SNP ministers consider new powers for regulator in the wake of Dundee University financial crisis

SNP ministers could strengthen a regulator’s powers of oversight and intervention in the wake of the financial crisis at Dundee University.

Higher and Further Education Minister Graeme Dey told MSPs he was considering using upcoming legislation to hand more “robust” powers to the Scottish Funding Council (SFC), which manages Government grants to colleges and universities.

He also signalled that the Scottish Government could accept a request from the higher education sector to be more flexible over the SFC’s powers to “clawback” funding from institutions that fail to meet their targets for recruiting Scottish undergraduates.

Dundee University is already facing a £30m deficit, but is expected to be dealt a further blow if the SFC asks for repayment of millions of pounds of its grant, in the wake of a shortfall of more than 300 students this year.

Higher education minister Graeme Dey. Picture: John Devlin | NW

Mr Dey and Education Secretary Jenny Gilruth were quizzed on the troubles at Dundee University while giving evidence to Holyrood’s education committee on Wednesday.

The Scotsman reported how Universities Scotland, the umbrella body for the sector, had pleaded for the SFC to give institutions more “space” when they are trying to recover, instead of being asked to repay huge sums of their grant under the clawback mechanism, warning “the consequences of clawback are now potentially far more damaging to institutional stability”.

In evidence, Mr Dey said he did not think it was “entirely an unreasonable ask” and he would not rule it out, although there was a “balance to be struck here”, particularly if it involved large sums of public money.

Changes to the role of the SFC are already being considered ahead of new legislation on post-school education and skills reform.

Mr Dey told MSPs the body’s powers could be enhanced if there was a need to learn lessons from Dundee University’s financial crisis, which has already led to the resignation of its principal, Iain Gillespie, last month. Staff at the institution are also being balloted on strike action over job cuts.

He said: “Of course we will look at the context of that legislation and as it develops through parliament, whether there are any measures that might need to be put into the Bill in terms of powers for the SFC, powers of oversight, powers of intervention.”

Mr Dey added: “I would want to be satisfied as minister, as the Cabinet secretary would, that where public funds are being utilised by institutions, they are being utilised or deployed appropriately.

“And where concerns are brought forward... perhaps one of the areas I’ve been exploring in the context of the forthcoming legislation is to ensure that there are mechanisms in place, in FE (further education) and HE (higher education), where, whether it be trade unions or other groups, have got legitimate concerns about activities in those institutions, they can be looked at, responded to.

“Now there needs to be a balance here, because as we know the industrial relations in some of these sectors are very poor, and there is a risk there would just be an endless stream of complaints.

“But on the other hand 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.

“One of the drivers for me in looking at this legislation is that I’ve not been entirely convinced that their powers of intervention are as strong as they need to be.

“I’m keen to take the opportunity through this legislation, which the committee will be involved in looking at, to ensure that we have the most robust set of powers available to our regulators, to try and ensure that all of us as parliamentarians can be satisfied that the appropriate use of public money is taking place.”

Mr Dey also told the committee he strongly suspected that the courts of other Scottish universities would be seeking assurances from their finance directors that they would not end up in the same position as Dundee University, which is currently working on a recovery plan.

The minister said he was “anticipating” that a report would be produced detailing how Dundee University ended up in its current position.

“I think there needs to be an explanation provided, because of the element of public funding. It needs to be provided for the staff, for the students. We need to understand how this occurred. I fully expect there to be a report,” he said.

Dundee University’s accounts for 2023/24 are still to be published, but local Labour MSP Michael Marra told the committee it had just £34m in reserves at the end of July 2024, following a £30m in-year reduction, with an in-year cash flow deficit of £30m.

This week, Mr Dey wrote to the SFC with his guidance for the coming year. Under a section on “institutional and sectoral sustainability”, the letter said: “I expect SFC to have contingency and resilience plans in place to manage the impact of any potential disruption to learning.”

Some have read this as a reference to the potential for institutional failure, although others say it could also apply to industrial action or building works.

At the education committee, Mr Marra said: “Let me say it is too big to fail. One in seven of the population of Dundee are students at that institution, 3,000 members of staff, an absolutely critical relationship with the NHS, whether it be joint contracts for the provision of oncology, all manner of areas.

“It cannot be allowed to fail and I would say that is a responsibility, in my view, of Government.”

Ms Gilruth said: “I agree very much with the importance of Dundee University.”

She added: “We will do all that we can to facilitate that support via the auspices of the Scottish Funding Council.”

Mr Dey said: “All I can say Mr Marra is my conversation with the chair of court, and I know the subsequent conversations the SFC have had with the University of Dundee, is that there is an optimism that they will get through this.

“They will get through this. There will be some pain attached to that, but they will get through it and it’s essential they do because they’re an important institution in the Scottish university landscape.”