SCOTTISH universities may have to hold back ambitions to continue being world-leading research centres as ministers launch a review into their funding model.

Universities Minister Richard Lochhead has instructed the Scottish Funding Council (SFC), the body which funds higher education in Scotland, to draw up plans for the future of how universities are funding – with institutions set to face operating deficits of up to £650 million in the next academic year alone.

READ MORE: Coronavirus: Scotland's universities set for 'phased campus return' after summer 

Meanwhile, fears have been raised that university staff and students “lack confidence” in proposals to re-open universities in Scotland.

The SFC has been told to provide its initial funding model considerations by August, but there are concerns over a lack of financial support from the Scottish Government for universities planning to re-open their doors to students this summer as some bosses sit down to balance their annual budget later this month.

Nicola Sturgeon has ruled out introducing tuition fees for Scottish undergraduate students, and is not being considered by the SFC as part of its review.

Labour MSP Daniel Johnson said: “It is welcome to see some movement from the Scottish Government on the looming funding black hole caused by Covid-19. 

"However, many principals will be concerned that this does not reflect the scale or pace of the challenge they face. 

"Universities are setting budgets this month and set to start a new academic year in September – a preliminary report on structures in August will do little to reassure those who have warned of an imminent cash shortfall.

“Mr Lochead must also spell out what is intended by the changes to structure hinted at. Without clarity on purpose and effect of such changes, they run the risk of creating anxiety, causing disruption and doing little to address the financial crisis facing universities."

There are suggestions that universities may be forced to merge in order to survive, with Mr Lochhead indicating “there is an opportunity for our colleges and universities to work closely together on a regional level and on a national level”, stating that he would like to see “further and higher education working very closely together”.

The Universities Minister also suggested at his last appearance before Holyrood’s Education Committee that “some commentators may think that we must lead the world in certain areas of research and that we must therefore put more resources into those areas and into certain institutions”, adding that “there are alternatives to that point of view”.

This could mean Scotland’s world-leading university research could have to be curtailed or remodelled as part of a new funding model.

Mr Lochhead added: “Further and higher education and the research sector must emerge from this crisis even stronger by being at the heart of our economic recovery, delivering on our skills needs and maintaining its world leading reputation.

“I am clear we will need to shift to meet those challenges, so the Scottish Funding Council will look at how its existing models of funding, governance and delivery can exploit new opportunities and continue to support our world class further and higher education systems.”

A spokesperson from Universities Scotland said: “Universities are already focused on adapting their provision to support a new normal after the pandemic and want that to reflect learners’ needs, institutional strengths and the First Minister’s desire to go beyond rebuilding to create a better future for Scotland. We hope the review will be similarly focused on societal and economic need and keep a focus on universities as a real asset to recovery.

“More broadly, it’s important to retain sight of the fact that universities’ ability to respond effectively to the needs of learners, employers, business and economic growth after the pandemic will be severely compromised unless the Scottish and UK Governments can offer a meaningful package of devolved and UK-level support to enable higher education to be a key part of the nation’s recovery and success. Reviewing provision is not a substitute for that.”

Universities and colleges are set for a “phased campus return” in the next academic year in the third phase of the Scottish Government’s programme in lifting the lockdown. Most universities and colleges are planning, initially, for a combination of digital and physical learning – with social distancing rules in place. In the fourth and final phase of lifting the lockdown, campuses would be fully open.

The University and College Union (UCU) Scotland wants to see a sustained reduction in cases and infection rates, coherent planning for social distancing, comprehensive testing and contact tracing, university-wide strategies for safe returns and protection for vulnerable people, before institutions can re-open.

UCU Scotland official Mary Senior said: “The safety of students and staff safety must be paramount if we are to counter the damage being done by the UK’s appalling record to date on Covid-19. We need assurances that health, safety and wellbeing are the top priorities before any return to university campuses can be considered.

READ MORE: Coronavirus: Fears universities could be merged if they don't embrace new normal

“We need to have sustained reduction in Covid-19 cases, and infection rates, along with coherent plans for social distancing, comprehensive testing and contract tracing before we can contemplate any moves back to working on campus. It is vital that universities work with trade unions to agree university-wide strategies for a safe return which, crucially, includes protection for the vulnerable.”

Jamie Greene, Scottish Conservative education spokesperson, said: “It’s no surprise people lack confidence in the Scottish Governments plans to re-open universities given the SNP’s handling of this pandemic thus far has left care homes exposed, health workers without PPE and now testing numbers nowhere near expected.

“It is absolutely right that universities should not re-open until they are satisfied that they can keep their students and staff safe.

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“The SNP Government must give universities that reassurance, but their inability to get a functioning test, trace and isolate regime off the ground would suggest there is some considerable way to go.”

Labour education spokesperson Iain Gray added: “The Scottish Government must work with universities and unions to make sure reopening Scotland’s university campuses is safe for students, their family members and staff.

“There must be a clear and deliverable plan in place so that social distancing measures can be maintained, there is sufficient access to PPE and testing, and so that the Scottish Government can be sure that all precautions have been made to stop the spread of the Covid-19 infection in our universities.

“It is vital that these plans are in place for every learning space before any action is taken to reintroduce staff and students, and Scottish Labour will work with the government and unions to make sure that happens.”

Mr Lochhead said that the safety of staff and students is the Scottish Government’s “overriding priority as universities plan for the next academic year”.

READ MORE: Richard Lochhead: We must protect universities, they are key to Covid recovery

He added: “The Scottish Government’s framework for decision making sets out our approach and the principles that will guide us on the way forward. This makes clear that we will proceed on the basis of the public health evidence. This was reiterated by clinical director Jason Leitch at yesterday’s ministerial Covid group meeting for further and higher education, hosted by myself.

“We continue to work closely with universities, student bodies and university staff representatives on plans for a phased return to campus, in line with our route map through and out of the crisis.”