College sector at 'fork in the road' as pressure mounts on MSPs over funding ahead of Scottish budget
Colleges Scotland has issued a stark warning to MSPs about the future of the sector ahead of Scottish budget decisions
Pressure is mounting on the Scottish Government to increase funding for the college sector ahead of budget decisions.
Colleges Scotland has issued a stark warning the sector is at a “fork in the road” as it highlights warnings half of all colleges could be insolvent by the end of this year.
CEO Gavin Donoghue pointed to what he called “chronic underinvestment” that could lead to “significant” job losses over the next two years.
The umbrella body is calling for a change to how colleges are funded and a “commitment to the sustainable funding of colleges in the 2026/27 draft Budget”.
"Scotland’s colleges are at a fork in the road,” Mr Donoghue said.
“Chronic underinvestment over a number of years, as evidenced by the recent Audit Scotland report, has left institutions struggling to meet the needs of learners and local employers.
“If flat-cash funding continues, 11 colleges may be at risk of effective insolvency in the next academic year.
“That is why colleges are calling on government and parliament to ensure the 2026/27 Budget restores funding, supports staff and students, and unlocks the full potential of these valued community anchor institutions.”
Colleges Scotland has now produced its budget submission, which is in line with recent reports from the Scottish Funding Council (SFC) and Audit Scotland.
As previously reported in The Scotsman, the SFC report warned of the “imminent risk” of some colleges becoming insolvent by the end of this year.
Four colleges are forecasting a cash deficit by the end of this year, increasing to 12 colleges by the end of the 2027/28 financial year.
Colleges Scotland’s submission lays out a worst-case scenario that if the current flat-cash funding model is followed in the next budget, 11 colleges may run out of cash in 2026/27.
It further warns of a forecasted reduction of £37.9 million in cash held by colleges, leading to a sector with deficit of £5.5m in 2026/27
The umbrella body adds that significant job losses could result in 2026/27, including potential compulsory redundancies.
Mr Donoghue added:“Colleges are the skills engines of our economy and are already widely engaged in the collaborative effort to eradicate poverty.
“Any additional money would not just be an investment in college education – it would be an investment in Scotland’s sustainable economic future.
“With campuses in every community, and a diverse range of learning opportunities, colleges are uniquely positioned to support this transformation.”
Colleges Scotland’s draft Budget submission outlines four funding scenarios.
These range from colleges receiving flat-cash funding, which it says is a real-terms cut because of inflation, to a “sustainable level of investment” that, it said, would offer more opportunities to more students, and secure jobs and campuses.
Recent reports have found that colleges have seen a real-terms fall in government investment of 20 per cent since 2021/22.
Meanwhile, the Scottish Funding Council has warned most colleges are now “not sustainable” under the current funding model.
Scottish Labour education spokeswoman Pam Duncan-Glancy MSP said: “This leaves a number of our colleges at serious risk of insolvency, while cash for several strategic funding schemes such as on mental health counsellors has been withdrawn in recent years.
“It is clear that we need to have better alignment between the economy and education directorates to better address these challenges, while supporting a regional approach to skills.”
Higher and Further Education Minister Ben Macpherson said: "I have been grateful for all the constructive dialogue that I’ve had with Colleges Scotland over the last months.
“Scotland’s colleges play such an important role in our economy and wider society, which is why the Scottish Government – through the Scottish Funding Council - provided the sector with a 2.6 per cent increase in teaching funding and almost a 5 per cent increase in capital funding this year.
“Nevertheless, we acknowledge recent reports from Audit Scotland and the Scottish Funding Council that make clear the challenges facing the sector, which are being exacerbated by the UK Government’s increase to National Insurance contributions and other external factors.
“As decisions around the Scottish Government’s Budget are being considered in the months ahead, I will continue to work closely and collaboratively with Colleges Scotland, to support skills development and ensure a successful and sustainable future for our colleges.”
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