Scotland's colleges suffer a near-200% increase in fiscal deficit
The financial position of Scotland’s colleges is increasingly dire, the Auditor General’s work shows
Ministers ‘must reward the vital role of colleges’ with an increased budget settlement as an audit of the sector shows a 195 per cent increase in fiscal deficit.
Audit Scotland’s annual scrutiny of Scotland’s 19 incorporated colleges shows a collective £5.6 million deficit in 2024/25 – up from £1.9m in 2023/24.
Despite an increase in Scottish Government investment for colleges in 2026, Audit Scotland found overall funding for colleges still remains 7.5 per cent lower in real terms than in 2021.
Among a bleak outline of the sector’s financial position, the watchdog also found five colleges needed up-front loans from the Scottish Funding Council (SFC).
Gavin Donoghue, CEO of Colleges Scotland, said the report recognises the “extremely challenging financial position colleges continue to operate in” due to reduced government support.
He said there are “clear signs of a sector still under considerable financial pressure” despite an uplift in last year’s budget.
The auditor’s report refers to 2024/25, prior to the Scottish Government’s increased funding in last January’s budget.
However, even with last year’s increase, the college sector is still at 7.5 per cent below 2021 in real terms.
Colleges are increasingly relying on short-term financial support from the SFC to balance their books.
In April 2026, the SFC classed eight of Scotland’s 25 colleges, including seven incorporated colleges, as financially at very high risk, with a further six colleges assessed as at high risk.
Stephen Boyle, Auditor General for Scotland, said: “The financial pressure on Scotland's colleges is increasing, and their situation remains extremely challenging.
“Without urgent and successful reform of the sector, it's not clear if colleges can continue to deliver for students and employers.”
Mr Boyle made a series of recommendation in 2025 to improve the sector but all eight are still being addressed, with the auditor saying only “slow progress” is being made.
As such, his report says, he has made no new recommendations this year.
He added that the Scottish Government, Scottish Funding Council and colleges need to take action to “implement them at pace”.
Mr Donoghue says colleges have “done their bit” to attempt to balance the books with Audit Scotland report setting out a 13 per cent reduction in staff head count.
READ MORE: Watchdog issues scathing critique of Scottish government's pledges for post-school education
The number of students has fallen by 40,000 over two years.
There is currently no way to track the alternative paths taken by students who are turned down for a college placement.
Mr Donoghue describes the situation as “quite concerning that we don’t know where they go”.
Mr Donoghue said: “Colleges meet all the Scottish Government’s priorities.
“We are integral to meeting anti-poverty and child poverty targets.
“The Fraser of Allander Institute recognises colleges are a £195 million net fiscal benefit to Scotland because of the work they do to get people into jobs that pay taxes, but also the amount of savings in the benefits system.
“Likewise, with economic growth, there is a clear recognition now, both at a Scottish and UK level, that we need more vocational and technical education, and the majority of that is delivered in colleges.
“We need to be shown by the government that they recognise the critical role that we have in meeting their own priorities in this year's Scottish Government budget as well.
“We want to see the £84.6m that has been outlined by Audit Scotland for the next two years of the spending review allocated accordingly.”
GMB Scotland, one of the biggest unions in further education, said the report exposed the damage done by years of underfunding in Scotland’s colleges and the need for urgent action.
Keir Greenaway, senior organiser in the public sector, said: “The Auditor General is ringing another alarm bell over college funding but too many have been ignored for too long.
“Our colleges’ ability to deliver workers capable of filling the skilled jobs of tomorrow is the bedrock of economic growth but has been sabotaged by persistent under-funding.
“The sector should be driving economic prosperity but without support or strategic planning is struggling to deliver for students or Scotland.”
Principal of Edinburgh College, Audrey Cumberford, said: “Colleges across Scotland continue to face a challenging financial reality, brought on by years of real terms cuts to funding, as is made clear in the Auditor General’s report.
“While the £70 million in resource and capital funding announced by the Scottish Government at the beginning of the year was most welcome, more must be done to secure a sustainable and prosperous future for colleges.
“I would urge those in power to do all they can to support Scotland’s colleges, which play a vital role in driving economic growth, and creating the workforce of the future.”
Mr Donoghue said it is a “real credit” to college staff that, despite financial pressures, more students than in previous years and staying on to complete their course.
Some 95 per cent of students reported at a recent survey to having satisfaction in their course.
Scottish Labour Tertiary Education spokesperson Jenny Young said “These stark figures lay bare the pressure Scottish colleges are under as a result of SNP cuts.
“Colleges can be engines of opportunity and growth, but the SNP has cut them to the bone.
“The Auditor General makes clear in his report that the Scottish Government is not acting fast enough to help our colleges – and John Swinney’s Programme for Government appears set to continue this pattern of neglect by delivering no real plans for the future of colleges.
“The SNP must work with our colleges to put them on a sustainable footing, deliver opportunities for Scots and unlock economic growth.”
Scottish Conservative education spokeswoman, Meghan Gallacher MSP said: “The SNP Government has completely lost its way on education.
“Scotland’s colleges are being left to lurch from crisis to crisis while SNP ministers refuse to intervene.
“This is what a decade of SNP failure looks like - institutions struggling, staff under pressure and no real solution.
“Scotland’s young people deserve better than a government that has repeatedly taken their education and future for granted.”
Minister for Tertiary Education Alyn Smith said the report recognises the challenges of the sector and the financial contributions it makes.
He said: “We are actively supporting the sector by increasing the college budget by 10 per cent this year, alongside supporting a range of measures that strengthen colleges' financial sustainability and operational flexibility.
“We have worked closely with the Scottish Funding Council and the sector to provide greater flexibility, including support for workforce costs.
“We also provided funding that enabled SFC to support colleges in developing business cases for transformational capital investment projects.”
Comments
Want to join the conversation? Please or to comment on this article.