Scotland's universities face 'bleak' future as £200m funding gap revealed

Scotland's universities face a funding gap of about £200m a year, according to major new report which warns it could increase in the future.

The picture is "bleak", the report's author Prof Sir Anton Muscatelli says, with total income no longer enough to sustain core activities such as teaching and research.

The report also spotlights the increasing dependence on fee-paying international students to cross-subsidise the tuition of Scottish undergraduates.

Universities Scotland said the analysis made clear that the current position was not sustainable.

The analysis comes from the Funding Gap Analysis team, a joint initiative launched by the Scottish government and Universities Scotland to review the funding of Scotland's 18 higher education institutions.

It highlights a funding gap between what they spend on teaching, research and infrastructure and the income they get from the Scottish government, tuition fees from students such as those from abroad and the rest of the UK and other areas such as research.

Full-time undergraduate students who live and study in Scotland do not pay tuition fees for their first degree so the Scottish government gives universities cash to cover the costs.

The report says the amount they get is £288m a year less than it costs to teach these courses.

BBC News has calculated that this means there was a shortage of £2,703 per Scottish student in 23/24, the academic year mentioned in the report.

The Funding Gap Analysis team says fee-paying students, who are mostly those from abroad and studying postgraduate courses, generated a surplus of £445m, but this amount is also used to subsidise a £500m shortfall in research.

The report explains that a recent decline in international students has led to "immediate and severe" consequences for the higher education balance sheet.

It also says a reduction in public funding, rising inflation and high energy prices have also harmed Scotland's higher education institutions.

In the past decade, the sources of income for universities have changed quite dramatically.

Ten years ago, fees from international students made up less than a third of teaching income but that element now provides just under half of the money that comes in for teaching - and has overtaken Scottish government funding as the largest source.

The other main sources of teaching income are provided by the Scottish government, via SAAS undergraduate tuition fees of £1,820 a year plus a block grant per university.

Income from fee-paying students from the rest of the UK, about 19,000 in total, is also part of the mix.

They now pay fees equivalent to the level if they were going to a university in England.

The amount universities in Scotland get from the block grant has not matched inflation across time, meaning universities have had to look to international students and other areas to grow income.

The report states that this "growing dependence creates vulnerability", however, universities have long used income from non-publicly funded teaching, along with commercial income, to offset shortfalls.

The warning now is that the proportion of funding coming from international students will not continue to grow and cannot be solely relied upon to keep universities afloat.

Some universities rely on international students more than others – with as many as 46% of those at St Andrews and 36% of students at the University of Glasgow coming from abroad, according to recent HESA figures.

International student figures in Scotland have fallen for two years in a row, with a 5% drop most recently.

The decline in those from the EU was steeper, with a 22% drop in 24/25 academic year.

The largest cohort of international students in Scotland come from China.

The Funding Gap Analysis report was commissioned after a series of financial crises hit institutions across the country, with Dundee University receiving a £62m bailout and thousands of jobs being lost throughout the entire sector due to funding shortages.

Prof James Miller, from Universities Scotland, said: "Scotland's universities have faced significant financial pressures for some time, and this report provides an important, evidence-based, assessment of their scale."

He said the report needed to be the start of a conversation about how to ensure Scotland's universities remained sustainable, successful and able to deliver for future generations.

NUS Scotland President Justine Pédussel said the report laid bare the stark reality of the systemic funding crisis in Scotland's universities.

"Public funding no longer covers the true cost of teaching and other services, leading institutions to plug the gap with international tuition fees.

"This model is not only unsustainable but is also unfair, placing too high a burden on students."

Scottish government Education Secretary Màiri McAllan said free tuition meant that Scottish students were not hampered by the levels of debt seen elsewhere in the UK.

"However, I recognise the need to ensure a sustainable model of funding which recognises wider financial pressures facing universities in Scotland and indeed across the UK," she said.

"This report, which is transparent in addressing the financial pressures in the sector, establishes a shared and evidence-based understanding of the need for change."