The first pillar of Scotland’s Future Framework for Universities deals with immediate, practical needs: the assessment of what Scotland needs from higher education in the future and how the current sector gets there comes later.
The message is simple and stark. For Scotland’s higher education system to keep doing what it is currently doing it needs an extra £200m, each year.
That’s the difference between TRAC expenditure and sector income in 2023-24, and it has grown steadily over the years. The deficit hits differently at different providers and for different activities – with the familiar patterns of publicly funded teaching and all kinds of research subsidised primarily by international student fees. Balancing the sustainability of a devolved sector on an income stream subject to the vagaries of increasingly inept immigration policy making at a UK government level makes the sector vulnerable.
Risk registered
That vulnerability, and the various ways in which providers need to cut spending and curtail activity to account for it, is a detriment to Scotland’s higher education sector – and therefore to Scotland as a nation. The report recognises that teaching and research are just the tip of the iceberg, noting support for industrial innovation, regional development, public services, and community wellbeing. All of these ancillary benefits are also at risk.
But the issue is not just with recurrent funding. Universities in Scotland also face a £1.1bn estates maintenance backlog, encompassing immediate priorities like the removal of potentially dangerous RAAC elements (£77.2m) and a longer term need to prepare for a future of extreme weather conditions and rising energy costs (wider commitments to net zero would cost at least £645m over the next decade).
Again, to be clear, this report is just pillar one of a much more detailed review. It does not identify underlying causes or propose policy responses. All it does is set out the current state of play, clearly and with rigour.
TRAC changes
Because we’re talking about costs of activities within higher education providers you would imagine that TRAC (Transparent Approach to Costing) data would be front and centre. It is a good dataset for doing what it does, but it has limitations (we’ve been over some of these on Wonkhe recently) and – given the level of UK-wide interest in the costs of university activity right now – you can expect to be talking about it a lot in the months to come.
Some of those limitations are very germane for this kind of study. TRAC hasn’t (since 2018-19) gotten into subject areas and cost centres. The – largely indicative – figures it generates are better in aggregate but that act of aggregation means that the huge differences in institutional circumstances are smoothed out in various ways. Instead of the usual TRAC groups we are offered “ancient universities” (St Andrews, Glasgow, Edinburgh, Aberdeen), “chartered universities” (Strathclyde, Heriot-Watt, Dundee, Stirling), “modern universities” (Glasgow Caledonian, Abertay, Napier, Queen Margaret, West of Scotland, Robert Gordon, UHI) and small specialists (Glasgow School of Art, Royal Conservatoire, SRUC).
Chartered universities (no doubt Dundee is an outlier here) have more income than expenditure, but the flattening effect of grouping financially stronger universities with weaker ones means that overall 99 per cent of this group’s projected in-year expenditure is covered by income. The report notes that TRAC’s methodology (the margin for sustainability and investment) will be flattering this figure and that in year figures are bleaker.
Teaching
In-year (HESA) data is also used to furnish six case studies that are used to illustrate issues in particular spheres of activity. In a teaching section that focuses on the decline in the amount of the cost of public teaching that public funding covers, we learn more about UWS social work provision in rural locations and the substantially higher costs that this kind of provision entails – it is a neat reminder that socially valuable provision in underserved areas is seldom cost effective.
Scotland’s ancient universities tend to be most able to access international student income, though the dwindling value of public funding for home student teaching has led other providers to attempt to increase this kind of recruitment over the past three years. While all groups have at least 40 per cent Scottish (home) students, for modern universities the proportion is nearly 80 per cent.
Research and capital
As you may well expect, Scottish universities do not recover the full cost of research via any of the common funding routes – the overall recovery rate is 72 per cent, which compares favourably with a whole UK figure of 67 per cent. Here we don’t get a breakdown by institutional type, but it is reasonable to expect that ancient and chartered universities are more likely to access the more traditional (UKRI) funding – with ancient universities (£70m) securing more overall than chartered universities (£25m) while modern providers rely more on SFC funding within a lower overall total (£1m).
In terms of maintenance and modernisation, the larger and older estates of ancient universities have seen an increase in property costs recently. As well as immediate priorities like addressing unsafe cladding and RAAC, universities will also be looking to minimise energy spending as costs are set to increase substantially – something which may also help with longer term (and potentially expensive) energy plans linked to net zero. There’s a great case study regarding Glasgow’s combined heat and power overhaul system in this section.
Uncosted activity
Running teaching and research, and maintaining estates, are some of the more expensive things that Scottish universities do. Other activity isn’t technically “uncosted” – there are of course innovation and knowledge exchange funding streams, and support of community-facing activities – but it does tend to seek subsidy to cover staffing costs in particular, and this spending is very difficult to isolate in TRAC.
The case studies here are the Royal Conservatoire of Scotland’s creative enterprise office – an uplift in SFC knowledge exchange funding enabled the launch of a free-to-access service to help develop emerging business ideas and support portfolio careers in and beyond the creative industries – and the Bright Red Triangle collaboration (Napier, Queen Margaret, Edinburgh College) designed to support student, staff, and graduate enterprise. In each case external funding was used to cover the extensive costs (which can reach up to £5m in the very largest university) of delivering knowledge exchange activities – providers highlighted the risks to such activities given tightening funding envelopes.
Student support is also difficult to cost – even when it covers government priority activity like the Student Mental Health Action Plan. The report recognises (via a Robert Gordon University case study) the growing complexity of student needs – university spending on mental health support rose by 73 per cent between 2020 and 2025, and has been supported in Scotland by time-limited funding streams.
Staff costs
While in TRAC staff costs are built into activity costs, the Pillar1a report separately analyses the impact of institutional financial pressure on pay, workload, and conditions. When even a 2 per cent (below inflation) pay increase for all staff would cost the sector £55m, it is easy to see the problem. The (new JNCHES) national bargaining scheme has led to a review of the pay spine – addressing known anomalies and compression between spine points – which could be implemented by this time next year.
Meanwhile staff (807 respondees to a UCU workload survey conducted earlier this year) report working an average 7.76 extra hours per week, with just over 61 per cent reporting an increase in workload over the last year. A decrease in staff numbers and an increase in administrative work are the most commonly cited reasons.
That administrative work links to another perennial bugbear – a legally rigorous and demanding regulatory framework. We get an overview of regulatory requirements, but commentary on the efficacy of these requirements is out of scope for this pillar 1a report.
Where this leaves us
There’s no real surprises in this report – we know that teaching and research don’t cover costs, that estates backlogs are growing, and that there is not enough money in the system to support the many other things the government would like universities to do. It is also well known that this growing financial pressure is having a detrimental effect on pay, conditions, and workload (the report does not spell out the obvious knock-on impacts for the student experience).
But with the analysis and policy recommendations still to come in later reports, the asks here are modest. The limitations of TRAC (designed and modified for more stable periods in university financial history) are becoming apparent. There is a call for the reappraisal of the need to allow TRAC costing to address individual subject areas (as used to happen in TRAC-T), and the margin for sustainability and investment (MSI) is singled out as needing an overhaul for these days of deficit: reducing required expenditure in response to falling funding makes it look like the sustainability gap is shrinking. There’s more of this in the analytical report that forms the background to this publication – I’m looking forward to diving more deeply into some of the data presented there at some point soon.
There’s also a need for better costing approaches for innovation, knowledge exchange and civic activity – and a review of the administrative reporting burden. As many of these processes are UK wide, this hints at the need for cross UK working on these issues (that affect each of the four UK HE sectors) as Wales and Northern Ireland make parallel in-depth examinations of funding models and the need for similar activity in England becomes even more apparent.
