’s skills delivery to better support economic growth.

“With campuses in every community, and a diverse range of learning opportunities, colleges are uniquely positioned to support this transformation.”

The Scottish Conservatives said the SNP’s “chronic failure to invest in colleges” put them at risk of closure while “undermining the training and skills we desperately need to promote economic growth”.

Miles Briggs, the party’s education spokesman at Holyrood, said: “Colleges have seen budgets cut by a staggering 20% over the past five years.

“There have been job losses and a huge reduction in student numbers, all thanks to the SNP’s neglect.

“That’s having a huge impact on the number of young people qualifying for essential sectors such as engineering, hospitality, manufacturing and trades.

“All while the number of apprenticeships have declined by as much as a third in the past decade and crucial employers like Babcock are having to recruit from abroad.

“The Nats have dismally failed to maintain the investment in skills essential for economic growth.

“As a result, Scottish businesses can’t grow, young people are losing out on training and jobs and the economy is lagging behind the rest of the UK.”

Higher and further education minister Ben Macpherson said: “I have been grateful for all the constructive dialogue that I’ve had with Colleges Scotland over the last months.

“Scotland’s colleges play such an important role in our economy and wider society, which is why the Scottish Government – through the SFC – provided the sector with a 2.6% increase in teaching funding and almost a 5% increase in capital funding this year.

“Nevertheless, we acknowledge recent reports from Audit Scotland and the SFC that make clear the challenges facing the sector, which are being exacerbated by the UK Government’s increase to national insurance contributions and other external factors.”