Revealed: almost half of Scotland's universities are in deficit

Labour MSP Iain Gray said: "The SNP told us education would be its top priority in government but on their watch universities simply are not getting the funding they need. All of this adds up to problems for our economy for the long term."

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Nineteen universities receive public money from the Scottish Funding Council (SFC) and also get fee income from students in the rest of the UK and abroad.

According to a submission to Holyrood last week by Universities Scotland, the umbrella group for higher education, SFC funding will have fallen in real terms by 13 per cent by 2018.

An analysis by this newspaper of each organisation’s latest annual accounts, covering 2015/16, reveals many of the universities are in deficit. However, a caveat is that the financial returns were the first to be presented under new accounting rules which require items such as pensions and depreciation to be included.

The University of the West of Scotland, led by principal Craig Mahoney, registered a deficit of £3.9m. In the same year, the principal’s remuneration went up from £259,000 to £264,000.

A spokesman said it is “common” for many higher education institutions to report a “slight and manageable budget” deficit, adding: “This was the case for UWS in 2015/16 as we took the strategic decision to fund a major transformation programme which would put us on a path of modernisation and continued investment.”

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Stirling University posted a deficit of £3.1m. Principal Gerry McCormac’s remuneration increased from £262,000 to £270,000.

A spokesperson said the reasons behind the deficit are “technical”, explaining: “They revolve around the revaluation of the University’s land and buildings, and the associated impact on depreciation together with new accounting treatment in respect of capital grants.”

Napier University recorded a £2.6m deficit in 2016. The principal’s remuneration package rose from £232,000 to £240,000 in the same period, primarily due to a £15,000 bonus.

A spokesperson confirmed the deficit figure, but said there had been an “operational surplus” prior to the “recognition of pension charges and actuarial movements as now required under revised accounting standards”.

Queen Margaret University, which is based in Musselburgh, declared a £1.8m deficit in its latest accounts. The remuneration of the principal, Professor Petra Wend, rose from £228,000 to £238,000.

A spokesperson said the previous accounting system would have resulted in the University posting a surplus: “The new accounting rules have changed the way we account for depreciation and pension costs and some other, more minor details, resulting in a reported deficit."

Robert Gordon University, one of two higher education institutions in Aberdeen, had a deficit of £7.4m.

The accounts stated: "The university is facing ongoing challenges with tight public funding settlements, with its research performance and with decreasing numbers of fee paying students.”

Glasgow Caledonian University's deficit was £5.2m last year. Principal Pamela Gillies’ salary and pension package fell from £273,000 to £266,000.

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A spokesperson said £32m had been invested to “transform” the Glasgow campus and noted there had been a drop in income from international students.

The Royal Conservatoire of Scotland (RCS), a specialist institution for music, drama and dance, had a small deficit of £51,000, while the sum for Scotland’s Rural College was £0.3m.

A spokesperson for the RCS said the new accounting regime had a “significant negative impact on the presentation of our operating result”, but said it had no impact on the body’s ongoing operations.

Aberdeen University recorded a deficit of £41,000 in 2016. In the same year, the principal’s salary and pension deal stood at £352,000, which included a £27,000 bonus.

However, some of the biggest names in the sector are in sound financial health. Glasgow University, St Andrews and Strathclyde all posted a surplus. Of the 19 universities, nine are in deficit, eight recorded a surplus and two are still to file their accounts.

Tory MSP Liz Smith said: “The SNP’s repeated cuts to higher education budgets are starting to hit hard, and this will undoubtedly have an effect on their ability to attract the highest quality students and staff."

A spokesperson for the SFC said: “SFC funding only forms part of a university’s overall income – around 34 per cent across the sector. The latest Audit Scotland report of higher education in Scottish universities states that the sector is in good financial health. In the decade leading up to 2014-15, university sector income increased by 38 per cent in real terms and SFC annual funding to universities remains at over £1 billion.”

A Scottish Government spokesperson said: “Audit Scotland found that the higher education sector was in good financial health and, during 2017/18, for the sixth year in succession, the Scottish Government will invest more than £1bn in the sector. This is an increase in the resources available and is around a third of the income universities generate in total.

“We have also put in place new opportunities for income generation, including arrangements for postgraduate funding and an uplift in fees chargeable to students from the rest of the UK. We place no limit on the number of rest of the UK or non-EU students universities can recruit, providing a significant additional income stream.

“Universities are autonomous institutions with a duty to manage their businesses in a robust, cost efficient and fiscally prudent way.  As recipients of public funding, there is an expectation that they will seek to secure on-going efficiencies to reduce their reliance on the public purse.”