The fallout from the Dundee investigation will have consequences across the sector

Today’s publication of the independent investigation into the University of Dundee’s finances, led by former Glasgow Caledonian vice chancellor Pamela Gillies concludes, is likely to prove required reading for university managers and governors. Key findings include poor financial monitoring, weak governance in relation to financial accountability, inadequate reporting, and lack of agility in responding to a fall in income.

The university’s principal Shane O’Neill, and two members of the governing body including the interim chair, have resigned. Former principal Iain Gillespie, who comes in for substantial criticism in the report, resigned in December.

Aside from the immediate facts of the case, the investigation also offers an insight into wider political questions in the Scottish context – and arguably beyond – both in terms of policy moves around governance and the thorny question of additional state support for institutions in financial jeopardy.

For example, it came as something of a surprise in early January when Scottish higher education minister Graeme Dey said he was considering that forthcoming legislation – what became the Tertiary Education and Training (Funding and Governance) Bill – would beef up the Scottish Funding Council’s oversight powers. His comments came in response to a parliamentary question on governance at the University of Dundee. The consultation that had preceded the legislation gave no indication that this was within the subsequent legislation’s scope or purpose.

When the bill arrived, it contained various provisions – still a little unclear, as the legislation works its way through parliamentary scrutiny – for additional responsibilities around disclosures and notifications to the funding council. But the Gillies report perhaps helps in places to shed some light on what encouraged ministers to use the legislation to toughen reporting requirements around finances.

So for example, we see that on 13 November 2024 a member of the university’s senior management wrote to SFC with the following note:

The Principal has asked that I drop you a line to let you know that the University will today be announcing to staff and students that it will need to find savings of around £25-30m over the next couple of years to balance the books in the face of ongoing funding pressures and the downturn in the international student market.

As the investigation concludes, this “falls below the standard of full and transparent disclosure” given that it contained “no reference to the technical breach of [banking] covenant (which turned out to be an absolute breach)” – one that the university’s senior management were by this point aware of. The funding council was not properly informed of the breach until the end of the month. You rather get the sense that this somewhat breezy approach to keeping SFC in the loop is a prime example of why the Scottish government thought that further powers and duties are needed.

Legislation aside, the SFC says it will “now take the time reflect on the actions, both immediate and longer-term, that should be taken to minimise the risk of this situation happening again.” There is also the question of the ongoing need for financial support.

Dundee has already received £22m in state support to manage initial liquidity risks, in a mix of low-cost loans and grants. Cooperation with the independent investigation was part of the quid pro quo. The university has made a further financial ask of the Scottish government (via the funding council), which Graeme Dey described last week as composed of two parts:

The first is to avoid the scale of disruption proposed, particularly in respect of employment, in the first iteration of the financial recovery plan. That would have been quite destructive to employment levels and nobody was in any way comfortable with that.

The second element is liquidity. It is self-evident that the institution got itself into difficulty, because it was essentially living beyond its means, and that position will not be recovered overnight. While the financial recovery plan is being implemented and taken forward, the institution will gain a degree of further support, whether from commercial sources, the Government or a combination of the two.

It’s been reported in the press that this new ask amounts to around £100m, though the minister declined to confirm this or speak to what extent it would be composed of loans. Dundee is the first institution in the UK to have received a government bailout in the current sector financial crisis, but it may not be the last. So how the report lands is likely to have a direct impact both on the university’s new request for further support, and on other universities that may go on to require assistance.

Scottish ministers have always tried to draw a line between Dundee and other institutions, suggest that it is a “special case” rather than a symptom of a more fundamental problem with funding. And indeed – for those looking on from outside Scotland – Rachel Reeves was reported in the Dundee local press a couple of months ago as saying that “the problems at Dundee are greater than other universities across Scotland and reflect some of the decisions made there.”

This is a narrative that can hold water while there is only one institution in immediate financial danger (in whichever part of the UK), but would struggle if liquidity problems became more widespread. In that context, how the Gillies report’s conclusions about managerial and governance failings are used, politically, will be important to keep an eye on.

The tenor of debate over Dundee in Scottish politics has at no point – at least, not so far – been about why the Scottish government is putting money in, and much more about why it didn’t have information it should have had, what it’s going to do next, what went wrong, and so on. The English political climate would clearly prove very different than Scotland’s if direct public financial support for a university became needed (consider recent speculation about whether anyone is getting a “secret bailout”).

It appears that we will get further answers next week about how much further the Scottish government is willing to put forward financial assistance, but the initial indications look fairly promising – in a statement today, education secretary Jenny Gilruth has welcomed the “decisive action which has been taken with the changes in leadership” and is set on “securing a positive future for Dundee.”

Gillies’ report might be damning around the decisions taken at the top levels of the university – but it too is at pains to stress the value of the education and research taking place, and the importance of this continuing to be the case:

The University of Dundee continues to retain a vibrant community of very talented and committed staff and students. The University has a strong track record of research success, is renowned for the quality of its teaching and student support, for its entrepreneurial flair and the very considerable contribution it makes to the economic, social and cultural life of the City of Dundee and beyond.