Dundee University given £40m bailout using 'unprecedented' powers

Scottish ministers are to use “unprecedented” powers to hand Dundee University a £40 million bailout over three financial years.

Education Secretary Jenny Gilruth said the move had been made necessary by the “exceptional circumstances” at the institution. The process will allow ministers to target a direct settlement at the university while placing “specific conditions” on the funding.

Dundee University | National World

It follows a devastating report into the financial crisis at the university, which led to its interim principal and two senior members of its governing body quitting last week.

The investigation, commissioned by the Scottish Funding Council (SFC) and led by Professor Pamela Gillies, was ordered after the university announced there could be hundreds of job losses as it struggles to deal with a £35m deficit.

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A £22m bailout for the university was announced by the Scottish Government in March, meaning up to £62m in additional funding has now been made available in total.

Speaking in Holyrood, Ms Gilruth said it was a “unique and unprecedented set of circumstances, which requires a unique and unprecedented response”.

She said: “Where there has been the appearance of financial mismanagement at an institution, Scottish ministers are obliged to consider whether it is necessary or expedient to issue a direction to the SFC about the provision of financial support.

“Subject to the public value test I have set out today, Scottish ministers consider it is both necessary and expedient for a direction to be issued to the SFC under section 25 of the Further and Higher Education (Scotland) Act 2005.

“The use of this power is unprecedented and has been made necessary by the exceptional circumstances at the university, as set out in the findings of the Gillies report, which recount ‘poor financial judgement’ and ‘weak governance’.

“The process as set out does, however, allow for ministers to target a direct settlement to the University of Dundee, and to place specific conditions on that funding, in this unprecedented set of circumstances.

“I can therefore confirm that the Scottish Government will provide funding in principle of up to £40m over two academic years, or three financial years, via the Scottish Funding Council, to support the University of Dundee.”

Funding will only be released once a sustainable, long-term recovery plan is put in place by the university that leverages commercial and private investment, the Scottish Government said.

Ms Gilruth told MSPs there remains a “liquidity gap” at the institution. “Dundee University estimate the gap to be in the region of between £45m up to £60m, across the next two academic years,” she said.

Cabinet Secretary for Education and Skills Jenny Gilruth | Andrew Milligan/PA Wire

“This figure is also likely to be impacted by progress at the university to reduce expenditure and stabilise income. Colleagues will understand that this figure requires to be further interrogated by the Scottish Funding Council.

“The SFC has been advised by Dundee University that whilst this is not an immediate cash need, it will need to be addressed before the end of this financial year.

“It is, therefore, vitally important that the university works to secure a plan, which will allow for commercial lending to support some or all of the liquidity ask. The Scottish Government will consider all avenues and other support we can provide to achieve that end.”

She said the additional funding for Dundee University “will not impact on the funding available from the SFC to any other institution”.

Prof Gillies’ report found the failure of the university’s financial governance system was “self-inflicted and experienced multiple times and at multiple levels”.

It said failures were compounded by a “top-down, hierarchical and reportedly over-confident style of leadership and management, a lack of transparency and clarity in respect of financial data, the promulgation of a positive narrative around financial matters and a culture in which challenge was actively discouraged”.

Conservative MSP Miles Briggs said: “While the priority must be ensuring Dundee University gets on the road to recovery, it is hard to accept that we should just draw a line under the financial vandalism that went on for far too long.

“Those responsible for that gross mismanagement have rightly fallen on their sword, but we must now see SNP ministers robustly scrutinise how the university will bring their finances into a sustainable position going forward.

“Staff and students remain deeply concerned about the precarious position the university finds itself in and will be worried that there appears to be no sign of a Plan B currently.

“There was clearly something rotten with the culture that was allowed to fester within Dundee University and that came from the very top.

“Too many of Scotland’s universities are in an unsustainable position currently, yet we are still to see SNP ministers or university bosses address this crisis with the leadership that is required.”