Universities in Scotland should diversify income streams away from “potentially volatile international student fees” as they try to fill funding gaps, a report from the House of Commons Scottish Affairs Committee has argued. 

The Universities and Scotland First Report of Session 2021–22 was released at the end of May this year and explored a wide range of subjects including public sector funding for higher education and the effect of Covid-19.

“We recognise that this leaves a 10% gap in funding that must be filled via alternative means”

The report noted that public sector funding for higher education in Scotland has reduced by 12% in real terms in seven years.

Despite the policy of free tuition for Scottish students, and a cap on Scottish student numbers, the report said that only 90% of the costs of teaching Scottish students at Scottish universities are covered by the Scottish government.

 “We recognise that this leaves a 10% gap in funding that must be filled via alternative means,” the report said. 

“The Scottish government and Scottish universities should work with the UK government and universities in other parts of the UK to seek out examples of best practice in diversifying income streams away from potentially volatile international student fees. 

“In doing so great care should be taken to ensure that core focus on education and research is not lost in favour of commercialised corporate ventures.”

James Conroy, dean for global engagement (Europe) and vice principal emeritus at the University of Glasgow told the committee that Scottish universities are “increasingly dependent on international student fee income not just to plug the gap, but to create the facilities, the capital spend that maintains our infrastructure”.

“We are cross-subsidising everything at the moment from our international student base, which has been a mark of our great success and our international reputation, but it does carry problems,” Conroy said. 

“We cannot expect [international students] in the long term to fund our universities’ development, and certainly not on their own.”

Covid-19 and its potential to disrupt the mobility of international students was cited as a reason for Scottish institutions to diversify their income streams. 

The committee’s report said that Universities Scotland had said that the pandemic has “exposed just how dependent the Scottish higher education sector now is on international student fee income to subsidise publicly-funded activities of teaching undergraduate Scottish [ … ] students and to underpin publicly funded research”.

The report identified funding opportunities for Scottish universities, noting that EU students paying international student rates could provide a “new and potentially lucrative income stream for Scottish universities”. 

“Although applications from EU students have dropped by about 40% for 2021–22 (that year being the first year that EU students will pay the new rates), this is a lower drop than many in the sector had feared, and Scottish universities will now receive four to five times more income per EU student than was previously the case,” the report said.  

“It is important that, following Brexit, Scotland is still able to attract the brightest and best from the EU”

“That said, it is important that, following Brexit, Scotland is still able to attract the brightest and best from the EU.” 

However, the report warned that this new income stream may face the same risks posed to fees from international students. 

“Our current status is at risk from a number of factors as highlighted in the report. The report makes clear that by working together, the UK and Scottish governments can support Scotland’s universities to drive the nation’s post-Covid recovery and renewal,” Universities Scotland director Alastair Sim said. 

“We hope both governments take the time to respond and ensure that Scottish universities can make the most of their potential, be that on immigration policies at Westminster or sustainable funding at Holyrood. 

“This will give Scotland’s universities the opportunity to maximise their potential and deliver for students, businesses and the community as well as bring about research that will improve lives throughout the world.”