‘Unique financial burden’ puts college jobs at risk

24th August 2018 at 00:00
Call for funding pledge as institution struggles to meet £2.1m annual PFI fee

Fit-for-purpose buildings and facilities are seen as a great asset for colleges. However, Ayrshire College’s Kilwinning campus has become a financial burden that opposition politicians believe could put college jobs at risk if no extra funding is made available. They are urging the Scottish Funding Council (SFC) and the Scottish government to ensure the financial sustainability of the institution.

The campus, which opened in 2000, was built using a private finance initiative (PFI) scheme set up prior to the creation of Ayrshire College through merger. The contract, which started in 1999-2000 and will end in 2024-25, requires the college to make payments of £2.1 million every year – about 4 per cent of its annual expenditure. The college now says it will struggle to pay from next year unless other sources of funding are forthcoming.

A recent Audit Scotland report says Ayrshire College forecast a net surplus each year between 2013-14 and 2017-18. However, it adds that increased staff costs have resulted in financial deficits, which the college has covered to date by using cash reserves, and warns that ongoing PFI costs “are contributing to its financial challenges”.

PFI contracts, which last from 25-30 years, are costly because, in addition to the capital project, they also include maintenance contracts, management fees and significant interest on borrowing. They were commonly used to fund public sector projects in recent decades – although Ayrshire College believes it is the only FE college in Scotland whose capital project is financed in this way.

“The college has indicated that it will find it difficult to meet the ongoing PFI costs,” the Audit Scotland report says, explaining that the Scottish government agreed that it could use money raised from selling land towards PFI costs in 2018-19. However, “there is currently no further funding commitment from the Scottish government or the SFC”.

Ayrshire College chair Willie Mackie says the PFI contract is “a unique financial burden”. He adds: “Since merger, the college has been funding the PFI contract from within its own resources and this has become significantly more difficult over the years when set against the other financial challenges faced by the sector.”

Mackie welcomes the government allowing the college to retain sale proceeds worth £1.2 million to partly offset the annual charge for 2018-19, but stresses that this is a one-year-only settlement, with no recurring support for the remaining six years of the PFI contract.

“Without further support to offset the annual PFI costs, the college will need to identify significant savings each year,” he says. “The college is seeking parity with other colleges that are not required to fund the financing costs of their campuses.

“The college continues to work with closely with the SFC to seek a sustainable funding solution. The board of management wishes to ensure we are able to invest in services for our students, our employers and the wider communities of Ayrshire.”

MSPs from across the political spectrum have now written to Scottish ministers to seek support for the college, warning that jobs and courses could be at risk if it is required to make savings to fund the payments.

John Scott, Tory MSP for Ayr, says he is “extremely concerned”, adding that the government should get behind the college as it has ended up in this position “through no fault of its own”. Without financial support, the institution may be forced to make staff redundant, he adds. “That is not what we want to see. We want to see how we can grow the college, not how to reduce the number of staff.”

South Scotland Tory MSP Brian Whittle says: “It cannot be right that Ayrshire College [should] be faced with the prospect of dealing with these payments year after year”.

Cunninghame South SNP MSP Ruth Maguire has written to education secretary John Swinney about the financial sustainability of Ayrshire College. “Myself and my SNP colleagues in Ayrshire and in government are deeply concerned that such a burden could impact the college’s ability to continue delivering for its students,” she says. “The priority is to ensure that jobs, learning and teaching at Ayrshire College are not affected.”

A spokesman for the SFC says: “We are working with Ayrshire College to help ensure that the college is financially sustainable and making the best use of its resources.”

A Scottish government spokesman says ministers have written to Ayrshire College to confirm that they are able to use proceeds from a land sale towards the PFI costs for one year only. He adds that the SFC will continue to work closely with the college to ensure that it remains in a financially stable position.

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