Scottish deficit predicted as staff salary deal bites

Universities Scotland warns of £40m shortfall in wake of funding settlement. Tariq Tahir reports.

Meeting the staff pay bill will help drive Scottish universities into a £40 million deficit for next year, vice-chancellors north of the border said this week.

Universities Scotland, the vice-chancellors umbrella body, expressed its disappointment when the Scottish Government said last month that the higher education budget would rise by £30 million - £138 million short of what vice-chancellors had asked for.

In a submission to the Scottish Government, released to The Times Higher , the body expresses concern about having to absorb the cost of the UK-wide 2006 pay settlement that will see an increase of 13.1 per cent over three years.

The submission says that the timescale of the pay deal was negotiated so that English universities would face the brunt of the financial burden in 2008-09, when they would be able to call on more of the additional income from the 2006 introduction of top-up tuition fees.

However, 2008-09 is the first year of the new Scottish budget settlement, in which university budgets will in effect stand still.

Using the current rate of inflation, Universities Scotland calculates that the cost of the 68 per cent of staff funded by the Scottish Funding Council will be £23.29 million, pension contributions £9.72 million and energy, water and sewerage £6.8 million.

Sources within the sector say that although there are unlikely to be widespread redundancies in the short term, universities will have to dip into their reserves, could begin cancelling projects or even run deficits in an effort to ride out the financial squeeze.

David Caldwell, director of Universities Scotland, told The Times Higher : "Scottish universities are being constructive when considering the cost pressures that they are going to face next year.

"This is not a major crisis, but at the same time it is important not to underestimate the scale of the challenge facing universities.

"In effect, we have a standstill budget for 2008-09 but have to meet sharply rising costs. Universities will have to be creative and ingenious to mitigate the damage.

"Nobody is predicting major disruption because of one difficult year, but there is no doubt that universities will be under severe cost pressures in 2008 and will not be able to make as large a contribution to the public good as they had hoped."

A spokesman for Universities and Colleges Union Scotland played down the possibility of job losses. But he added: "There will be some demoralisation in the sector as the budget will see a continuation of the trend towards seeing universities as businesses rather than places of learning."

A Scottish Government spokesman said the Universities Scotland submission would be discussed at the first meeting of the new Future Think task force for higher education later this month.

• The Scottish Government has announced that part-time students who earn £18,000 or less could be eligible for £500 grants towards their tuition fees from next year.