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Higher education in Scotland: Funding shortfalls, off-quota students and research blockages

  • 7 December 2022
  • By Nick Hillman

This speech was delivered by Nick Hillman, Director of HEPI, at Heriot-Watt University earlier today.


It is a huge pleasure to be back here at Heriot-Watt.

The organisation I lead, the Higher Education Policy Institute or HEPI, is a specialist think tank that seeks to build bridges between policymakers and the higher education sector. HEPI is a UK-wide institution and our Chair is Professor Dame Sally Mapstone, whom you will know well as not only the Principal and Vice-Chancellor of St Andrews but also the Convener of your representative body, Universities Scotland.

The easiest way to engage with HEPI’s work, assuming you do not already do so, is through our daily blog, so please do sign up for this at the bottom of our homepage if you have not already done so.

The best part of my job as HEPI’s Director is getting out on to university campuses like this one. Although that was harder during COVID, I have visited most UK universities – typically more than once – during my nine years at HEPI. As a small organisation, we are only effective when we work closely with staff and students in higher education institutions and keep our ears close to the ground. So it is on visits like this that we obtain ideas for future HEPI work, and I am delighted to be back on the road and to see campuses back to their pre-pandemic levels of busyness. Plus, on my last visit here your Vice-Chancellor gave me the only glass of whisky I have ever enjoyed – perhaps you keep the best here in Scotland… – so I have returned for the warm hospitality too.

I have watched Heriot-Watt’s recent success from a distance but with huge admiration. Of course, you have always been a successful institution – I come from a family of teachers and I recall how, as a child in the 1980s, my father, who taught Chemistry in the south of England, was always particularly proud when one of his students won a place here, given your strong historic reputation for science and engineering. On my last visit, I was also mightily impressed to see for myself just how you have managed to integrate your overseas campuses to a greater degree than any other UK institution of which I am aware. It is a fantastic example of entrepreneurialism in our sector, which is sometimes – wrongly – regarded as slow and stuffy.

Congratulations too on last year’s bicentenary – I am a governor of my old university, the University of Manchester, which is often said to be the oldest non-ancient university in the UK, but of course you pipped them to the post by three years.

HEPI research

HEPI is best known for its written output and most of our papers are relevant to institutions throughout the UK, covering for example:

Other bits of our output bring together diverse voices or evidence from across the UK – for example, we recently published a collection of essays on research assessment, which includes a searingly honest account of the research funding challenges here in Scotland by Professor Iain Gillespie, Principal and Vice-Chancellor at the University of Dundee. His piece concludes somewhat depressingly that ‘the Scottish funding model is placing Scottish research-intensive institutions at a competitive disadvantage.’

A small minority of our reports focus specifically on the differences in higher education across the UK. For example, we are perhaps best known for the annual Student Academic Experience Survey, produced with Advance HE, which generally highlights some fascinating differences. This year, for example, we found greater concerns among Scottish students than others about a lack of in-person contact hours. This reflected not weaknesses within Scottish universities but the different COVID guidance here in Scotland relative to England when our field work was undertaken in early 2022.

We have also gathered together many years’ data from this annual survey in order to conduct a deep dive into how the student experience differs across the UK. We looked at local students in each part of the UK (for example, English-domiciled students studying in England and Scottish-domiciled students studying in Scotland) and found:

  • English students work less hard than others;
  • Scottish students have notably different opinions on funding, with a higher proportion thinking higher education should be free and a greater proportion believing they are receiving ‘very good’ value for money;
  • Welsh students are more positive about their staff; and
  • students from Northern Ireland score more positively for wellbeing.

Funding shortfalls

These student perceptions are a good stopping off point for the first substantive point I want to address, which is: funding shortfalls. At its most basic, the university funding model has assumed:

  • institutions more-or-less break even on home students; while
  • making money on international students; but
  • losing money on research.

I am leaving things like halls of residences – on which you can either make a loss or a modest surplus – as well as philanthropy aside.

But the first thing any vice-chancellor from pretty much anywhere in the UK now tells you when you bump into them is that institutions are losing money on home students. This is due to things like high inflation, which is causing a severe headache because income for teaching home students is not keeping up. Although this situation of making a loss on home students is relatively new in England, it has of course been the scenario here in Scotland for many years.

According to Universities Scotland, the Scottish Government’s funding per Scottish student has fallen by £2,325 in real terms since 2014/15 and there is now a £4,000 to £7,000 funding gap per student, depending on subject studied – that is, between what it actually costs a university to teach a Scottish-domiciled student and the level of funding universities receive from the Scottish Government.

