Explained: Why are Scottish universities worried about money?

In recent months questions have been raised about the viability of the current funding system for Scotland’s higher education sector. 

But where do universities get their money from? Why are their budgets stretched? And how does the situation compare to other parts of the UK?

Ferret Fact Service explains.

Ferret Fact Service | Scotland's impartial fact check project

How are Scottish unis funded?

Scotland’s 15 universities have three main income streams; annual public funding from the Scottish Government, tuition fees charged on students from outside Scotland, and grants for specific research from the public sector, private companies and charities.

In total, the Scottish Government has allocated around £1.1bn to universities for the upcoming 2024-25 academic year. 

Most of this public funding is for teaching and staff but there is also money for research, innovation and capital spending, such as on the upkeep of buildings.

Explained: Why are Scottish universities worried about money? 5

Scottish universities can charge students from the rest of the UK tuition fees of up to £9,250 per year. International students can be charged at much higher rates.

Tuition fees from non-EU students, in particular, have become an increasingly vital part of the funding landscape. A Ferret analysis of each Scottish university’s most recent annual accounts shows that together, Scots unis received over £1.3bn from international students in 2022-23.

Our analysis also showed Scottish unis received research grants worth £920m in 2022-23, although more than half of this went to the University of Edinburgh and University of Glasgow.

Other sources of income include charging students to stay in halls of residence, investments and donations, and from holding conferences.

Why are budgets stretched?

The funding provided to universities by the Scottish Government has decreased in real terms over the last decade.

According to the Institute for Fiscal Studies (IFS), after inflation is taken into account, the value of the main teaching grant – the biggest chunk of funding provided by the Scottish Government – was 19 per cent lower per student in 2023-24 than it was ten years previously in 2013-14.

As well as these real terms cuts in the long term, the teaching funding budget was also cut by £28.5m in cash terms between 2023-24 and 2024-25. 

These funding decreases come at the same time as enrolment of Scottish students at universities reaches record highs. According to the most recently available data, for 2021-22, there were 183,025 Scottish-domiciled students at our universities, a record number.

The fall in government funding has increased universities’ reliance on international tuition fees as a source of cash.

Seven of Scotland’s unis got more than a quarter of their total income in 2022-23 from fees paid by non-EU students.

Explained: Why are Scottish universities worried about money? 7

But this can be a “volatile” income stream which is vulnerable to changes in the geopolitical landscape. There was a fall in enrolment of international students in 2023-24. 

According to Universities Scotland, cumulatively this meant that universities brought in £100m less than expected over the last academic year. The body believes that this is not a one-year anomaly with almost all universities expecting to see a fall in international recruitment next year, too.

The drop has been partly blamed on changes to immigration policy in Britain, in particular about which international students can access a dependants visa. This is a type of visa that allows students to bring family members when they move to the UK. 

From January 2024, only international students studying for a PhD, doctoral qualification, or research based postgraduate degree can get a dependants visa. The UK Government said the policy was brought in to “slash migration and curb abuse of the immigration system”. 

Nearly two thirds of international students studying at Scottish unis are on taught postgraduate degrees – like masters courses. Prospective students on these courses can no longer bring dependants with them, which some argue makes Scotland and the UK a less attractive destination to study.

There are also concerns that Scottish universities are underfunded for their research activity. The Scottish Funding Council, the Scottish Government body responsible for Scotland’s higher education sector, estimated in 2021 that research at Scottish universities is underfunded by £328m each year.

How does the situation compare with the rest of the UK?

Unlike in Scotland, undergraduate students in the rest of the UK pay tuition fees to study in their home country. 

In England, English students pay up to £9,250 each year. For a Welsh student studying in Wales, the fee is up to £9,000, although this will rise to £9,250 in September 2024. 

In Northern Ireland, students pay fees of up to £4,710 to study at a Northern Irish university.

The IFS calculated that each year the Scottish Government gives direct public funding of £7,610 for each undergraduate Scottish student each year.

This meant that, in 2023-24, universities in England receive more for each ‘home’ student they enrolled than Scottish universities did. 

However, because most Scottish undergraduate degrees are four years long, compared with three years in other UK countries, total funding for each Scottish undergraduate is actually slightly higher over their whole course of study than elsewhere.

Universities in the rest of the UK are also facing financial pressures. The Guardian reported in May that a growing number of English universities face “a material risk” of closure unless they cut costs or merge. 

A report by the Office for Students said that English unis are also over-reliant on international students and 40 per cent of them could run deficits this year.

This Ferret story was also published in the Sunday National. Our partnerships with other media help us reach new audiences and become more sustainable as a media co-op.  Join us to read all our stories and tell us what we should investigate next.

Ferret Fact Service (FFS) is a non-partisan fact checker, and signatory to the International Fact-Checking Network fact-checkers’ code of principles.

All the sources used in our checks are publicly available and the FFS fact-checking methodology can be viewed here.

Want to suggest a fact check?

Email us at factcheck@theferret.scot or join our Facebook group.

Main image: AlanMBarr/iStock

Leave a Reply

Your email address will not be published. Required fields are marked *

Hi! You can login using the form below.
Not registered yet?
Having trouble logging in? Try here.