Scottish Universities Under Pressure As Less Foreign Students Applying
20th November 2024
The Institute for Fiscal Studies has prepared a report showing the problems facing Scottish universities,
Falls in funding for home students, a decline in international enrolments and higher labour costs put Scottish university finances under pressure.
In our report on the Scottish Government's Budget for 2024-25, we examined in detail how higher education in Scotland is funded, and some of the challenges facing universities and students. As we will discuss more fully in an upcoming report ahead of the Scottish Budget for 2025-26 on 4 December, the overall funding situation for the Scottish Government may have improved, but there remain difficult decisions to be made on higher education funding. We here update some key figures, and highlight some emerging challenges for the finances of Scottish universities.
University finances
In the year to July 2023 - the most recent covered by HESA finance data - Scottish universities appeared to be in reasonable financial health. After adjusting for mostly one-off pension effects, the vast majority were in surplus (with income exceeding their expenditures) and the surplus was worth on average 5.2% of their income. This was lower than the sector-wide surplus the previous year (9.9%) although it was similar to the modest surpluses typical in Scotland before 2020–21 and it remained larger than the same figure for universities in England (3.7%).
However, there are two reasons to be concerned that the finances of the sector may have worsened further since: changes in the funding available for teaching home undergraduates, and likely falls in international student recruitment.
Resources for teaching home undergraduates
The resources available to Scottish universities specifically to teach Scottish undergraduate students are made up of a ‘tuition fee' paid on behalf of most Scottish undergraduate students by the Student Awards Agency Scotland (SAAS) and grant funding distributed to universities by the Scottish Funding Council. The tuition fee for home fee students remained flat in cash terms in 2024–25 at £1,820 – remarkably the fifteenth year in a row that it had been at that same cash level. The Scottish Government's 2024–25 Budget included a year-on-year cash decrease in the university resource budget for financial year 2024–25 of £28.5 million (–3.6%, or –5.8% in real terms). As we described back in February, this cut was shared between cuts to per-student resources, and cuts to the number of ‘funded' places for Scottish students.
In May, the Scottish Funding Council (SFC) confirmed that cuts to the number of funded places would be smaller than many had feared. An additional 1,289 places had been introduced in 2020–21 to meet additional demand from students who had gained the required SQA qualifications after results were revised in light of the COVID-19 pandemic. The Scottish Government had committed to funding this larger student cohort through their studies, but these additional courses have now largely been completed and the places removed. The SFC had received guidance from the Scottish Government that no additional places should be removed in the 2024–25 academic year. The loss of these funded places accounts for around £7 million of the cut in the main teaching grant for 2024–25 – which has been set at £681.9 million, a reduction of £17.6 million (–2.5%, or –4.8% in real terms) year on year. However, this leaves a substantial reduction in teaching grant per student amongst the remaining funded places.
Overall, this means Scottish universities will receive direct public funding of around £7,530 per student for teaching Scottish undergraduates in 2024–25. This represents another real-terms decline in per-student resources. As shown in Figure 3, using an economy-wide measure of inflation, they will receive 22% less per student this academic year than in 2013–14. More than half of this fall has been over the last three years.
Read the full IFS report HERE
