Higher Education Finance in the UK*

Abstract The introduction of top‐up fees for home‐domiciled undergraduate tuition in England from 2006–07 – and their planned increase in 2012–13 – raises important issues for university funding in Scotland, since it abolished tuition fees for Scottish and EU students in 2000–01. This paper focuses on what the increase in resources directed at English universities arising from top‐up fees means for the relative funding of English and Scottish undergraduates. Widely‐used funding‐per‐head figures do not provide an accurate picture of home‐ and EU‐domiciled undergraduate funding, as they include funding for research, postgraduate degrees and overseas students. The empirical work of this paper focuses on creating a consistent series of funding per full‐time equivalent undergraduate over time for England and for Scotland, stripping out funding for research, non‐EU students and postgraduate degrees to create a more accurate picture of the funding gap between the two countries. It also takes into account the different composition of undergraduate degree subjects taken in England and Scotland. The findings indicate that the apparent historical advantage in funding per head in Scottish institutions compared with English ones has been largely driven by compositional differences: Scotland has a high proportion of medical, science and engineering undergraduates – subjects that command greater funding due to their relative complexity to teach. The top‐up fee introduced in 2006–07 brought funding per head in England to a level similar to that experienced in Scotland, and the future increase will result in funding per head in England outstripping that in Scotland by some magnitude. This suggests that the funding of Scottish students will fall significantly behind that of English students unless additional new sources of public or private funding for nScottish universities are found.