THE financial health gap between Scotland’s oldest universities and the rest is widening, as institutions struggle with rising costs and state funding cuts, the country’s spending watchdog has warned.

Audit Scotland said the country’s 19 universities had seen the Scottish Funding Council (SFC) cut overall grants by 7 per cent, from £1.2bn in 2014/15 to £1.1bn in 2017/18.

It meant tuition fees, largely from non-EU students, overtook SFC grants as the sector’s largest source of income for the first time last year.

At the same times, universities faced rising estate and pension costs, and the potential loss of EU research and teaching funds because of Brexit.

Although three ancient universities - Glasgow, Edinburgh and St Andrew’s - reported strong financial positions last year, 10 other universities were in deficit.

Aberdeen, the other ancient, Dundee, Queen Margaret, Robert Gordon, Stirling and the University of the West of Scotland reported deficits in each of the last four years.

The watchdog found modern universities were heavily reliant on state funding, and had smaller rises in revenue from other sources.

It also said that while the SFC used outcome agreements to set out universities’ commitments in return for public funding, last year many of these did not include clear targets for teaching and research, making it difficult to assess if they were delivering government priorities.

Auditor General for Scotland Caroline Gardner said: “There’s significant variation in the financial strength of Scotland’s university sector.

“A small number of universities are stretching ahead of the rest and are in a better position to deal with the financial pressures facing the whole sector. But they still face strong global competition.

“More work needs to be done to make sure that universities’ outcome agreements provide a clearer picture of what each institution is contributing to the government’s national priorities.”

Tory MSP Liz Smith said: “The Audit Scotland report raises very serious concerns, most especially about the future sustainability of the sector if it has to endure yet another year of real term cuts from the SNP government.

“University principals are making it very clear that a direct result of the cuts is the increasing dependence on income from international student fees and that, in turn, is forcing universities to change their teaching structures.

“It is also brings into question how able the sector is to widen access in the way the Scottish Government has directed and how able it is to upgrade campus facilities to be in keeping with 21st century aspirations.

“Yet again, Audit Scotland has exposed fundamental failings in the SNP’s higher education policies which, if they are allowed to continue, will do untold damage to our world class institutions.”

Labour MSP Iain Gray said: “Our universities are vital to our social, cultural and economic success. For the SNP to have deprioritised them is stupid, short sighted and dangerous.

“Audit Scotland warned three years ago that universities faced ‘underlying risks’ when it came to their finances. It has just got worse. Institutions are borrowing millions to keep going.

“When our education system fails, it isn’t just the individual that is held back, it is all of us.

“The SNP cannot say these budget cuts are caused by decreased funding from Westminster – the Audit Scotland report shows that is not the case.”

Jenny Marra, convener of Holyrood’s public audit committee, said MSPs would want to examine “the financial gap between the ancient universities that are generating surpluses and the six universities that have reported deficits in each of the last four years”.

In particular, it will want to hear how these six universities intend to become financially sustainable in the longer term.”

NUS Scotland President Liam McCabe said: “This report underlines concerns that are held by students in Scotland about the sustainability of funding of our universities. We need a fully funded sector, not one which is increasingly reliant on fee paying students.”

SNP higher education minister Richard Lochhead said it was a “useful overview of the financial issues facing the sector.”

He said: “We have invested over £1bn in our universities every year since 2012-13 and the report demonstrates the many ways in which universities are diversifying their income streams while ensuring efficiencies.

“We will continue to work with the Scottish Funding Council to support our universities to remain globally competitive and collaborative.”