Despite increased tax revenues and UK government support, the strain from rising public sector wages and inflation is set to intensify.
Despite increased tax revenues and UK government support, the strain from rising public sector wages and inflation is set to intensify.
The Scottish higher education system, renowned for its generosity, particularly in comparison to England and Wales, is navigating a period of intense financial strain. The situation is exacerbated by the Scottish government’s anticipated budget gap of £1 billion (approx. US$1.27 billion), as outlined in the Medium-Term Financial Strategy.
Despite unexpected tax revenue increases and UK government support, escalating public sector pay and persistent inflation are set to widen this gap further.
Scotland offers free university tuition for its residents, a policy costing approximately £900 million in 2022–23. Additionally, the government provides up to £2,000 (US$2,548) in non-repayable bursaries for the poorest students. However, maintaining this model is becoming increasingly challenging due to financial pressures on both the government and educational institutions.
Scottish universities, while not charging tuition to local students, face limitations in funding per student and caps on student numbers. The main teaching grant, approximately £5,790 (US$7,377) per student in 2023–24, and a frozen notional tuition fee paid by the government, amount to about £7,610 (US$9,695) per Scottish student, 19 percent less in real terms than in 2013–14. This contrasts with English universities, where funding per student is higher.
School spending in Scotland has also seen contrasting trends. In 2022–23, it was over £8,500 (US$10,829) per pupil, 20 percent higher in real terms than in 2013–14, and significantly more than in England. Scottish universities receive less funding per undergraduate compared to school pupils, despite longer undergraduate degree durations in Scotland.
The Scottish Funding Council controls university student numbers, offering funding for a set number of Scottish students. Universities can slightly exceed this number but face financial penalties for significant over-enrollment. This system differs from England, where no such caps exist. Scottish universities can charge higher tuition fees to students from the rest of the UK and international students, incentivizing them to prioritize these students over Scottish ones.
Despite the longer duration of studies, Scottish students graduate with significantly lower debt compared to English students, primarily due to free tuition. However, they are entitled to less financial support for living costs. The support system, predominantly through loans, has become less generous over time, with the real value of entitlements decreasing.
Future reforms aim to enhance financial support for Scottish students. The government announced a significant increase in loan entitlements for the next academic year, aligning support with the living wage. Furthermore, loan repayment terms are set to become more favorable, with an expected increase in the earnings threshold for repayments, contrasting with the policy in England where the threshold remains frozen.
These changes, while beneficial for students and graduates, are unlikely to impact the main budget of the Scottish Government. The costs of additional loans and reduced loan repayments are covered by the UK government, provided the terms remain broadly similar to those in England.
The upcoming budget poses a challenge in securing additional resources for teaching to prevent further decline in per-student funding and accommodate more Scottish students. The ‘free tuition’ model directly affects the Scottish departmental expenditure limit, already under substantial pressure. The Scottish Government may need to reevaluate its higher education finance model, balancing the need for targeted resource allocation against the principle of free tuition.
