Audit Scotland report warns of risks to university funding for teaching, research, capital and overall sustainability

Audit Scotland has today [Thursday, 7 July 2016] published a broad audit of higher education funding and student support.

The audit warns of a number of ‘underlying risks’ to Scotland’s university sector as a result of mounting funding pressures. It calls on the Scottish Government to ensure ‘its approach to funding higher education is sustainable in the longer term if it is to deliver its policy ambitions’ and makes a number of findings and recommendations for universities, the Scottish Funding Council (SFC) and Scottish Government.

Risks to higher education institutions, identified in the audit, include:


  • Teaching funding: every Scottish and EU domiciled undergraduate place in Scotland was under-funded by 6 per cent in 2014/15.[1] This gap has emerged before the impact of further cuts of 2.9% in teaching funding per student to take effect in academic year 2016/17, which Audit Scotland describe as a risk to high-quality learning and teaching.[2]
  • Availability of places: it is getting harder for Scottish and EU domiciled students to get a place at Scotland’s universities: 19% of Scottish applicants did not receive any offers from a Scottish university in 2015, an increase of 4% since 2010. It notes that the additional access places for 2016/17 were paid for by an SFC ‘overspend’ for 2016/17 budget.
  • Research funding: Audit Scotland note challenges to maintaining Scotland’s world-leading position in academic research, including a real-terms reduction of 7% in SFC research funding between 2014/15 and 2016/17.[3]
  • Capital funding: has fallen by 69 per cent in real terms since 2010/11, by over £55m per year. £1.2 million of BIS capital funding will not be drawn down in 2016/17 and will be sent back to the UK Government unspent because SFC could not find the funds to match it. Capital funding is needed to maintain buildings and buy teaching and research equipment for staff and students.[4]
  • In overall sustainability: there is a 3.9% ‘sustainability gap’ across the sector between the recommended surplus institutions should have and the average held by Scottish institutions. This gap has been widening in recent years.[5]


The audit identifies overall that universities face ’significant challenges from increasing costs, potential further reductions in Scottish Government funding, and risks to their ability to continue to increase their income from other sources’.[6]

Despite a series of concerning findings, the audit also makes a number of positive observations about Scotland’s higher education sector. They include:


  • Higher education contributes £7.2 billion in gross value added to Scotland ever year and has an ‘important role’ in all four priorities stated in the Scottish Government’s Economic Strategy for sustainable economic growth.
  • Universities deliver excellent outcomes for students and graduates including high levels of student satisfaction and high levels of graduates going onto positive destinations within six months of graduation.[7]
  • When it comes to income generation and partnership working Audit Scotland describes universities as: ‘flexible, innovative and entrepreneurial in how they work’.[8]
  • Universities have taken a proactive approach to the efficiency agenda, working collaboratively and exceeding the efficiency targets on an annual basis.[9]
  • Universities have multiple lines of accountability and reporting in place in return for the public investment they receive.


Responding to the audit, Professor Sir Pete Downes, Convener of Universities Scotland and Principal of the University of Dundee, said:


“Audit Scotland’s report makes it clear that higher education is facing a range of very real funding pressures that need to be addressed. This assessment was reached before the Brexit vote which is causing instability and serious levels of risk in almost every aspect of universities’ business. The continued sustainability of Scotland’s universities cannot be in question.

“Scotland’s universities perform strongly with high levels of student satisfaction, excellent graduate destinations and world-leading research impact and innovation. We have a higher education sector that Scotland can and does take pride in. It is a sector that has worked hard to diversify sources of income and has been proactive it its approach to making efficiency savings. It is one of the best in the world but our current success is seriously threatened by the funding pressures identified and quantified in the report.

“We want to work closely with the Scottish Government, Funding Council and other stakeholders to address these challenges. We need to start from the same place; that higher education funding should be sustainable and competitive. There is a need to start these discussions early in the summer, made all the more urgent by the Brexit vote, as funding decisions taken for higher education in the next few years will be very important to our long-term future.”


The audit makes a number of recommendations for the Scottish Funding Council. It notes that current funding pressures pose risks to the Funding Council’s long-term outcomes which are stated as ‘high quality teaching’ and ‘improving and maintaining world-class research’. It recommends that the Council develop strategic plans for its funding in key areas such as research, innovation and capital investment and it recommends that a new SFC performance framework be completed to deliver a fuller set of performance measures and better alignment between the framework and the strategic plan.

Addressing Audit Scotland’s recommendations for the Scottish Funding Council, Professor Andrea Nolan, Universities Scotland Convener-elect and Principal of Edinburgh Napier University, said:


“We value the role that the Scottish Funding Council can provide as an intermediary between the Scottish Government and universities. It has the capacity to provide a positive challenge to both Government and institutions and to use its expertise to help shape policy and funding outcomes to the benefit of universities, their staff, students and Scotland more widely. As autonomous institutions we believe it is right that the responsibility for allocation and accountability of public investment in higher education lie with a body that sits outside the direct control of ministers.

“We welcome recommendations that the Funding Council should develop strategies for investment in capital, in research and innovation. We look forward to working in partnership with the Funding Council and Government to shape these strategies. We also welcome the call to ensure that its decision-making is transparent and evidence based.”





  1. This is expressed in the Audit Scotland report as Scottish Government funding being equivalent to 94 percent of the full economic cost of an undergraduate place for Scottish and EU domiciled students.
  2. Paragraph 63
  3. Paragraphs 37, page 28/para57
  4. Paragraph 35, page 21
  5. Paragraph 78, page 36.
  6. Part 5, key message 1 (page 49)
  7. Paragraphs 113-115, page 48
  8. Paragraph 21, page 14.
  9. Paragraph 73, page 35.