SNP tables new law to strengthen regulator's powers in wake of university financial crisis

New powers to monitor the financial stability of Scottish colleges and universities have been included in draft legislation unveiled by SNP ministers.

During recent questions from MSPs over the ongoing financial crisis at Dundee University, the Higher and Further Education Minister Graeme Dey suggested he could move to enhance the Scottish Funding Council’s (SFC) ability to oversee and intervene in such institutions.

Mr Dey has now published a Bill which includes new provisions for the “monitoring of the financial sustainability of post-16 education bodies”.

The University of Dundee has flagged staffing cuts to meet a £30 million deficit. | TSPL

If approved, they would place a duty on the SFC to secure the monitoring of the finances of colleges and universities, and allow ministers to ask the regulator to provide them with information and advice in relation to the sustainability of these institutions.

Other changes include a requirement for institutions to notify the SFC if there is “potentially serious jeopardy to a post-16 education body”.

Examples given in the explanatory notes include a cyberattack or a material change in their circumstances such as a “rapidly worsening financial situation”.

Another new power would enable the SFC to arrange studies designed to “improve economy, efficiency and effectiveness in the management or operations of any fundable body”, and it places a “corresponding obligation on such bodies to share information and documents with the person carrying out a study”.

Such a study may include consideration of the “extent to which the needs and interests of the students are being met”, and the SFC would have the power to issue recommendations.

The Bill would also give SFC the ability to “issue guidance to fundable bodies and to persons in receipt of funding”.

Dundee University was plunged into turmoil in November when its principal, Iain Gillespie, announced staff cuts were inevitable to plug a deficit of up to £30m.

Mr Gillespie resigned from his post in December and staff at the university have since voted for strike action. The institution has ordered an independent investigation into how it ended up in its current position.

Proposals to strengthen the SFC’s powers are included in the Tertiary Education and Training Bill, which was published by the Scottish Government on Thursday.

The legislation, which could come into effect from autumn 2026, aims to simplify the funding system for learners at college and university, as well as apprentices, in Scotland.

If passed by MSPs, the Bill will see responsibility for providing national training programmes and apprenticeships move to the SFC from Skills Development Scotland (SDS).

It is understood it could lead to significant numbers of SDS staff moving to the SFC.

Mr Dey said: “The Bill marks an important step in driving improvement in the tertiary education sector and will help ensure that our annual £3 billion investment delivers the greatest impact for learners.”

Claire McPherson, director of umbrella body Universities Scotland, said: “We supported reform of the post-school public bodies and so we welcome, in broad terms, this Bill as the necessary legislation to move this forward.

“The Bill intends for the funding council to assume responsibility for apprenticeships, and this creates the potential to build in more agility and responsiveness to learner and employer needs in the way graduate apprenticeships are delivered. Universities very much welcome this, as restrictions built into the current system limit this flexibility.

“As with any legislation, the detail of the Bill will need careful scrutiny and engagement with Government. It makes new, very broadly defined, provisions regarding the monitoring of the financial sustainability of institutions and the minister’s statement to Parliament alluded to secondary legislation to define this at a later stage.

“That is an area that will need sensitive handling to avoid putting universities’ ONS classification at risk.”