Hansard

I welcome the opportunity to speak in today’s debate on behalf of the Education, Children and Young People Committee. For our budget scrutiny, we focused on the long-term sustainability of funding for colleges and universities.

First, I turn to the college sector, which has been a considerable focus for the committee throughout this session. We have repeatedly raised concerns about the extent and impact of the financial challenges that our colleges face.

In gathering evidence ahead of this year’s budget, the committee heard more about the on-going pressures on colleges. Following flat cash settlements in 2021-22 and 2022-23, the resource budget decreased from £675.7 million to £643 million between 2023-24 and 2024-25. Although the net capital budget for colleges increased from £82.4 million to £84.9 million, that was set against the existence of a considerable maintenance backlog at Scottish colleges.

In its 2022 report on Scotland’s colleges, Audit Scotland identified a £321 million shortfall in funding for lifestyle and backlog maintenance. In its 2023 report, it stated that the £4.7 million fund that was available in 2023-24 from the Scottish Funding Council for urgent repairs was in high demand—bids with a total value of £20 million were received from the sector for that £4.7 million fund.

In its 2024 report, Audit Scotland said that the financial health of the sector had deteriorated and that there had been a 17 per cent real-terms reduction in resource funding since 2021-22.

In June, the Scottish Funding Council told the committee that four colleges were experiencing significant cash-flow issues and that the SFC was supporting recovery plans, which included options such as rescheduling grants, funding voluntary exit schemes and deferring loan repayments.

In the 2025-26 budget, the resource budget for colleges has remained largely static. It has increased in cash terms by £13 million, but, according to SPICe’s budget day calculations, that represents a decrease of 0.33 per cent in real terms. The capital budget has decreased in cash terms by £20 million, to £65 million.

The director of the Fraser of Allander Institute, Mairi Spowage, warned that cutting the funding for colleges was likely to affect the generation in the economy of long-term productivity benefits from upskilling the population; the economic activity that is generated by the goods and services that are bought by colleges; and the contribution that colleges make to the goals that are set out in the Scottish Government’s national strategy for economic transformation.

Colleges are classified as public bodies. As such, they must balance their budgets every year, and they are restricted in the scope that they have to build up financial reserves. Their classification as public bodies also means that they are largely reliant on public funds—78 per cent of their income comes from the SFC grant.

In our pre-budget letter to the minister and the cabinet secretary, we reiterated our call for as many financial and operational flexibilities as possible to be made available to improve colleges’ ability to deliver, but we acknowledged that such flexibilities alone will not address the financial issues that they face.

In his response to the committee, the minister stated that the SFC plans to revamp the college funding model for future sustainability, and when he gave evidence to the committee earlier this month, he highlighted the work that is under way to support colleges to grow their commercial income so that they can become less dependent on public sources. The committee is keen to hear more about the SFC’s plans, as well as what support for colleges could look like.

In her letter to the Finance and Public Administration Committee this week, the Cabinet Secretary for Finance and Local Government announced £3.5 million for the creation of an offshore wind skills programme and a college care skills programme, as well as the provision of £700,000 to support the continuation of Corseford College. It would be helpful if we could be provided with more information about those funds and how they will be allocated.

I now turn to the university sector. The university resource budget for 2024-25 was £760.7 million, which was a decrease from £789.2 million in 2023-24. The capital budget increased from £340.7 million in 2023-24 to £356.9 million in 2024-25.

In its final allocations for universities in 2024-25, the SFC noted that, across all institutions, there was a 3.6 per cent reduction in teaching funding and a 4.2 per cent increase in research and innovation funding, that upskilling funding that had been worth £7 million in 2023-24 was being removed, and that digital poverty funding that had been worth £1.6 million in 2023-24 was being removed.

The higher education resource budget for 2025-26 has been set at £774 million, which represents a 1.7 per cent cash increase compared to 2024-25 but a 0.68 per cent decrease in real terms. The higher education budget has increased from £357 million in 2024-25 to £368 million, a rise of 3.2 per cent in cash terms but, in real terms, a 0.9 per cent decrease.

The committee will continue questioning the Government on many issues that it has heard about during its deliberations, but we welcome the support that we have had from committee members and from the cabinet secretary, the minister and their officials. Given the financial challenges that universities and colleges are facing, we hope that we can continue to look at those and find some solutions for these important sectors.