Auditor General calls for ‘urgent’ action for cash-strapped colleges

Scotland’s colleges need “urgent” reform in the face of increasing financial strain, a watchdog has warned.

The country’s 19 incorporated colleges reported a combined deficit of £5.6m in 2024-25 – up from £1.3m in 2023-24 – and five institutions needed a cash advance from the Scottish Funding Council (SFC) that year.

Overall funding is seven per cent lower in real terms than in 2021. A nine per cent uplift in resource funding was delivered by the Scottish Government this year.

Meanwhile, student numbers have dropped by almost 16 per cent since 202-23 and the workforce has been cut by 13 per cent since 2019, even as the overall public sector workforce has risen.

Auditor General Stephen Boyle has now said the Scottish Government and partners must speed up reform work to help the sector. He said: “The financial pressure on Scotland’s colleges is increasing, and their situation remains extremely challenging. Without urgent and successful reform of the sector, it’s not clear if colleges can continue to deliver for students and employers.”

Despite the challenges, the proportion of students successfully completing courses went up in 2024-25, with most going into work, training or further study.

The findings come from a new Audit Scotland report and come after a separate analysis warned that the country’s universities face a funding gap of around £200m a year.

Audit Scotland found voluntary severance schemes in colleges cost £7.2m in 2024-25, but staff costs are still rising. The report said: “Despite the reductions made to the college workforce over the last two years, staff costs have increased and still account for two-thirds of college expenditure (67%).”

Responding, Gavin Donoghue of umbrella body Colleges Scotland said: “Today’s Audit Scotland report recognises the extremely challenging financial position colleges continue to operate in due to the 7.5 per cent real terms cut to government investment. During 2024-25, an increasing number of colleges needed to rely on short-term support to balance the books. This is a clear sign of a sector still under considerable financial pressure.

“For several years, colleges have worked hard to manage these significant financial pressures, reduce costs, and protect the quality of learning and teaching. It is notable that colleges have already cut their workforce by 13 per cent since 2019, compared to a 12 per cent increase across the devolved public sector in Scotland.

“It is a real credit to staff that, despite growing financial pressures, colleges have still increased the proportion of students who successfully completed their courses, and supported a high proportion of students into positive destinations. However, despite every effort to protect the college offer, a reduction in 40,000 college students over two years is the wrong direction of travel for our sector and our economy.”

Labour’s Jenny Young said SNP governments have cut colleges “to the bone”. She said: “The Auditor General makes clear in his report that the Scottish Government is not acting fast enough to help our colleges – and John Swinney’s Programme for Government appears set to continue this pattern of neglect by delivering no real plans for the future of colleges.

“The SNP must work with our colleges to put them on a sustainable footing, deliver opportunities for Scots and unlock economic growth.”

Meanwhile, Tory MSP Meghan Gallacher said: “The SNP Government has completely lost its way on education.

“Scotland’s colleges are being left to lurch from crisis to crisis while SNP ministers refuse to intervene.

“This is what a decade of SNP failure looks like – institutions struggling, staff under pressure and no real solution.”

The report comes days after new minister for tertiary education, Alyn Smith, joined the government. He said the Scottish Government is “actively supporting” colleges and “supporting a range of measures that strengthen” financial sustainability and operational flexibility.

Smith said: “We have worked closely with the Scottish Funding Council and the sector to provide greater flexibility, including support for workforce costs.

“We also provided funding that enabled SFC to support colleges in developing business cases for transformational capital investment projects.”