Back in those dim and distant days three Prime Ministers ago, when Philip Hammond was Chancellor of the Exchequer, Treasury officials were secretly sent up to Scotland to try and find out how your institutions could survive on a unit-of-resource for home students that was so much lower than in England. The answer of course is that you have survived on your wits and your ingenuity.

Student number limits

Another answer is that you have survived by having student number caps, which save expenditure on higher education. I am fiercely opposed to number caps. In my view, education is an unalloyed good to which we should never artificially limit access. The thing I am proudest to have done in my whole career is to have helped remove limits on student places in England, while serving as the Special Adviser to David Willetts, the Minister for Universities and Science in Whitehall. I am not, by the way, making a defence here of low-quality courses. While quality is not always easy to define in higher education, we should nonetheless seek to root out inadequate courses through regulation, quality assurance and enhancement and information.

So I was shocked to see the new campaign by the Glasgow University Students’ Representative Council to ‘Cap Student Numbers Now’. They appear to want new institutional number caps to be imposed on top of those already put in place by the Scottish Government.

I recognise the cause of the Glasgow campaign is a set a concerns around the student experience, plus a shortage of accommodation. But surely Adam Smith taught us that sometimes the simpler solution is the better one? The right response to a shortage of student accommodation is to have more student accommodation. It would be idiotic to respond to the challenges faced by today’s students by blocking future students.

To solve the accommodation challenge, we need the wider economic backdrop to be conducive to new halls, we need student landlords to be encouraged rather than discouraged and we need the student maintenance arrangements to be appropriately generous to cover the costs of safe, secure and suitable – not plush –  accommodation. None of these three is currently in place, especially here in Scotland. So while I understand the frustrations of students, these are the areas to tackle – not building new impenetrable barriers for those still in school, whose education has already been so badly damaged by the effects of the pandemic.


The other reason why I have tended to support the absence of student number caps is that I think they are generally good for access. Historically, the best way to widen participation in higher education is to have more places. This is because the middle-classes are tenacious in their grip on educational opportunities (and I do not blame them for that).

However, I have to admit that Scotland seems to have somewhat bucked the trend here, as Professor Sir Peter Scott, Scotland’s first Commissioner for Fair Access and a former HEPI Trustee, has made clear. In his final report for the Scottish Government. He said:

Scotland continues to set the pace in terms of fair access to higher education among the UK nations. At a time when there is much talk about the ‘failures’ of Government, both UK and Scottish, it is good to be able to point to an unambiguous success. [My emphasis]

So far, so good. But Peter also went on to warn that a reduction in the number of funded places risks a double whammy in which better-off families complain they are being squeezed out of Scottish universities while improvements in access to higher education for others become harder. His final report also states:

Despite the pressure on the Scottish Government’s budget, it is essential to provide an adequate number of (properly) funded places in higher education. Failure to do this, or perception of failure, could lead to an increase in competition for places. This could revive fears that better qualified (although more advantaged) students were being ‘displaced’ by SIMD20 entrants. Justified or not, these fears act as a drag on efforts to achieve fair access. [My emphasis]

Squaring the circle

As someone who is not from Scotland, I find it extraordinary that this part of the UK, which is so brilliant at attracting students from elsewhere, does not offer enough places for its own local students. It is strange that a Scottish student who can afford to do so is not even allowed to pay the full economic cost of a place here at a Scottish university, while non-Scots do this in droves and when Scots can buy a place over the border in England or, indeed, just about anywhere else. It is odd in part because, when people leave, they often do not come back permanently. Given the underlying demographics here, that is surely a challenge.

I should clarify that this is a personal view, rather than a HEPI position. I am perhaps more aware than most about how controversial it would be to allow ‘off-quota’ students to buy a place in this way, given that there was a major scandal when we recommended this should be allowed in England before student number caps were finally removed. An unhelpful newspaper front page and an Urgent Question in the House of Commons delivered my most difficult 24 hours as a government adviser. But these are the sort of difficult conversations that have to happen when, on the one hand, policymakers opt to continue constraining spending through centralised student number caps and, on the other, there is a growing number of 18-year olds and high levels of aspiration.

I was struck last week by a Tweet from Andrew Norton, the leading Australian thinker about higher education (who has written for HEPI on these issues in the past). He publicised a chart showing, yet again, how ‘free’ education inevitably means fewer places and missed opportunities. This rule is not like water swirling down a plug hole, where things happen differently in the northern and southern hemispheres; it is true wherever you are. Even as brilliantly effective a politician as Nicola Sturgeon has not found a way to buck the trend.

