University autonomy fears as Scotland mulls new oversight powers

Ministers have been warned to tread carefully as they consider handing greater powers to the Scottish Funding Council (SFC) amid rising concern about the state of balance sheets at several major universities.

At a recent appearance in front of the Scottish parliament’s education committee, higher education minister Graeme Dey said he was looking at whether the SFC needed more “robust” powers of oversight and intervention to check how public money is being spent.

“I do think we need to ensure that the SFC are in a position to respond, when legitimate concerns are raised, to investigate them and to act,” he said, suggesting that this will be part of wider legislation planned for the post-16 education sector.

Dey was responding to questions about how a £30 million deficit was accumulated at the University of Dundee, apparently without the knowledge of even some of those involved in the governance of the institution.

Dundee has been far from the only university suffering of late: St Andrews, Abertay, Robert Gordon and Heriot-Watt universities, as well as the University of the West of Scotland (UWS) and the University of Aberdeen, have all posted deficits in their most recent accounts.

Dey had already told the SFC to consider more frequent engagement on financial metrics with institutions in his annual letter on budget allocations published on 7 January, but his comments at the committee hinted that he feels it can go further still.

What new powers could be forthcoming were far from clear, however. As a funder, the SFC wields greatest power in its ability to attach conditions to its grants. The ability to intervene by, for example, appointing auditors to oversee a university’s accounts, would take it into new territory and attempts to wield greater control over institutional governance have been met with fierce resistance in the past.

Michael Marra, a Labour MSP for North East Scotland who sits on the committee, said there had been instances where governance had failed institutions, and there was a case for making sure the SFC was equipped to react when this threatens their viability.

But overall, these examples had been limited, he said, and most universities were “dealing with a bad situation fairly well”. Marra therefore sensed Dey’s keenness to talk about governance issues was in part motivated by not wanting to address the broader financial situation universities face, caused by what the Institute for Fiscal Studies has identified as a 22 per cent reduction in funding for Scottish students by the current government.

A Scottish government spokesperson said that “whilst universities are autonomous institutions with responsibility for their own strategic and operational decision making, the Scottish government through the Scottish Funding Council will continue to offer support to individual universities as they develop their own plans to mitigate their financial challenges”.

“Views from the sector and responses to a consultation which concluded last year will inform our development of new legislation, including whether any enhanced functions for the Scottish Funding Council may be required,” they said.

Lucy Hunter Blackburn, a former head of the higher education division in the Scottish Civil Service, said protecting universities from political interference was a very high principle in Scotland and it was hard to design legislation in this area that didn’t open the potential for misuse.

“Ministers are clearly entitled to be anxious about the risk that a major university like Dundee could go under,” she said.

“Obviously they will be concerned about that possibility and want to explore all the potential ways to protect the investment that has been made in that university over decades.

“But they need to be careful that any new powers that are taken to deal with this particular situation in front of them don’t contain the seeds of future political interference of the sort that has been rejected in previous legislation in Scotland.

“I understand the need to make a visible political gesture to show it is being taken seriously. But we should always be wary about legislating in haste in this area, if that is indeed the plan.”

Alongside planning for future institutional difficulties, Dey was also under pressure to outline what further immediate steps the government will take to protect Dundee, including committing to a bailout to stop the institution from going under.

He has signalled a willingness to accept a request from Universities Scotland to be more flexible over the SFC’s ability to “claw back” grants when institutions miss recruitment targets, which was adding to the financial difficulties at Dundee and UWS, which both potentially owe the funder millions of pounds.

A spokesperson for Universities Scotland welcomed the minister’s willingness to work on this issue, adding that more flexibility around clawback “would allow institutions most at risk from further financial shock to steady themselves”.

Marra said any recovery plan for Dundee should not involve “shock therapy” and the government should consider providing bridging funding to limit the impact of the financial difficulties in the immediate future and “spread the pain more gently”.

“The institution must be allowed to find a more sustainable path,” he said. “It is not reasonable to say ‘we want to see you return to surplus in 12 months’. The pain of that frankly is too great for the institution to bear.”

tom.williams@timeshighereducation.com