The Scottish government announced its budget in December by saying it was increasing “total investment in higher education” by 3.5 per cent.

Universities Scotland dug around in the spreadsheets at the time, working out that this figure was really about funding per student – based on a bit of new investment, plus the reallocation of funding that had been temporarily attached to what’s become known as “SQA places”, those temporary funded places put into the system during the pandemic. If all of that money was put into increasing the teaching subject price (the unit of resource, more or less), this could equate to a 3.5 per cent uplift. Per student funded, rather than funding overall.

At the time it wasn’t even clear whether the Scottish government would indeed route all the SQA places funding back into higher education – it was something of a relief to the sector when the SFC guidance letter, published in January, contained a stipulation that all the funding “should be repurposed and targeted across the system to reflect demand.”

An increase to SFC funding per student of 3.5 per cent would have had the added political benefit of exceeding the tuition fee uplift of 3.1 per cent in England and Wales (the university capital budget was also raised by 3.2 per cent at the budget – possibly we are being too cynical here).

This week has brought SFC’s indicative funding allocations for the coming year (largely similar final allocations will come around May time). And the teaching subject price rose by 3.3 per cent in the end – slightly less than promised (if you very generously interpret Shona Robison’s statement as only referring to the unit of resource), but also slightly above England and Wales.

But. The higher education resource budget in Scotland has not had anywhere near a 3.5 per cent increase. Total teaching funding is up 1.9 per cent, below inflation. While the sector will be pleased that what money was there has been directed into the teaching subject price, this is largely money that was previously allocated elsewhere. As Universities Scotland has said:

The amount invested in each Scottish student next year will increase in cash terms and we were clear to the Government and Funding Council that was our priority, so we do welcome that decision. However, the Funding Council’s indicative allocations confirm that most institutions will see a real terms cut to their teaching funding. Taking the long-term view, next year’s cash increase doesn’t fundamentally change the fact that the gap between the cost of teaching and the investment in each Scottish student remains unacceptably high. The reality is that the level of additional investment made by the Scottish Government does not give the sector the financial support we asked for at a time when it has never been more necessary.

Where the places have gone

What SFC has done to remove the 2,500 SQA places (and hence free up funds to be invested back into the unit of resource) has worked in two stages. First, the funding council has removed them according to their original institutional allocations – but these were made back in 2020–21, and the recruitment landscape for many universities has changed. So for those three institutions who were “delivering significantly in excess of their allocated funded places” – Glasgow Caledonian, Glasgow School of Art, and the Open University in Scotland – the removal of places is reversed, and the SQA places stay in.

The result of this would be that not all 2,500 places would be removed. So there is an additional reduction to funded places from institutions “under-delivering by more than 4% against their funded places,” even after SQA places are removed.

In many ways this makes sense, as the result of giving more funded places to universities that are struggling to recruit to them would likely be that more funds need to be “clawed back” by SFC further down the road. The issue of clawback has become a pressing one, as paying money back to SFC appears to be a challenge for some universities who were not able to use their inflated student number allocations. As per a committee submission by Universities Scotland in January (page 51):

Clawback is presently underway for institutions in this financial/academic year based on 2022/23 performance. This coincides with a far more precarious financial situation for individual institutions which means the consequences of clawback are now potentially far more damaging to institutional stability.

The representative body worried that clawback could “become a barrier to the institution’s ability to recover in a wider sense,” and hoped the funding council and the Scottish government would allow some leeway in how and when funds have to be returned. There’s no news yet on whether this flexibility will be afforded.

The removal of funded places to all but three institutions, despite the welcome increase in the teaching subject price, is why for next year 17 out of 19 institutions will see a real terms cut in their teaching funding (as Universities Scotland points out).

Beyond teaching

Elsewhere the allocations for 2025–26 bring mixed news. The SFC has taken the probably very welcome decision to pump more or less all of its increased capital budget into core research and innovation funding – this goes up 3.6 per cent. Included here is an 8.7 per cent uplift to the Knowledge Exchange and Innovation Fund (KEIF), which gets a particular boost to compensate for “historic underinvestment.”

Compensation for strategically important subjects is reduced by £1.7m, as had been flagged last year. Both widening access funding and the disabled students premium are unchanged in cash terms – that is, cut in real terms.

The other point to note here is that SFC has not yet released its annual financial sustainability report for colleges and universities – it’s expected next week, and is likely to put universities’ finances back in the spotlight once more.