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I am not aware of any discussions of potential mergers between colleges or universities, and merging institutions is not on our agenda. However, I am aware of—and encourage—the development of a more collaborative working approach between universities and colleges, not just in the sense of articulation. The University of the West of Scotland is a good example of that, as it is particularly active in that regard and has a close working relationship with Dumfries and Galloway College. Similarly, Queen Margaret University is doing some stuff in Fife and, as I mentioned earlier, NESCol is closely engaged with the two universities in Aberdeen. That is the kind of space in which we will see growth—in sensible, co-operative working rather than mergers.

If two colleges came to the SFC and said that they thought that it would be in their best interests to merge, and if they had a robust business case, the SFC would look to facilitate that—it did something similar with the University of the Highlands and Islands just last year. However, I am not aware that that is on the agenda.

The subject of shared services is interesting. We all hear talk about shared services being the way forward but, in my experience, those proposals rarely come to fruition, sometimes because of certain impediments. I am not entirely sighted on this, but a university said to me at the weekend that one impediment to having shared services is VAT—I will interrogate that a bit more to see what lies behind it.

It is obvious that having shared services would be a good way to go forward, but it does not happen often. Any institutions that are thinking about it are responsible for making progress on that but, if there were impediments that we could be part of helping to remove, we would look to accommodate that.

One of the difficulties in trying to answer a question as honestly and openly as you can is that you might set hares running. I read the article in question and it was accurate. That is what I said. I was simply trying—and I will do the same today—to weigh up why it is not possible to be definitive at this stage. To give a current example that is relevant to the education budget, the Educational Institute of Scotland recommended a teachers’ pay settlement offer just yesterday. We await the outcome of that, which has financial implications. We are also waiting to learn what consequentials relevant to teachers’ pay might be coming from the United Kingdom Government and when they might come. We do not have those numbers or that outcome, so there is a degree of uncertainty.

Of course, unexpected issues can arise in-year. I cannot sit today and categorically rule out the possibility of in-year savings having to be made. However, I am not saying that that will or might be necessary. It is difficult to tell at this stage.

Where and when we are confronted by such a situation, we focus, as you have indicated, on budget lines that are demand led. As I did when we last engaged on this issue, I undertake to keep the committee updated on any changes that occur. I cannot be any more definitive on that, partly because of the example that I have given you.

We will bear that in mind.

As you well know, Mr Rennie, I am always advocating for universities, colleges and apprenticeships with some degree of passion. I was simply weighing out an answer to the convener’s question. Of course I want more money for all those things, but I am in a similar position to the committee. You are the Education, Children and Young People Committee and you have to look at the overall picture in education. I am sure that you are cognisant of the fact that if, out of this process, you called for more money for colleges, universities, apprenticeships or all of them, that would have to come from somewhere. We are in the same position with the education budget.

I am not in any way a bystander in the matter. I advocate strongly for all those interests. I just recognise that the situation is not entirely within our control, so I cannot rule anything out or in at this stage.

Anecdotally, I hear the same thing from businesses and colleges, and I am not going to deny that. I said earlier that we tried, wherever possible, to target redistribution of money within the budget—or cuts; whatever term you want to use—on demand-led budget lines, but that is not always possible. Unfortunately, those funds were two examples of where it was not possible to avoid a situation that I would rather have avoided. It would be good to be in a position to reinstate one fund, if not both, but we are—unfortunately—not in that position at the moment.

We are aware of the situation that exists “down south”, as you term it. We are aware that some colleges are facing more considerable challenges than others. The Scottish Funding Council is across that situation and is providing assistance.

I do not think that there is an immediate issue, but we are working with all colleges and universities to ensure that they have a sustainable future.

You have been keeping tabs on me, convener.

That is a projection based on this year. Stuart Greig can explain the basis of that.

I am aware of what you are referring to. There was a reference in a document to that possibility, or that risk. We will monitor that risk.

At this stage, I am not seeing any anecdotal evidence of there being a problem, but we will monitor that because the agenda is hugely important for us. I have acknowledged today that there is a threat to the 2026 target. However, the biggest threat would come from being restricted to using one measure. When we embarked on this agenda, we took that approach with good intent, but the experience of our universities shows that we need something else, or that we need multiple things, and that how we facilitate that matters. The pilot in your area is a good example of that.

I absolutely accept that higher education finances are not as I would want them to be. I could trade reasons with you about why we are in that situation. We are working closely with the universities to determine what opportunities there are to further enhance their access to public funding to mitigate that.