Pillar one of Scotland’s Future Framework for universities suggests that to keep doing what it currently does, the sector needs an extra £200 million a year – on 2023–24 figures.
There is, however, a fatal flaw in the calculations. Education takes two to tango – and nowhere in the sector’s meticulous costing of itself is an equivalent audit of the student funding gap. So much for the home of student partnership.
When it last independently reviewed student finance, Scotland promised students a living-wage-linked minimum income. It took years to sort of get there, and has slipped back significantly since.
So Scotland needs to size both gaps, and then something will need to fill them. Some believe that one more grasp of the straws will cause the SNP to fold and introduce tuition fees.
It’s not going to happen. But something else might.
Mind the gap
In 2021, the Programme for Government promised the poorest students a living-wage-level income. Scotland hit that benchmark for exactly one year, and has since frozen the package at £1,378 a year short of its own standard – closing that gap for the roughly 25,000 students on the maximum package would cost around £35 million a year.
You could measure what students actually spend. The Student Finance and Wellbeing Study found median expenditure running £1,530 above median education-related income – a gap worth around £180 million across the full-time population. That’s an illustration rather than a robust total, and if anything an understatement, because students who are already skint cut food, heating and travel before any survey minds the gap.
The better claim is the promise Scotland originally signed up to. The 2017 independent review proposed a universal Minimum Student Income – every full-time student able to reach a minimum pegged to the real living wage, with household income deciding the mix of bursary and loan rather than the total – and restoring that universal version, uprated, would on my sums cost around £280 million.
That review somehow suggested that studying full-time for a year involved 950 hours of work – 25 notional hours of study a week across a 38-week academic session. Diamond in Wales, and later Augar in England, preferred a full working week – 37.5 hours across the 30 weeks of term, or 1,125 hours a year. The actual credit system in use across the UK? 1,200 hours a year.
Even if you swap the Real Living Wage for the minimum wage, that gets you to around £450 million. And then there’s the sorry state of postgraduate, part-time and disabled students’ funding. Let’s call it £600m for now.
So given that tuition fees and extra devolved spending are unlikely, where else might it come from?
Three tests and a brick wall
When a devolved government designs its own student finance system, as regular readers will by now be able to recite, the Treasury applies three tests.
Test one compares how much it lends to a cohort of its students with what England’s policies would have lent to the same students.
Test two compares how much of that lending the Office for National Statistics expects to become public spending – the “capital transfer” – with the English equivalent.
Test three gives each nation cover for expected losses on its lending – RAB – broadly related to population share, with anything above it found from the devolved budget.
Since November 2023 the rulebook has read like this:
the UK Government will require the devolved administration to demonstrate that their scheme costs the same or less than it would cost if they were to apply UK Government policy in their respective nation
As Justine Pédussel and I have argued, that’s an astoundingly dodgy deal. Shoving almost all spend on teaching through the loan book meant Westminster could cut the subsidy for Scotland – and will only give it back via subsidised student debt.
What should happen – now that we know how much public expenditure is recorded via student loan subsidy – is that devolved nations get their fair share, to be allocated in grants or debt subsidy as the nation sees fit.
But let’s be honest about how the last decade and a half has actually gone. There is no sign whatsoever that the Treasury intends to hand devolved governments flexible money for grant-shaped support. And some in the sector would worry that even if it was successfully claimed, extra money would go on non-HE priorities.
Win, no fee
So why not test how far the machinery will stretch?
Imagine a Student Success and Services Fee of roughly £1,700 for each of the 142,000 or so eligible Scottish-domiciled undergraduates at Scottish HEIs, paid through the existing SAAS and Student Loans Company systems – a fee that was cancelled automatically on successful completion. That would generate around £242 million a year for institutions.
£200 million is what pillar one says the sector needs each year to keep doing what it currently does – and the £42 million balance would start funding something students actually get to see.
A student who didn’t complete? The tagged balance would stay on the account under the same Plan 4 terms as any other borrowing – so nobody’s monthly deduction changes because they didn’t finish.
Compassionate cancellation would cover serious illness, caring responsibilities, bereavement and provider closure – and transferring or suspending study wouldn’t count as dropping out.
Would this stretch to the limit the definition of a “loan”? Yes. Does the existing system stretch to the limit the definitions of “comparability” and “fairness”? Also yes.
The maintenance side, meanwhile, would be ordinary Plan 4 lending – not cancelled – because a cancelled fee is nearly all subsidy while a conventional loan consumes a fraction of the fiscal capacity, and because balances barely change what anyone repays each month anyway.
The something students would see is a statutory student-services floor – every provider eventually required to spend at least £870 per enrolled student on student services, without touching the £200 million that keeps teaching, research and the estate standing.
Getting everyone to £870 costs somewhere between £80 million and £105 million once you do the sums provider by provider – over-spenders can’t subsidise under-spenders, the broad HESA “staff and student facilities” baseline of around £149 million is missing Dundee and the OU, and so the floor would phase in as proper baselines are published, with the fee rate recalibrated annually as it does.
The floor’s first guaranteed component would be £100 per student for the recognised students’ association – around £27 million nationally – plus Student Services Councils giving students shared control over the protected spend, on the Flemish model.
And “tuition” would remain free – the £1,820 degree-level SAAS payment and the SFC teaching grant protected in statute, alongside rules preventing the new money being used to cut what government and providers already spend.
Pass notes
Would the package pass the tests? The ceilings that follow are my own reconstructed proxies, because the comparison the Treasury actually runs is a secret cohort one it won’t release.
On Test 1 (the lending test), the package would appear to pass comfortably. Loan-only outlay of around £773m plus the £842m package takes Scotland to about £1.61bn against the £2.04bn indicative ceiling – 79 per cent used, £420m or so spare – and under the real cohort comparison it’s arguably safer still, since English policy applied to Scottish borrowers would mean £9,790 fee loans plus English maintenance and masters lending, and the PG and PT tranche grows that comparator in step.
On Test 2 (the ONS transfer test), even on deliberately conservative assumptions – the cancelled fee scoring at 95p of public spending in every pound, and the maintenance at the 31p per pound Scotland’s whole loan book has historically generated – the total lands at around £767m against the £777m ceiling. That’s a squeak, but it’s in.
Then on Test 3 (the RAB test), take the existing £100m provision on in-year lending, add the whole £242m fee scored prudently as impairment, and price the £600m of maintenance at the roughly 11p per pound that £100m provision implies for new Scottish lending – around £406m against the £677m reconstructed benchmark, with some £270m of room.
Meanwhile in Cardiff and Belfast
Could Wales do the same? Not without a change to the tests – because Wales is the nation sitting under its ONS fair share while over its RAB cover, so a Welsh success fee would smack straight into the discount-rate scoreboard I complained about earlier in the week.
Northern Ireland is the easy one. Its ring-fenced cover was £226.9 million in 2024–25 against an outturn of around minus £40 million – and as Ulster’s vice chancellor Paul Bartholomew argued in the comments under that piece, a loan-financed supplement flows straight to universities while the write-off does the subsidising.
It’s a paper exercise. In reality, devolved nations should be able to spend their fair share of public expenditure as they wish. A fat system – fewer students, more spend on each. A thinner system – more students, less spend on each. A more loany system enables more students. A more granty system means less spent on them each. And so on.
Some would baulk at students being used as money mules and any extra fee at all. Others will only settle for increased fees that universities can play with. But we are where we are, and perfect is always the enemy of the good.
If the only way to get its fair share is to get its students to take out more loans, Scotland should go ahead – and then cancel the institutional slice of that debt the moment those students succeed.
