Bailing out the University of Dundee has established the Scottish government as a ¡°banker of last resort¡±, with policymakers being warned they will face another crisis unless they review how higher education is funded.

Turmoil that brought the institution to the brink of bankruptcy appears to be far from over, with the newly appointed interim chief financial officer recently resigning after eight days in post.

Ministers attempting to shore up the university¡¯s future ¨C following an?additional cash injection of ?40 million?¨C have been urged to also learn lessons from what happened.

Lucy Hunter Blackburn, a former head of the higher education division in the Scottish Civil Service, described the situation at Dundee as a ¡°canary down the mine¡± for the wider sector.

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While she doesn¡¯t believe all institutions are ¡°just a nanosecond from being like Dundee¡±, most face?similar financial pressures.

A report commissioned by the Scottish Funding Council (SFC) and led by Pamela Gillies, former vice-chancellor of Glasgow Caledonian University,?largely blamed mismanagement at the university for the problems, with former vice-chancellor Iain Gillespie singled out for ¡°poor financial judgement¡±.

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This has led to concerns that the wider systemic issues that contributed to the crisis may have been overlooked.

Speaking after the release of the SFC report, James Miller, principal of the University of the West of Scotland, said the ¡°primary challenge for the wider sector is one of financial sustainability¡­not one of widespread failures in governance¡±.?

¡°If the latter misconception takes hold, it will become a distraction from the very real need to address the funding issues facing every institution.¡±?

Mary Senior, Scotland official at UCU, said the way the inquiry had been commissioned ¨C with a focus on the specific circumstances at Dundee ¨C hadn¡¯t allowed any time to consider wider issues.

But these challenges in Scotland are particularly pronounced.??has found that Scottish higher education institutions receive 24 per cent less income?per domestic undergraduate student than their English counterparts.

¡°The Scottish government is actually very generous¡­but it¡¯s all going towards students,¡± said Gavan Conlon, partner at London Economics. ¡°It¡¯s not going to institutions.¡±

These pressures have been compounded by fluctuations in international student numbers.?

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¡°Institutions are forced to look elsewhere to cross-subsidise the money, and I think perhaps Dundee was at the sharp end of that,¡± said Senior.?

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David Bell, emeritus professor of economics at the University of Stirling, said it was ¡°difficult to see how the sector, which actually is one of the better-performing parts of the Scottish economy, is going to be able to continue with the current model¡±.

Despite this, with elections coming up next year, there is?very little political appetite to address the problems?in the funding system in Scotland, with all discussion of axeing universal free tuition perceived as too risky.??

¡°It¡¯s instantaneous political death,¡± said Conlon. ¡°There¡¯s a lot of individuals in different political parties who absolutely realise that it is, in effect, a massive middle-class subsidy and something has to change, but nobody is prepared to do it.¡±

With the government having already injected over ?60 million into Dundee, there are also questions around whether other institutions will see similar levels of support if they too reach crisis levels.

Senior said a ¡°precedent¡± had now been set, while Hunter Blackburn believed institutions may see the government ¡°as a kind of banker of last resort¡±.?

¡°This is not a strategic approach to the finances of the university sector,¡± said Bell. ¡°Knowing that there will be a bailout is not going to be good for the universities that aren¡¯t managing to keep their head above water.¡±

A spokesperson for the SFC said it had ¡°robust processes in place to monitor the financial sustainability and governance of the institutions we fund¡±.

¡°However, the Gillies report did identify lessons for the wider sector and we will be considering those over the coming weeks.¡±

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helen.packer@timeshighereducation.com