Scots need to counter England's fees bonanza

The Scottish Executive must maintain the competitive position of Scotland's higher education, says David Caldwell

The management of higher education may be a devolved function, but for the past year and a half many of the biggest issues for Scottish universities have been to do with the English White Paper and the subsequent Higher Education Act. That should not be a surprise. Scottish higher education is not self-contained. It has vital interactions with systems elsewhere, and especially with the rest of the UK. These cover every major aspect - learning and research, staff and students.

But it was not easy to assess the impact on Scotland when there was still much uncertainty about exactly what was going to happen in England. Now that the Bill has become an Act, the implications for Scottish higher education are clearer.

The most critical issue is the overall level of funding. England has taken the first important step towards resolving the problems arising from at least two decades of underinvestment in higher education that threatened to erode the strong competitive position of British universities. The Act will enable English universities to increase their income substantially, with the net gain probably at a level of at least £1,500 for every full-time undergraduate student. Scotland's problem is that the extra income is generated by increased tuition fees. This is a solution that, in the current political climate and for the foreseeable future, it cannot adopt. For most Scottish-based students, there are no fees to increase.

Yet, if the income of universities in Scotland does not increase proportionately to that in England, their competitive position will be undermined. They will have less to invest in the renewal of infrastructure for learning and for research, and will find it increasingly difficult to attract the most talented teachers and researchers.

When the Scottish Executive decided to abolish tuition fees four years ago, it recognised that it was depriving universities of an important income stream. It compensated them with a sum equivalent to the tuition fee for every student exempted from personal liability. The context for that decision was a fee fixed at a little over £1,000, adjusted annually in line with inflation. Circumstances are now different. There will be a variable fee in England but not in Scotland, with most English universities expected to charge the full £3,000 for most courses, and the prospect of higher fees from 2010.

The context has changed, but the logic remains the same. Core higher education provision is funded from two main sources. One is Government and the other is the individual beneficiary, the student. In England, the Government has chosen to contain its contribution by increasing the student contribution. Scotland has chosen to minimise the student contribution. I applaud that choice, provided Scottish ministers continue to recognise and act on the corollary - namely, to increase their contribution to make good the shortfall. We will not know whether they will until the outcome of next month's spending review.

In the meantime, plans are being worked out for dealing with one practical issue - cross-border student movements. Every year about 6,000 new students come to study in Scotland from England, and about 2,000 Scots go in the other direction. We want that to continue. It is beneficial for Scottish universities to have students from other parts of the UK, and from countries in Europe and beyond. The Scottish Executive wants it too, because it is keen to attract fresh talent to revitalise a population that is ageing and declining. But it would be unfortunate if the lure of lower fees increased the flow of students from outside Scotland to an extent that opportunities for Scottish students were significantly curtailed. Moreover, Scots who have good reasons for wanting to study outside Scotland ought not to have to pay a huge financial penalty. Therefore, the executive is constructing a package to keep these forces in balance.

But this is a minor issue. Low fees, even zero fees, will lose their attraction if the learning environment does not match the best international standards. It is the overall funding package that remains the dominant issue. There is little doubt that ministers' intentions are good.

Both Jack McConnell, the First Minister, and Jim Wallace, the Deputy First Minister, have said that they will do what is necessary to maintain the competitive position of Scottish higher education. But it is the outcome of the 2004 spending review that will signal how serious they are. Just matching the increased funding in England would cost about £150 million a year - but the real cost to Scotland of failing to do so would be much higher.

David Caldwell is director of Universities Scotland.