AYRSHIRE College has told auditors that it will find it ‘difficult’ to keep up yearly payments of £2.2 million for the Kilwinning Campus PFI scheme.

The college is the only one in Scotland which makes PFI payments, inheriting the financial burden when the campus move transferred from James Watt College.

The College confirmed that it required to make savings of £2m per year to make the payments.

A spokesperson also acknowledged that it had been given ‘one-off’ permission to sell land to fund the PFI payment in 2018-19, but nothing is in place for future years.

The college has also seen one of the largest falls in part time student numbers in Scotland.

Despite these issues, Ayrshire College had maintained a relatively steady position in terms of attainment compared to others.

In a report on the current state of Scotland’s colleges, Audit Scotland stated that Ayrshire College had expected to have a financial surplus between 2013-14 and 2017-18 but was one of five to be operating at a deficit.

The report continues: “However, increased staff costs have resulted in the college experiencing financial deficits, which it has covered to date by using cash reserves.

“The college has indicated that ongoing PFI costs are contributing to its financial challenges. As part of the merger that created Ayrshire College, the college inherited a Private Finance Initiative (PFI) scheme from the former James Watt College for its Kilwinning campus. The 25-year PFI scheme started in 1999-2000, with annual payments of £2.1 million until 2024-25.

“The PFI costs equate to around four per cent of the college’s annual expenditure.

“Ayrshire College identified that making the annual payments was a financial risk at the point of merger. The college has indicated that it will find it difficult to meet the ongoing PFI costs.”

An Ayrshire College spokesperson told us: “The PFI is a legacy from the former James Watt College, and the risk associated with ongoing PFI charges was highlighted to the Scottish Funding Council and Scottish Government prior to the merger which created Ayrshire College in August 2013.

“A letter from the Deputy First Minister in March 2018 acknowledged that Ayrshire College is faced with a ‘unique position in the sector in carrying such a financial burden’ and confirmed that the College could retain the sale proceeds of the former Kilmarnock campus building to offset the annual PFI charges for the Kilwinning campus for 2018-19.

“While the College welcomed this decision, it is a one year only settlement for 2018-19 with no recurring annual support for the remaining six years of the PFI.

“The situation facing Ayrshire College is that we will need to identify significant savings of around £2 million each year due to the PFI contract from 2019-20 for the remaining six years of the contract.

“The College continues to work with the Scottish Funding Council to seek a solution to this unique financial burden, to ensure that we are able to invest in services to students, employers and the communities of Ayrshire.”

SNP MSP Kenneth Gibson has raised the issue in the Scottish Parliament recently.

He asked Shirley Anne Somerville, the Minister for Further Education, Higher Education and Science: “The previous Labour-Liberal Democrat Administration saddled the then James Watt college with a £50 million PFI burden following a £7 million investment in Kilwinning, which Ayrshire college subsequently inherited following regionalisation.

“Does the minister agree that it is unfair that, uniquely among Scottish colleges, Ayrshire college must make annual PFI payments of £2.18 million and that such a burden makes it increasingly difficult for the college to continue delivering outstanding outcomes for students, many of whom are from challenging backgrounds?”

Ms Somerville responded: “The Deputy First Minister has written to the college to confirm the proceeds from the college disposing of its former Kilmarnock campus, with expected net proceeds of around £1.2 million to be retained by the college to be used towards the PFI costs on a one-year basis only.

“The Scottish Further and Higher Education Funding Council will continue to work closely with the college to ensure that it takes appropriate steps to ensure that it has a financially stable position going forward.”

The Audit Scotland report also raises concerns about the viability of funding after Brexit.

It highlights the fact that the Non Profit Distributing programme, which has been used at the Kilwinning Campus, was able to secure funds from the European Investment Bank, but was unclear about this financial avenue post-Brexit