Edinburgh university has blamed the UK Government’s increases in National Insurance contributions for a round of redundancies.

Sir Peter Mathieson, principal and vice-chancellor said the hike in employers’ NICs has created “a multi-million pound increase to our salary bill”.

He has warned staff to expect “selective voluntary and, if unavoidable, compulsory redundancy” measures to come. No figure was put on the numbers expected to leave.

The announcement follows changes announced in the Budget statement that will see the rate of employers’ NICs rise by 1.2 percentage points to 15% from April next year. A change in thresholds means NICs will kick in from £5,000, rather than the current £9,100.

In a message, Sir Peter wrote: “We will work with our unions and managers to ensure that the actions we will be taking are communicated clearly and to help colleagues through the changes.

“I realise that this will be a difficult and unsettling message. However, it is important that we are honest about the scale of the challenges that we need to address, the reasons behind the course of action that we are taking, and the impact that this will have on our operations and on everyone in the university.

“It is important to emphasise that our university remains a respected and capable organisation with the potential to continue to develop its world-leading research and teaching. Taking some tough decisions now will ensure that we retain this status into the future.”

Sir Peter said monthly running costs for the university now stand at £120m per month. Tuition fees make up 37% of total income and the failure to hit targets for student recruitment in 2023-24 is causing a shortfall on forecast.

Staff costs make up 60% of annual outgoings which Sir Peter says is higher than at “comparable universities”.

He said the “small increase to tuition fees for students” is a “small step in addressing funding sustainability” but “the potential additional income this could generate falls far short of the significant increase in staff costs resulting from the NI increase”. 

Sir Peter, whose own remuneration packgage worth more than £400,000 makes him the best-paid university principal in the UK, went on: “Like many other universities, we were not able to recruit fully to target in 2023-24 and as a result we experienced a shortfall in our projected tuition fee income.

“We also now have a fee forecast for 2024-25, based on actual intakes, which shows a shortfall to target, this indicating a trend. These figures underline the fact that our outgoings are consistently growing faster than our income and that we require to change our operating model to ensure we remain financially sustainable.”

In a statement to the press, Sir Peter commented: “Throughout this year, I have been frank about the severe financial challenges our university and the sector are facing. Today, Monday 18 November, I have issued an update to all colleagues on the latest developments in terms of our costs and income, and our plans to address these serious issues.

“The university costs £120m each month to run. In the context of the recent sector challenges around international student recruitment, increasing staff costs since the pandemic, and the unsustainable levels of funding for Scottish and other UK students, our outgoings are consistently higher than our income. 

“In response to this situation and recent developments with regards to National Insurance, we have concluded that we need to take a series of actions, which will include selective voluntary and, if unavoidable, compulsory redundancies.

“We will be offering staff the opportunity to find out more through a variety of online and in-person meetings, and we will continue to work with our unions and managers to help colleagues through these changes.

“I don’t underestimate how unsettling this news will be, however, it is important that I am honest about the scale of the challenge we have and transparent about the actions we need to take to address it.”

Robert Gordon and Dundee universities have signalled potential cuts and Universities Scotland has of a potential £45 million tax hike for Scotland’s Universities due to the National Insurance hikes.  

The SNP repeated its call for the UK Government to “fully fund” the NI change.

Michelle Thomson MSP said: Firstly, my thoughts are with staff at the University of Edinburgh who are facing redundancy at this time, due to Labour’s backdoor tax hikes.  

“We’ve known for some time now the destructive potential of Labour’s National Insurance hikes – with Universities Scotland warning of a £45 million bill if the cost of this policy was not met by the UK Government.  

“The impact won’t just be felt by Scotland’s Universities either – Labour’s NI tax hike could cost the Scottish Government £500 million, and Scotland’s voluntary sector £75 million.

“Today’s announcement from the University of Edinburgh is the tip of the iceberg as the impact of Labour’s budget becomes clear. I again urge the UK Government to fully fund their National Insurance tax hike for Scotland’s universities.” 

Scottish Conservative shadow cabinet secretary for education and skills Miles Briggs commented: “Scotland’s universities are facing a double whammy as a result of Labour’s National Insurance hikes and the failure of the SNP to properly fund them.

“The prospect of job losses is devastating news for workers at Edinburgh University ahead of Christmas and the financial situation facing universities is increasingly unsustainable.

“As a result, Scottish students find it harder to attend their own universities, which are being denied the resources to compete. We urgently need a common-sense approach that will protect our world-class universities and give Scottish students the chances they deserve.”

Retail warning

More than 70 retailers including Tesco, Marks & Spencer, Sainsbury’s, Asda and Next have written to the chancellor warning that the “sheer scale” of new costs on businesses means that job losses are “inevitable”.

They say that a combination of measures including a rise in employers’ national insurance, an increase in the national minimum wage and new levies on packaging could increase the industry’s costs by up to £7 billion a year.

Of the 79 signatories eight are in Scotland: CJ Lang & Son, Dobbies, One O One, Scotmid, SGF, Schuh, The House of Bruar, The Paint Shed.

The Scottish Retail Consortium estimates the hike in employers’ NICs will add £190m to costs.

David Lonsdale, director of the SRC, said: “At a time when Scottish retail sales are flatlining a tax hike of this magnitude will put upward pressure on shop prices and undermine efforts to rejuvenate retail destinations, the very antithesis of the UK Government’s desire to see greater levels of commercial investment.

“It’s imperative Scottish Ministers don’t do anything to compound the costs crunch facing retailers in their upcoming Scottish Budget.”