University finances pose a headache for the Scottish Government
as it prepares for its upcoming Budget. Following an £18 million
cut in the main teaching grant this year, per-student funding for
teaching Scottish students is 22% lower in real terms than in
2013–14. As with their counterparts in the rest of the UK, where
funding has also been squeezed, Scottish universities have
substantially increased recruitment of international students to
shore up their finances, allowing most to run modest surpluses in
recent years.
But changes to visa rules have led to a significant reduction in
the number of new overseas masters students across the UK, with a
number of Scottish universities – such as Edinburgh Napier,
Glasgow Caledonian and Robert Gordon – heavily exposed to those
nationalities seeing the biggest falls in student numbers. At the
same time, Scottish universities are facing higher staff costs as
a result of higher employer National Insurance bills – although
over time we expect this rise to be offset to a significant
extent by slower wage growth.
In England, the recently announced increase in tuition fees will
help defray these costs somewhat. However, with Scottish students
receiving free tuition if they remain in Scotland, the Scottish
Government would need to increase grant funding by around £60
million if it wanted to avoid further real-terms cuts to
per-student funding and offset higher National Insurance
bills.
Kate Ogden, Senior Research Economist at the Institute
for Fiscal Studies and author of the comment, said:
‘A fall in the number of international postgraduate students,
together with rising staff costs as a result of upcoming
increases in employers' National Insurance, represents something
of a perfect storm for Scottish universities' finances.
‘Universities in England will be grappling with the same
challenges. But after a long-running freeze in fees, they will be
allowed to increase tuition fees by 3.1% in the coming year,
which will provide some help in addressing financial challenges.
‘With tuition free for Scottish students in Scotland, if the
Scottish Government wants to provide more funding to universities
it will need to look to its own Budget. Despite a much-improved
funding outlook for the coming year following the UK Budget, this
could still prove challenging given the number of competing
priorities facing the Scottish Finance Secretary .'
READ THE BRIEFING.
