Colleges Scotland has commented on the indicative college funding allocations for the next academic year. 

The overall amount of investment for colleges means that there is a real terms cut for the sector, as the investment is not keeping pace inflation - colleges are being under-invested in for another year. 

The total teaching funding allocated to colleges for AY 2025-26 has been set at £522.5million, an increase of £13 million and a 2.6% increase from last year – but this falls below the inflation rate of nearly 3%. While all investment is welcome, the Scottish Government has not fully provided enough funding to cover the cost of all the activity that colleges carry out, at a time when employers are crying out for more skilled and qualified workers to come into the labour market and college education is more essential than ever.

Increased national insurance contribution costs for colleges are also still to be clarified.

The allocations are being made under a revised funding model, which is newly in place for the next academic year.

Dr Graeme Jackson, Interim CEO at Colleges Scotland said: “The allocations announced today confirm that eight colleges will receive funding which is above inflation. The remaining colleges and college region will receive funding which is at or below inflation.

“We appreciate the effort that the Scottish Funding Council has gone to in terms of revising the model which decides the funding for each college. Unfortunately, the mitigations on offer to transition to the revised model haven’t been explained in full to the sector as yet.

“Increased employer National Insurance contribution costs for colleges are also incredibly concerning and will cost colleges millions of pounds. Colleges Scotland will continue to raise this issue with the Scottish Government – in England colleges are receiving 100% of additional NI costs. 
 
“College funding overall has dropped 17% since 2021/22 and more investment is badly needed to provide students with the right skills to help critical sectors of the economy grow. Colleges also have a major and under recognised role in alleviating and preventing poverty, so it is critical that the overall funding picture starts to improve, and soon.”

Explainer – how college finance is changing  
 
The Scottish Government provides investment for Scotland’s 24 colleges. The Scottish Funding Council (SFC) administers this investment using a system called college funding allocations. 
 
For many years, colleges have been asking the SFC to change how college funding allocations were calculated, because it was not easily understood what the reasoning was behind each college allocation, which led to questions about fairness and transparency. 
 
Last year, the SFC announced that it was working to revise the funding model, and some changes were introduced. In February of this year SFC brought forward more changes which it said were about addressing the system inequality, and increasing transparency. 
 
Colleges Scotland has welcomed the SFC moving to modernise the funding model, and the SFC is moving at pace so that colleges can understand the model for the coming three Academic Years. However there are more details needed from SFC about how the revised model was designed, and more transparency needed about how it will operate in the future. 
 
Initial conversations have indicated that the revised funding model will have different impacts for different colleges. For some colleges funding is likely to reduce over the next three years by up to -5.6%, while other colleges will see an increase of 4.5%, with a range of change in between. In an effort to keep the college sector stable, the SFC is putting mitigations in place for 2025/26 so that there is some smoothing of the new arrangements, however colleges are still waiting to hear fully about the mitigations on offer. 
 
It is really important that colleges have support during the transition period and beyond, as for some colleges these are big adjustments which could have a meaningful negative or positive effects on their funding. Colleges Scotland is calling for that support to come forwards quickly to make sure that there aren’t unintended consequences of these changes in the short-medium term.