Scotland’s universities are in a crisis of Holyrood’s own making. The Scottish Funding Council is currently discussing bailout terms for the University of Dundee, while other universities, including my own alma mater the University of Edinburgh, have announced large redundancy packages to try and balance the books. This financial pressure, while exacerbated by other factors, largely results from the Scottish National party’s (SNP) zero tuition fee policy, in which domestic students pay nothing for their education. Some good may, however, yet come from this crisis, as it has increased political will to reconsider this cornerstone SNP policy.
The current crisis represents an inflection point for Scotland’s higher education sector
Currently, Scotland’s most prominent universities rely on international student fees to compensate for the substantial losses they incur from educating domestic students. This was never sustainable: a university’s reputation is a finite resource, relying on the academic merit of its students, and will be quickly eroded if funding pressures result in unqualified students being admitted. Nor is this system fair – it takes advantage of international students, many of whom will provide significant economic benefit to Scotland as employees, entrepreneurs, or researchers, and disadvantages domestic students for whom the number of university places is capped.
This ill-designed funding mechanism is largely restricted to universities with significant international reputations to squander. It therefore leaves lower-ranked institutions and those with a higher proportion of domestic students at a significant financial disadvantage, a disadvantage which results in significantly lower quality of teaching and research. The Covid-19 pandemic worsened funding pressures by reducing Scotland’s intake of international students, thereby exposing its elite universities to the financial realities faced by other institutions
Providing higher education costs money. Since it primarily benefits those who attend, it seems fair that they should bear this cost. Some fellow graduates have suggested that university should be subsidised by society because the benefits of their education are shared equally by all. This is an argument made by graduates, to other graduates, the majority of whom would be rightly embarrassed if forced to repeat the argument to their plumber.
It is obvious that the benefits I derive from my degree, primarily in the form of more mentally stimulating and financially rewarding work, do not accrue to both me and the rest of society equally. It should therefore be obvious that we should not pay equal amounts for my degree. A system in which only half of society attends university while everyone chips in to pay for it is an implicit subsidy to attendees, who are predominantly already from wealthier social backgrounds. Any change in funding mechanism should start with this core principle.
The thinktank Reform Scotland has recommended a system of deferred fees, in which only those who both attended university and earn above a certain income threshold repay the costs of their education. This solution is politically palatable, and preferable to the current system, but has some fundamental issues. In order to cover the associated costs of tuition, it would have to be levied at a relatively high rate, and would therefore increase the effective marginal tax rate paid by top graduates.
This would disincentivise high earners, who already lose a large proportion of their income to tax. It also presumes that the costs associated with educating those who earn below the threshold are borne by other graduates, but in reality, they would more likely be shifted to either universities or the taxpayer. If universities are responsible for collecting these deferred fees, Scotland’s elite universities would collect far more revenue, since almost all of their graduates will earn above the national average income; if the government foots the bill, then the policy still represents an inherent subsidy for those who had the privilege of attending university.
A more logical solution is therefore to copy England and Wales in introducing tuition fees, with the government involved in ensuring access to loans. There is no real need to introduce a cap on fees, since Scottish universities would in practice be forced to align what they charge with English universities or risk students fleeing South.
Scotland’s privileged financial situation within the union means that it could likely afford to provide student loans at more favourable rates than those currently available to English students. It could therefore avoid some of the negative consequences of the switch. Scotland should, however, seek to learn from the mistakes built into the English system, and therefore avoid providing generous loans for courses where students receive no real benefit from attending.
The current crisis represents an inflection point for Scotland’s higher education sector. The Scottish government should use the opportunity to explore other, more sustainable options, which will allow Scotland’s universities to compete on the global stage and retain their place as hubs of innovation. To do otherwise will hasten their decline.
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