More than £50 million in philanthropic donations could be lost and up to £27 million in tax breaks because of their charitable status may disappear, Universities Scotland warns in a submission to Holyrood’s finance committee.
Universities also face the loss of key funding sources which provide most of their £370 million annual spending on infrastructure investments.
The fears stem from the prospect of universities being reclassified as central government bodies by the Office for National Statistics (ONS) as a result of the new controls ministers will have over the way they are run under the Higher Education and Governance Bill.
In its submission, Universities Scotland warns: “Some of universities’ most important sources of finance will be cut off. This would no longer be simply a question of ‘meeting costs’ but a critical change to operational capabilities.”
The submission comes after it emerged last week that the general council of St Andrews University wrote to more than 40,000 graduates of the university urging them to lobby the Scottish Parliament in opposition to the changes.
Opposition parties last night branded the proposals an “assault” on the autonomy of universities and said they will have “very serious consequences” for future funding.
Universities Scotland represents the principals and directors of Scotland’s 19 higher education institutions. The submission also warns that government plans to pay chairs have been drastically underestimated and will “realistically” result in costs of about £400,000.
Although universities currently enjoy significant levels of public funding, two-thirds of their income – about £2 billion – comes from sources outwith grants.
These include profits from spin-off firms, partnerships with private sector firms and philanthropic donations.
But this could all be at risk if universities are classified as central government bodies – because it would heavily restrict their ability to borrow from banks as they would no longer be allowed to run surpluses from year to year.
“Without the financial tools and autonomy to invest strategically in this way, universities would inevitably have to reduce their levels of activity and investment, with significant implications for their ability to deliver on Scottish Government priorities, such as skills provisions, innovation and social mobility,” said the submission.
The Higher Education Governance Bill has already drawn an angry reaction from universities over the prospect of greater control it will hand to ministers, particularly the creation of elected chairs which, it is feared, would “politicise” the role.
It is this which has prompted fears the ONS, which is to review the classification of higher institutions, could brand them central government entities.
The universities claim the new powers will allow ministers to decide how people should become chairs of governing bodies and how long they should serve as chairs of governing bodies, as well as determining the composition of governing bodies.
This “reclassification” has already happened in the case of Scotland’s colleges, and in the funding of the Aberdeen bypass road through the Scottish Futures Trust.
The ONS last night confirmed that greater government control is a factor which could see universities reclassified in national accounts, but said it would have to study the SNP government’s specific proposals before it could make a decision.
Liz Smith, the Scottish Conservatives’ spokeswoman for young people, said: “Universities Scotland are absolutely right to flag up what are very significant concerns about the implications of reclassification.
“As it stands, the higher education bill is an assault on the autonomy of the university sector and it is likely to have very serious consequences for future funding, most especially if it threatens charitable status.
“No-one understands why the Scottish Government is hell- bent on meddling in university governance issues when there is no evidence that the current system is, in any way, undermining tertiary education and when there are so many other education issues which should be the priority for the SNP.”
A Scottish Government spokesperson said last night: “We are clear that universities are autonomous bodies. This Bill simply aims to enable our higher education institutions to make governance more inclusive and transparent, ensuring every voice on campus is heard.
“We are confident the provisions in the Bill are compliant with what the current indicators of government control set out.
“In a response to the original consultation in the Bill, the [Office of the] Scottish Charity Regulator raised no concerns about the plans set out. Any comments offered by OSCR or other stakeholders will be considered in detail as the Bill progresses through Parliament.”