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Last saved by: Shirley James
Company: Audit Scotland

Audit of higher education in Scottish universities – 7 July 2016 
Podcast script 
I’m speaking with audit manager Kirsty Whyte, author of Audit Scotland’s first overview report lookin at the higher education sector in Scotland. 

Kirsty, what did this report look at and one did you find? 

The report examined how higher education is funded and delivered in Scotland, how universities contribute to national objectives, and what future challenges the sector and the Scottish Government are likely to face.

We found Scotland's higher education sector is currently financially healthy but faces future challenges, and tough choices are likely to lie ahead if public funding is to deliver Scottish Government policy ambitions.

Now, why did Audit Scotland choose to this review of higher education at this particular time?

Scotland’s 19 universities play an important role in the country’s economic and social development. They deliver a wide range of benefits to individuals, communities and economies, not only in Scotland but across the word. The Scottish higher education sector is internationally renowned, and delivers learning in a range of countries. 

The sector is diverse and complex. Universities are independent charitable bodies and as such are autonomous. However, they receive significant amounts of public funding. 

In 2014/15, the Scottish Government provided over £1.7billion to universities and individual students to help achieve policy ambitions for higher education, such as widening access for students from deprived backgrounds and achieving world-class research. 

It’s an appropriate time for Audit Scotland to examine higher education given the scale of the public funding involved and the significant challenges facing the sector and the Scottish Government.

What are the implications for the higher education sector after the results of last week’s UK referendum on membership of the European Union?

As we say in the report, the EU is one of the bodies which influences the performance of the higher education sector in Scotland.

There are significant numbers of EU students studying in Scotland. Public funding in Scotland supports access to higher education for these students, and universities also receive funding from the EU for areas such as research. 

However, there is still a great deal of uncertainty following the outcome of the referendum so it’s too early to say what the impact may be on higher education, or indeed the rest of the public sector in Scotland. We’re closely monitoring developments and assessing what it may mean for our audit work in the future.

You’ve talked about the significant amounts of public money that goes into supporting the higher education sector. Can you give me an example of how that funding is used?

There are two main public funding streams for higher education in Scotland; funding for universities for areas such as teaching and research, and funding for individual students. 

One of the most obvious examples of public funding is the money provided by the Scottish Government to pay the tuition fees for Scottish students, and as I’ve already touched on, EU students as well. 

The Scottish Government also provides funding to the Scottish Funding Council to fund university places for Scottish and EU students. The Funding Council determines the number of funded places available for students, based on the amount of funding provided by the Scottish Government. Universities themselves are responsible for setting the number of students they wish to recruit from the rest of the UK, and non-EU countries.

We found that the Scottish Funding Council needs to do more to ensure the funding it receives from the Scottish Government makes the maximum contribution to achieving the Scottish Government’s policy ambitions. 

For example, we found that the current funding approach to improving access to university for students from deprived backgrounds is under pressure due to budget constraints. 

Now what is the overall financial position of the higher education sector?

We found that the sector was in good financial health overall in 2014/15, but this masks underlying risks. 

The sector had a total income of £3.5 billion in 2014 and made a surplus of £146 million. However, surpluses and reserves are concentrated in a small number of universities. Some universities are heavily reliant on the Scottish Government for funding, and there is increasing dependence across the sector on income from fee-paying students from the rest of the UK, and outside the EU.

Like public bodies, universities will have to continue making efficiency savings in the years to come. This is at the same time as dealing with other financial challenges, such as increasing costs, potential further reductions in Scottish Government funding, and risks to their ability to continue growing income from other sources, particularly fee-paying students from the rest of the UK and non-EU. 

Now you mentioned that one of the Scottish Government’s policy ambitions is widening access and the report does look at that, and also Scotland’s student population. What did you find there?

In 2014/15, there were just over 230,000 students studying at Scottish
universities, two thirds of whom were Scottish. Over the past decade student population is becoming increasingly international. The majority of students have a positive experience of higher education, and in 2014, 90 per cent progressed from university to employment or further study.

We found that it’s become more difficult for Scottish and EU students to gain a place at university. This is partly because applications have increased faster than the number of places funded by the Scottish Funding Council for Scottish and EU students.

And the Scottish Government introduced significant changes to financial support for students in 2013/14. What’s been the impact of that?

The Scottish Government introduced changes to the student support system 
in 2013/14 with the aim of removing financial barriers for students entering higher education These changes increased the amount of loan funding available to all Scottish students and reduced the amount of non-repayable bursary and grant funding. 

Scottish student debt has increased in recent years as financial support has shifted from those non-repayable bursaries and grants to loans. We estimate that by 2019, the average student loan debt upon graduation will be around £20,000. 

And overall, Scottish students from deprived areas have higher levels of student loan debt than students from less deprived areas

So what happens next?

The Scottish Government, the Scottish Funding Councils, and universities need to work together to plan how they will address the challenges we’ve identified in our review. 

For example, continuing pressure on Scottish Government finances in future years means it needs to ensure its approach to funding higher education is sustainable if its policy priorities are to be delivered. That will mean being clear about how it will target public funding to support those aims, including how the new national targets for widening access will be achieved. 

Kirsty, thank you. And the report is available to download from our website, www.audit-scotland.gov.uk 

ENDS.