Aside from introducing off-quota places, another sensitive alternative to the current challenges would be to reopen the whole conversation about student funding in Scotland, as Reform Scotland and others have bravely suggested. Perhaps we are still some way from that debate catching fire again – although I note student funding is up for debate again in England as Labour stride ahead in the polls. (Do come to our hybrid event on new student funding options, which is taking place on Tuesday in London and online.) And, if the Salmond stone can be moved from this campus, perhaps anything is possible.


I used to think England followed Australia in higher education policy while Scotland tended to follow Germany. And I also used to think that Scotland and England were diverging. However, looking back across these issues of funding, number caps and access, and despite the unsustainability of some aspects of the Scottish model, I am coming to the conclusion that England is actually following Scotland.

  • I have already shown how the funding challenge in England is coming to resemble the one in Scotland with ever bigger losses on home students, as is the debate about regulating student accommodation.
  • The student number debate in England has come to resemble the one in Scotland too: English politicians have been keen to raise the possibility of Scottish-style student number caps.
  • Meanwhile, England marches slowly towards a more robust model on widening participation, with the new Director for Fair Access and Participation at the Office for Students coming to play a role somewhat more akin to Scotland’s Commissioner for Fair Access. I look forward by the way to hearing soon who the new Commissioner will be.

Famously, it has been easier for years to get into Scottish universities if you are not Scottish than if you are. It is now becoming easier to get into some English universities if you are not English than if you are. The same sort of funding shortfalls which have led to official student number caps here in Scotland are now leading to self-imposed student number caps in England and could, in time, lead to new official caps south of the border too.

This helps to explain why the advice to applicants throughout the UK needs to become more nuanced. As Andrew Hargreaves of DataHE put it with his customary wisdom in a Tweet last week, applicants need to ensure they are ‘spreading their bets’.

International students

When thinking about what I might say today, I went back to look at what I said in my last speech here, which was delivered over six years ago in autumn 2016. Most of what I said then is horribly out of date now, as 2016 was a different era. The Brexit vote had only just happened, England’s Higher Education and Research Bill (setting up the Office for Students) was still wending its way through Westminster and Scottish universities were deep in thought about whether to sign up to the new-fangled Teaching Excellence Framework.

One other area I discussed is one where there was actually some really positive change in the years after I last spoke to you. This is the rules around international students. For most of the 2010s, the UK Government tried hard to dissuade international students from coming here. At sub-degree level, the numbers fell of cliff while higher-level courses flat-lined. At HEPI, we responded to this state of affairs by working with a range of organisations to publish a stream of evidence-rich publications showing the huge benefits – educationally, financially and in terms of soft power – of hosting so many foreign students.

For example:

This sort of evidence produced by us and so many others helped to shift policy to a better place. In particular, Boris Johnson’s Government abolished the failed target of reducing net inward migration, including students, to ‘tens of thousands’ and introduced a better post-study work regime (something which, in many notable respects, closely resembled the trailblazing ‘Fresh Talent: Working in Scotland Scheme’ that was in place from 2005 to 2008). Although the number of incoming EU students took a big dive after Brexit took effect, the overall international student numbers were on a positive trajectory, helping to mask – as I have already noted – the underlying financial challenges faced by universities.

My sense is the politics are currently around dependents. Of course, the fact that undergraduates are generally not allowed to bring dependents with them has become lost in the noise, as has the fact that you can only bring your dependents if they have substantial financial resources and also if charges like the Immigration Health Surcharge and visa fees are covered. It is reasonable for people to ask questions about the big increase in dependants to check that the spirit and the letter of the rules are being kept to, though it seems less defensible to tell universities to diversify away from having such a high proportion of Chinese students, who typically do not bring dependents with them, and then to criticise those same institutions for doing what they’ve been told to do by attracting students from other countries.

I plead with people on both sides of the international student debate to choose their language carefully. On the one hand, policymakers often muddle up students, the majority of whom return home after completing their studies, with other categories of migrants. On the other hand, we have also seen some unhelpful caricatures about international students coming from within our own sector. Just last week, an influential HE commentator said, ‘One of the things the sector tells itself … is that the odd international student comes into the UK, has a cup of English Breakfast tea, goes to see the Queen and then takes British values back all around the world’. This is a vivid – perhaps even amusing – self-portrait of our sector, but it is also a surrealist and slightly irresponsible one that risks weaponising the whole issue. In reality, no one in universities actually talks in such simplistic terms. They are more likely to point out that international students make campuses more diverse and interesting, keep multiple courses economically viable and promote levelling up.

