Colleges suffer real-terms funding cut of 20% in five years, watchdog says

Scotland’s colleges have seen their funding cut by 20% in real terms over five years, a new report from a public spending watchdog has made clear.

Audit Scotland said Scottish Government funding for colleges amounted to £656.2m in 2025-26.

The watchdog added: “This means that between 2021-22 and 2025-26, funding for colleges has decreased by almost £20m (3%) in cash terms and by 20% in real terms.”

The funding award for this year includes cash to help colleges meet the cost of the rise in employer national insurance contributions, as well as money for pay increases for lecturers.

But Audit Scotland noted that “colleges have not received a funding uplift to cover general inflationary pressures, meaning that colleges must find savings to match rising costs”.

Its report highlighted how colleges are already delivering less teaching to fewer students as they attempt to balance their books.

It also warned there is a risk that colleges could prioritise courses that are less expensive to deliver over those that meet local need.

Savings so far have “mostly been achieved through voluntary severance schemes”, the report said – noting that the number of staff working in colleges decreased by over 7% in 2023-24.

However despite such measures, Audit Scotland found seven colleges had reported a deficit in 2023-24, adding that two had required liquidity support from the Scottish Funding Council (SFC) – the body which distributes Scottish Government cash to colleges.

The report was published just days after an SFC report warned that “most colleges are not sustainable”, and that the financial position across the sector “continues to be extremely challenging”.

Meanwhile, Auditor General for Scotland Stephen Boyle said that for colleges “funding has reduced and the demands on the sector are changing”,

He said there were fewer older students enrolling, with colleges facing “increasing competition from universities and the impact of digital technology on delivering teaching”.

Mr Boyle warned: “If those pressures continue, colleges will need to change how they operate rather than trying to deliver more of the same with decreasing resources.”

Colleges Scotland CEO Gavin Donoghue said the report, along with the earlier one from the SFC, showed the “dire financial circumstances colleges are operating in”.

He added: “Taking together, these two reports show very clearly the acute damage being done to colleges by cutting government investment by 20%.”

Mr Donoghue stated: “Reducing college funding by a fifth has directly led to less students being able to access a world-class college education, unsustainable cuts to staff numbers, inadequate estates maintenance, and reductions in courses on offer.”

He said there must be a “step-change” in next year’s Scottish Budget to “halt the decline and bring back a sustainable level of investment for our crucial college sector”.

Labour education spokesperson Pam Duncan-Glancy accused the Scottish Government of having “systematically hollowed out Scotland’s colleges”, adding this had “robbed Scots of all ages of opportunities”.

She said: “This damning report lays bare years of punishing budget cuts and a total lack of leadership from this SNP government.

“College staff are doing a fantastic job of supporting students in the face of SNP failure, but their jobs are being cut by the day.”

Tory education spokesperson Miles Briggs said: “Audit Scotland’s conclusions are a damning judgment on the SNP’s neglect of the college sector, which is vital for skills, jobs and growth.

“Swingeing Nationalist funding cuts have left too many colleges on the brink financially, with two requiring emergency bailouts.

“The inevitable result of this mismanagement is jobs, courses and student numbers being slashed.”

Liberal Democrat MSP Willie Rennie accused the government of having “guillotined college budgets over many years” – adding that this “has led to a lack of skilled staff in key areas, from social care to nursery education, and contributed to a wider economic malaise”.

A Scottish Government spokesperson said: “The Scottish Government recognises the vital role that Scotland’s colleges play in our economy and wider society.

“This report notes a number of high-level pressures facing the sector. The Scottish Government will consider the report’s recommendations and will work closely with colleges to ensure a successful and sustainable future.”