Scotland's under pressure universities are facing a £45 million bill to pay next year for an increase in employer national insurance contributions announced by the Chancellor in her Budget, it can be revealed.

The university representative organisation Universities Scotland warn the additional costs will put the institutions under "serious pressure".

It is demanding compensation from the Scottish Government for the national insurance contributions hike which it initially estimated at a lower figure but later revised.

The cost of the increase to universities north of the border comes after the local authority representative organisation Cosla warned the rise would cost Scotland's councils £265 million next year.

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“Universities cannot absorb the cost of the national insurance contributions increase within existing budgets," a spokesperson for Universities Scotland told The Herald.

"Having spent the week running the numbers, we’ve been forced to revise the cost up to £45million. This puts serious pressure on a sector which has seen repeated cuts to its budget over the last decade. 

"The Scottish Government’s budget settlement for universities in just over a month’s time is going to be vital for the sustainability of institutions. We have no choice but to look for a settlement that is commensurate with the challenges we face.”

In her first budget last week Chancellor Rachel Reeves unveiled a rise in employer national insurance contributions from 13.8% to 15% alongside a lowering of the threshold from £9,100 to £5,000 at which companies begin paying contributions on each salary. Ms Reeves said the changes would raise £25 billion a year.

Chancellor Rachel Reeves (Image: PA) A post budget analysis of the policy by the Institute for Fiscal Studies estimated that employers will have to pay an additional £900 for each employee on median average earnings. 

In her budget, Ms Reeves also announced a £1.5 billion funding boost for Holyrood this financial year and a further £3.4 billion next year.

However, it was unclear whether mitigations for the public sector over the increase to employers’ national insurance and lowering the threshold for contributions were included in the £3.4 billion.

John Swinney was pressed on the extra cost to public bodies of the rise at First Minister's Questions in Holyrood on Thursday.

He told MSPs finance secretary Shona Robison had written to the Chancellor to seek "clarity" ahead of the Scottish Budget on December 4.

Finance secretary Shona Robison (Image: PA) "We need clarity for our own budgeting purposes about what compensatory effects will be allocated to public funds to deal with the increased costs that will arise from the increase in the employers’ national insurance contribution," he said.

"That will apply to clearly identifiable public service organisations, but there is also a question about whether it will apply to organisations that are not classified as being in the public sector but provide public services, such as care providers, third sector organisations or further afield, universities and colleges.

"There is significant uncertainty about whether that will be adequately and properly covered in the budget, and that will be the subject of detailed discussions between the Scottish Government and the UK Government as we proceed with our budget steps."

Universities are already under significant financial strain with cuts of £28.5 million announced to "core teaching activities" to the sector in January by Ms Robison.

The cuts meant universities would offer fewer places offered to Scottish students than during Covid.

Ministers were told the funding cuts would pose a "significant" risk to increased competition for places and put pupils from poorer families at a disadvantage - but opted to progress the plans anyway.

Responding last night to the warning from Universities Scotland about the cost of the national insurance contributions (NIC) rise, higher education minister Graeme Dey said: “The UK Government’s decision to increase employer national insurance contributions is causing real alarm for sectors across the country. 

"It’s therefore vital the UK Government now provides urgent clarity on whether it will fully meet the costs it is imposing on public sector employers, as well as those providing public services like universities. 

 "The costs of the UK Government's decisions should not fall on Scotland's public sector, charities and universities."

A UK Government spokesman said: “We have taken tough decisions to fix the foundations of the UK economy while protecting the smallest employers across Scotland by more than doubling the Employment Allowance to £10,500 - meaning more than half of them with NICs liabilities either gain or see no change next year.

“The Scottish Government will receive additional funding on top of its record £47.7 billion settlement announced at Budget to support them with the costs associated with changes to employer national insurance contributions. More details will be set out in due course.”