Exclusive:SNP under pressure to open 'urgent' talks on university funding with seven institutions in the red

The warning comes as recently published accounts show at least seven of 18 Scottish higher education institutions reported an operational deficit for 2023/24, up from four in the previous year.

Two-thirds of universities revealed a deterioration in their finances against this measure compared to the year before.

The current year is set to be even more challenging for some, with Edinburgh University seeking £140 million of savings, and Dundee University requiring loans from the taxpayer to buy it time to plug a huge hole in its budget.

Strike action by staff is also under way at Dundee over potential job losses, with academics at Edinburgh expected to follow.

The crisis has been widely blamed on years of underfunding from the SNP Government to pay for the “free tuition” of Scottish undergraduates, combined with a drop in fee-paying international students, as a result of visa changes and anti-immigration rhetoric from the previous Conservative government at Westminster.

The sector faces a further £45m blow over Labour’s decision to raise employer National Insurance contributions.

Against this backdrop, Liberal Democrat education spokesman Willie Rennie said any further geopolitical upheaval could “easily send the system over the precipice”.

He is now calling on Higher Education Minister Graeme Dey to arrange cross-party talks to find a sustainable way forward.

All the main parties at Holyrood are committed to maintaining “free tuition” for Scots, and there are some hopes that the debate over university finance may soon be able to move on from its recent impasse, to look at aspects such as funding levels and methodology.

Mr Rennie said: “Scotland’s world class universities produce talented graduates, important research and good jobs across the country, but without action now, Scottish higher education is not sustainable.

“The previous model of relying on income from international students to subsidise domestic students is all but dead thanks to changes in the global economy. Greater geopolitical upheaval could easily send the system over the precipice.

“When I pressed Graeme Dey at education committee to commit to a discussion on sustainable funding he agreed. This effort must now proceed with urgency.

“I know that Universities Scotland are working hard on this issue, whilst the Royal Society of Edinburgh are hosting an event.

“We are now past the point where the SNP can just point at Scotland’s lack of tuition fees and declare the conversation over higher education over. If both free tuition and the sustainability of our higher education institutions are to be maintained, now is the time to step up."

Sir Paul Grice, interim convener of umbrella body Universities Scotland, welcomed Mr Rennie’s intervention.

“Scotland absolutely needs to have a meaningful conversation about how to fund universities on a sustainable and competitive basis,” he said.

“For years, any conversation on funding has run straight into the issue of ‘free versus fees’ which has meant the opportunity for a much-needed focus on sustainable funding has been missed. We are grateful to Willie Rennie for breaking us out of that binary division and to Minister Dey for his openness to get into a more nuanced discussion.

“What Scotland needs is to chart its own course, taking a strategic and long-term look at future skills needs, demographics and models of provision alongside levels of funding.

“There are acute pressures facing institutions now, which need to be addressed, but we also need to look beyond the short term.

“Students, staff, employers and the institutions themselves need a long-term solution to be found. This will take some time to do well, and longer again to implement, but it will be time well spent.

“Scotland needs a thriving university sector to deliver future plans for socially just economic growth.”

Crisis-hit Dundee University is the only Scottish university still to publish its accounts for 2023/24.

An operational deficit can be caused by a number of factors and is not necessarily a sign of financial turmoil for a university, but most would seek to take measures to return to a surplus position as quickly as possible.

The University of the West of Scotland (UWS) had the largest operational deficit among Scottish higher education institutions last year, of £15.3m, having recorded a surplus before other gains and losses of £909,000 in 2022/23.

It was followed by St Andrews University, which posted an underlying operating deficit of £13m, up from £5.5m in 2022/23.

Scotland’s Rural College (SRUC) had an underlying deficit of £10.8m, up from £4.5m in the preceding year, while the loss at Heriot-Watt University in Edinburgh shrunk from £15.7m to £10.5m.

Aberdeen University recorded an underlying deficit of £8.5m, although this represented an improvement on earlier forecasts, while neighbouring Robert Gordon University (RGU) posted a deficit before other losses of £6.15m, down from an underlying surplus of £2.74m in 2022/23.

Abertay University was the fourth institution to move from an underlying surplus to deficit last year, alongside UWS, Aberdeen and RGU. It reported a deficit before other gains or losses of £578,000, compared to an operating surplus of £1.217m in 2022/23.

While the others remained in the black, many recorded hugely reduced surpluses.

Edinburgh University’s surplus before other gains and losses, and prior to pension-related changes, was £25m, down from £104m in the year before, while Strathclyde University’s dropped from £63.5m to £2.4m in a year, and Glasgow University’s fell from £68.2m to £28.7m.

A Scottish Government spokesperson said: “Universities make a valuable contribution to Scotland’s economy and wider society. Ministers have listened closely to the sector in the development of this year’s budget, which is why we are investing over £1.1 billion in university teaching and research.

“While universities are autonomous institutions with responsibility for their own strategic and operational decision making, the Scottish Government and Scottish Funding Council will continue to work closely with the sector and offer appropriate support as institutions develop plans to mitigate their financial challenges.

“There are factors impacting universities across the UK, including UK migration policies and the UK Government’s increase to employer national insurance contributions, which is estimated to cost Scottish universities over £48m.”