Scotland nervous of top-up exodus

England may have to compensate Scottish higher education if the introduction of top-up fees creates a flood of students heading to universities in Scotland to escape charges, an adviser to the Scottish Parliament has suggested.

Arthur Midwinter, emeritus professor of politics at Strathclyde University and budget adviser to the Scottish Parliament's finance committee, said there had to be debate about whether the higher education funding system needed overhauling in the light of plans to introduce £3,000 top-up fees in England in 2006.

There should be a consideration of whether a system of cross-border compensation was required, Professor Midwinter said in evidence submitted this week to the enterprise and culture committee's inquiry into the impact of England's white paper. The National Health System operated a system of cross-border payments to compensate health authorities when necessary, he said.

Many Scottish universities fear that they could be swamped by applications from English students eager to escape top-up fees south of the border. The Scottish government operates a system of flat-rate graduate endowment payments and has no plans to introduce top-up fees. There are fears that English students could squeeze places available for Scots.

Scotland already caters for 11 per cent of the UK student population, although its total population is only 9.6 per cent of the UK. When higher education funding was devolved in 1993-94, Scotland was assumed to be funding a surplus of 12,600 students from elsewhere in the UK.

Professor Midwinter said: "The most recent estimates I have seen suggest this grew to about 16,500 prior to the change in student finance in 1999."

He said the committee needed more up-to-date information on student numbers.

Post-devolution funding in Scotland comes through the Barnett formula, which is based on proportion of population. But Professor Midwinter said that higher education's share of the Scottish budget had been falling since devolution in 1999 because of ministerial decisions.

Professor Midwinter said: "The higher education programme's share of the Scottish budget has been falling consistently. Over the next spending review period, its share will fall again, from 3.3 per cent to 3.1 per cent."

Spending plans up to 2005-06 show the overall Scottish budget rising by 23.8 per cent.Total education spending will jump by 25.4 per cent, but higher education will get 14.9 per cent more.

English universities that charge top-up fees would have a comparative income advantage over their Scottish counterparts because the funds would go direct to the institutions, Professor Midwinter said.

But as tuition fee income is not classed as public expenditure, this will have no impact on the Barnett formula and so will mean no extra money for Scotland.