As I said to you six years ago in the only part of my last speech to you that could have remained unchanged today – and as I wrote for the Times Higher Education just a few days ago – the underlying problem is a structural one. We give complete responsibility for international students to the Home Office rather than recognising that responsibility for educational exports should be a shared endeavour across a number of different departments, and not the exclusive preserve of a department with no substantial direct policy interest in education, economic growth or international influence. It would be wonderful if the new Prime Minister, who has a passion for all three of these things – education, economic growth and international influence – could redraw the lines of policy responsibility to promote better policy through more interdepartmental working.


The final issue I wish to touch upon is research, which is an area where policy responsibility is partly retained in Whitehall and partly devolved. I know there are arguments here in Scotland about whether the Barnett consequentials for research funding will actually arrive in full in universities, and whether money is being divvied up appropriately between Scotland’s research-active institutions. I join the loud and growing chorus of voices urging the Scottish Government to pass on any increases in public expenditure as a result of research funding decisions made in Whitehall. But I also want to raise my eyes higher than this to look at the overall picture.

I think we are in a slightly dangerous place, more dangerous than is generally realised. The Westminster Government is committed to spending 2.4% of GDP on research and development by 2027, up from around 1.7% previously. But the Office for National Statistics have just devised a new methodology and, miraculously, it now says we are already spending 2.4%. Before becoming a higher education policy wonk, I was a benefits policy wonk and it all reminds me of how you can make dramatic in-roads to child poverty via the stroke of a pen but without actually changing lives.

So far, however, Jeremy Hunt as the Chancellor of the Exchequer has said all the right things, including in his recent Autumn Statement that it would be ‘a profound mistake’ to cut R&D spending. It seems, as someone with first-hand experience of such decisions said to me the other day, that we have ‘dodged a bullet.’

But we are significantly more than halfway through this Parliament already, with a general election approaching in the next couple of years, meaning the electoral consequences of every spending decision will now start coming to the fore. And I am sorry to say, there are (close to) zero votes in research. I have told before how I once managed to win a vote on the doorstep as a general election candidate in 2010 by promising to support a one-year delay to the introduction of impact in the first Research Excellence Framework. But it is perhaps the only vote ever to have depended upon such things (and I still went on to lose by 6,792 votes).

My advice is that we all need to do three things better.

  1. First, we need to remind policymakers that 2.4% was once generally seen as a staging post on the way to 3% and it could be once again.
  2. Secondly, we need to talk more about the practical fruits of research; we need to get under the skin of those projects with nice names, stellar researchers and large budgets to explain how they will actually change people’s lives.
  3. Thirdly, we need to invite policymakers and potential future policymakers of every stripe on to campus – not just those for the specific constituency or constituencies in which any institution resides. Such visits are the single best way to convert sceptics into advocates.


I was asked to touch briefly upon the Office for Students in my remarks today. I am reluctant to spend too long talking about an England-only body while I am in Scotland. But, equally, I do recognise the Office for Students has been set up to have different powers and a different way of working to its predecessor, the Higher Education Funding Council for England, and that this has consequences throughout the UK.

I said earlier that the first thing that most vice-chancellors will bend your ear on is funding. But another current top issue for them in England, and one which has not had anything like the public attention it deserves, is the decision over the summer that the Designated Quality Body for higher education – the Quality Assurance Agency, which recently celebrated its 25th birthday – no longer wants the job. Yet the reputation of English higher education and the reputation of UK higher education rest in part upon such external agencies. It is possible that the recent turnover of Education Ministers has hindered a proper focus on what comes next but it does need resolving. So it was great to see Susan Lapworth, the Chief Executive of the Office for Students, addressing this issue directly with institutional leaders the other day.

Without such thought, we would risk seeing what Tim O’Shea in his days leading Edinburgh University used to tell me should happen. He used to say with a glint in his eye, that Scottish institutions should emphasise their Scottishness rather than the fact that they are part of a single UK-wide higher education sector. I instinctively disagree with this because, to coin a phrase, I think we are better together. Indeed, the main conclusion of the HEPI paper I mentioned at the start on whether there is still a single UK higher education system was that there is and that we all benefit from it, but also that it is stretching at the seams more than in the past.

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