Scotland's 62 universities and colleges face a huge task over the next three years in finding the lion's share of the pound;48 million a year "efficiency gains" in education and lifelong learning that are being forced on them.
The savings which John Swinney, the Finance Secretary, is demanding amount to 2 per cent a year until 2011. That equates to pound;32 million each year for further and higher education. If the normal 60:40 split between the sectors is applied, it means universities will have to find savings of pound;19.2 million a year and colleges pound;12.8 million, totalling pound;96 million by the end of the exercise.
The only break in the cloudy skies is that the sectors will be allowed to keep the gains they have made, although they will have to demonstrate that these have led to improvements in learning and increased investment in teaching and research.
This comes on top of the normal funding settlement for colleges and universities, which is already drawing fire for its stringency. Although the grant for further education has increased by pound;19 million, the reaction from the Association of Scotland's Colleges suggests this 4 per cent rise will not help colleges deal with the increasing pressures they face.
Howard McKenzie, acting chief executive of the ASC, said: "Colleges have not grown for seven years. In that same period, the economy has grown by almost 15 per cent. Businesses and individuals are demanding more from colleges.
"The targeted strategic growth set out in this year's funding settlement will help areas where people are at a significant disadvantage, but the whole sector needs to be able to grow if we are to address the skills needs of a 21st-century Scotland."
Colleges are particularly concerned about the ring-fencing of "small amounts of money for big issues", such as knowledge transfer to support small businesses, employer engagement and employability. They believe they are best placed to meet local priorities.
The two sectors were already on a tight financial rein before the new savings targets were set, as the Government itself admitted. Its statement last week noted that colleges and universities would have had to achieve efficiencies "in order to fund the 'super-inflationary' cost pressures which they face - particularly in relation to salaries". The universities, where the pay settlement for lecturers has imposed significant demands on their budgets, yielded pound;95 million in savings in the last financial year.
Ministers want to see more action, however, and have targeted three key areas for savings: sharing new approaches in learning and research; joint procurement to maximise buying power; and "estates" collaboration in the use of facilities, buildings, energy and waste management.
An "assurance process" will be established which will require annual certificates from each institution demonstrating that its 2 per cent savings targets have been met. This means they will have to maintain a register and keep evidence of efficiency projects to show the auditors.
The process will be overseen by the Scottish Funding Council, led by Martin Fairbairn, its director of governance and management: appraisal and policy. The council will be expected to build on its established practice of ensuring colleges and universities comply with policy in return for their funding.
The SFC has already added co-operation with the Advanced Procurement for Universities and Colleges as a condition of grants. According to the Government, APUC plans to deliver "significant" procurement-related savings for institutions.
However, many are sceptical that another costly body is necessary to carry out this work.
One principal said: "Savings that we have carried out - such as a new registration system and a print strategy which has allowed us to get rid of hundreds of desktop printers - would have happened anyway, so they are not additional to our ordinary operational activity.
"The problem is that if we can save money, we do, so having APUC isn't going to make a huge difference, and we've no evidence it is going to give us a better deal than the collaborative purchasing agreements that already exist.
"There is also some concern that institutions will be forced to work with larger contracts which exclude local companies they have, as a matter of principle, supported. This would damage local relationships."
But APUC has a powerful backer in John McClelland, chairman of the funding council. Its creation was one of the recommendations in a report on procurement in the public services that was drawn up for the previous Government by Mr McClelland.