Most Scottish colleges running at a loss sparking fears for future

When other financial factors are considered, such as assets and pensions, the position is better overall, but even so more than half of institutions are in deficit with the total amounting to nearly £10 million.

Herald View: College deficits are a cause for concern

The largest deficit of more than £7m was at Edinburgh College while Ayrshire, Dundee & Angus, Forth Valley, Glasgow Clyde, Inverness, New Lanarkshire and Perth colleges all recorded losses of more than £1m.

The details have emerged at a difficult time in further education with Scottish Government funding reductions of 18 per cent in real terms between 2010/11 and 2015/16 leading to job cuts and falling student rolls. Funding increased again this year.

Herald View: College deficits are a cause for concern

In 2016 Audit Scotland reported that the overall financial health of the sector was “relatively stable”, but also said colleges did not have long-term financial plans to help them prepare for future financial pressures.

And just last week, Audit Scotland reported three colleges to the Scottish Parliament because of fears over their finances.

The accounts have been published at a time when lecturers are taking strike action over the lack of progress towards a national pay agreement to equalise salaries across Scotland. Terms and conditions are also being negotiated.

A spokesman for Colleges Scotland, which represents principals, said institutions managed their finances well, but the new figures collated by The Herald were a reflection of tight public finances as well as increased cost pressures such as pensions.

He said: “We appreciate the Scottish Government’s additional funding available in 2017/18, which recognises the difficult financial challenges the sector faces as it continues to deliver the skills and training that individuals, employers and the economy needs.

“However, the overall number of colleges forecasting deficits is increasing and this is not a sustainable situation.

“We are continuing to work with the Scottish Government and the Scottish Funding Council to ensure sustainable funding for the sector and manage cost pressures.”

Herald View: College deficits are a cause for concern

Colleges Scotland also said the figures underlined the difficulties faced by the sector in negotiating a pay deal that could be sustainable in the future.

Larry Flanagan, general secretary of the Educational Institute of Scotland teaching union, which is leading on industrial action in the sector, also called for sustainable future funding.

He said: “It is clear that provision in further education has been impacted in recent years by significant cuts to staffing, student places and courses and that the mergers process – which was not supposed to be used as a mechanism for cuts – has also had an impact on the range of learning opportunities provided.

“It is essential that a sustainable model of supporting further education provision is delivered in the future.”

However, Mr Flanagan also stated that it was clear there was currently sufficient money within the sector and already allocated to colleges to meet the pay harmonisation agreement.

A spokesman for the Scottish Funding Council (SFC) said: "The new accounting standard for this round of college annual reports means our analysts have had to adjust the way they understand the overall financial health of the sector.

“This still shows there are some parts of the sector we need to support and work with to improve the overall position and we’ll monitor the effects of this work."

Herald View: College deficits are a cause for concern

A Scottish Government spokesman said: “The vast majority of colleges are financially stable, with one-off restructuring costs creating deficits in some cases.

“We have invested more than £6 billion into colleges since 2007 and continue to demonstrate our commitment by increasing funding by £41.7m to £599m this year.

“The SFC continues to support the college sector, including through delivery of business transformation plans that will ensure the continued sustainability of the sector alongside significant government investment.”