Great care must be taken on use of college reserves

OUR college sector has not been one of this Government’s success stories. While the ministerial eye has been on the university sector, things have gone badly wrong at college level, as we reported last week with the latest machinations at the Glasgow Colleges Regional Board.

The mergers programme may one day be adjudged a rightful exercise, but for now the jury is out and across the country there are legitimate complaints. But the issue of what can and should be done with funding reserves accumulated by colleges is far more complex than the demand for these to be freed up for regular running costs.

This is bound up with Treasury rules and the danger that any funds deemed to be part of the public sector finances will be clawed back from the block grant. The EIS call for these funds to be freed up to improve “student support and the quality of teaching” can be translated as a plea for lecturers and students. The decline in lecturers’ pay is a legitimate issue but college reserves are not the way to deal with it.

The Herald is instinctively sceptical about arms-length bodies created to run public services, not least because this means they all too often disappear into a grey area where transparency and accountability are lost, for example to scrutiny under Freedom of Information. These foundations and organisations, so-called Aleos and Alfs, cannot be wished away. Larry Flanagan of the EIS, says: “The fact Scotland’s colleges have moved almost £100 million in cash reserves out of public sector funds and into Alfs raises a number of significant concerns. Shifting these reserves into Alfs removes the option of this funding being pooled by government for reinvestment across the sector.”

But this was not done as a measure to undermine the public sector role of colleges; quite the opposite. When colleges were brought back into full public sector status, it was a way to allow them to hold on to their reserves. NUS president Gerald Maloney complains that it is wrong for money to be parked in this way when students struggle to make ends meet.

While we sympathise with the plight of college students, this is an argument better taken up with ministers in lobbying over general funding. As Shona Struthers, chief executive of Colleges Scotland, said, the creation of the foundations was a vital way of protecting the money so it could be spent on further education.

She says: “The creation of arm’s length foundations was to ensure that the money already generated by colleges, including some non-public money generated by commercial activities, could continue to be used to benefit colleges, staff and learners.”

We agree that such financial sleight of hand is far from ideal but, in dealing with Treasury rules, pragmatism might be better than principle when it comes to avoiding losing money. We already have the ridiculous position that Police Scotland is not exempt from VAT when every other force in these islands is. Colleges have little choice but to make best use of Treasury rules.