WESTMINSTER spending rules have shortchanged Scottish universities by more than £5 billion, new research has found.
The analysis, published by higher education policy analysts Wonkhe, found that Scotland has missed out on £5.7bn of public spending on higher education over 13 years because of the way the Treasury counts student loans.
Wonkhe used data from the Office for National Statistics (ONS) that records the portion of student lending that is never expected to be repaid for each UK nation.
This is spending that has counted as public expenditure since a 2019 accounting change, and which is recorded as government spending in the year each loan is issued.
Between 2012/13 and 2024/25, the ONS recorded £82.9bn of that spending for England, and £2.3bn for Scotland.
Had England's spending per head been matched in Scotland, Wonkhe said that the figure would have been £8bn – a difference of £5.7bn, meaning the spending recorded for Scotland ran at around 29% of the English rate.
This figure is a counterfactual comparison, rather than a formal entitlement under existing Treasury rules.
Per resident, the UK Government's counted spending on student loan write-offs over the period comes to £1437 in England and £419 in Scotland.
In 2024/25 alone, the gap was £364 million – close to six times the £62m of emergency support the University of Dundee needed to stay open.
The research from Wonkhe found that the mechanism used is not the Barnett formula but a separate set of Treasury controls, under which loan funding flows through annually managed expenditure and is available only in proportion to the lending a nation actually generates.
In turn, the policy analysts said that a nation that supports students by not charging tuition fees, such as Scotland, "draws nothing from that machinery", and the saving is not returned as usable funding for teaching, grants or student support.
The report from Wonkhe also said that because funded places are financed from a fixed Scottish budget rather than from demand-led UK lending, capping student numbers reduces the comparison the UK Treasury runs.
The Scottish branch of the National Union of Students (NUS) branded the rule "indefensible".
NUS Scotland president Justine Pedussel said: "Every conversation about university funding in Scotland starts from the same premise – that there is no money, so something has to give, whether that is jobs at Dundee, places for Scottish students or the value of the bursaries our poorest students live on."
Pedussel said the new research from Wonkhe "shows that premise is false".
"The money exists, it is counted, it is published, and it is being spent at more than three times the Scottish rate on students in England," Pedussel said.
She added: "The rule is simple and it is indefensible. Load students with debt and the Treasury pays. Educate them without it, as Scotland chooses to do, and the Treasury pays nothing and keeps the difference.
"Free tuition is not a subsidy Scotland receives, it is a choice Scotland pays for twice."
Pedussel said that any review of higher education "cannot stop at efficiencies while ignoring the machinery that sets the size of the pot".
She continued: "We are asking the Scottish Government to put this in scope and take it to the Treasury, and we are asking the Treasury to publish its workings and to negotiate a settlement that funds the choice rather than the debt – exactly as it did for welfare in 2016."
The UK Government has been contacted for comment.
