Treasury Accounting Rules Cost Scotland £5.7Bn in HE Spending, new Analysis Finds

Scotland has missed out on £5.7 billion of public spending on higher education over thirteen years because of the way the Treasury counts student loans, according to new research published today by the higher education policy analysts Wonkhe.

The analysis uses the Office for National Statistics figures that record, for each UK nation, the portion of student lending that is never expected to be repaid – 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 £82.9 billion of that spending for England and £2.3 billion for Scotland. Had England’s spending per head been matched in Scotland, the figure would have been £8 billion – a difference of £5.7 billion, meaning the spending recorded for Scotland ran at around 29 per cent of the English rate.

Per resident, the UK government’s counted spending on student loan write-offs over the period comes to £1,437 in England and £419 in Scotland. In 2024–25 alone, the gap was £364 million – close to six times the £62 million of emergency support the University of Dundee needed to stay open.

The research finds that the mechanism 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. A nation that supports students by not charging tuition fees draws nothing from that machinery, and the saving is not returned as usable funding for teaching, grants or student support. The report also notes 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 Treasury runs.

Justine Pedussel, President of NUS Scotland, 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. This research 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.

“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.

“The review of higher education cannot stop at efficiencies while ignoring the machinery that sets the size of the pot. 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.”