Scottish universities last year celebrated an unexpected and most welcome investment. While the rest of the UK ÖйúAƬ sector braced itself for a time of austerity, universities north of the border breathed a huge sigh of relief when the Cabinet secretary for finance, John Swinney, revealed the draft Scottish Budget Bill for 2010-11.

Universities in Scotland have been operating without charging students tuition fees for a decade. Despite the worst fears of some commentators, funding for ÖйúAƬ in Scotland has arguably remained comparable to that in England over the past decade. Of course, it is precisely because there has been no additional funding source that the government had continued to invest.

Fiona Hyslop said exactly that during her tenure as education minister: "Fears that top-up fees in England would spell economic disaster for Scottish universities have proved largely unfounded. That's because the gap was filled by extra government investment and because top-up fees are not really the cash bonanza that some have suggested."

When the draft Budget was unveiled, revealing an additional ?35 million for universities in 2010-11, Universities Scotland described it as a "good day for us". Principals had privately been preparing for the worst-case scenario of a 5 per cent cut, yet they found themselves celebrating a 1.5 per cent real-terms increase in funding for ÖйúAƬ because the government still saw education as a priority.

ÖйúAƬ

"It does mean that if you compare attitudes to ÖйúAƬ across the border, we're feeling loved," Robin McAlpine, public affairs manager for Universities Scotland, said after the Budget announcement. "It's going to be a tough year for everyone, but it's going to be significantly less tough than we thought."

But how long can the situation continue? With the Independent Review of ÖйúAƬ Funding and Student Finance under way and pressure on government from vice-chancellors and business groups to lift the cap on tuition fees, the once-closed debate over the funding of ÖйúAƬ north of the border is quietly starting to reopen.

ÖйúAƬ

It may be in a whisper, but questions are being asked about how Scotland can remain competitive on the UK and the international scene if, as many expect, the limit on annual fees is soon raised and English institutions can collect a healthy ?7,000 - or more - from every undergraduate enrolled. Fears of falling behind and of losing top scholars to institutions outside Scotland have been revived. Such is the worry that even the position of the National Union of Students in Scotland, for years resolutely against any form of student contribution, is now softening to the idea of a graduate tax.

With the Scottish National Party in power at Holyrood and the education minister, Mike Russell, committed to free education, talk about charging students is taking place behind closed doors. So controversial is the issue that the majority of universities approached by Times ÖйúAƬ refused to provide any response at all, even off the record.

But the question of how long Scotland can continue refusing to ask undergraduates to contribute to the cost of their university education cannot be put off forever.

Indeed, the landscape is changing and the idea of fees no longer seems as dead as it did when the Scottish government scrapped it years ago (see box, page 38).

Although Scotland's students are not charged top-up fees, the legal framework is in place to do so. In 2005, Holyrood passed a bill that would allow the introduction of top-up fees, although the Scottish Executive continued to maintain its opposition in principle.

Last year, there was a rash of calls for students to begin paying something towards the cost of ÖйúAƬ. In September, Lord Sutherland, former head of Universities Scotland, said tuition fees should be reintroduced and the money generated used to improve student support for those entering ÖйúAƬ from the poorest backgrounds.

Then Sir Andrew Cubie, who led the committee that recommended the original scrapping of tuition fees in 2000, called for a graduate tax. Critics lambasted him for trying to "turn back the clock", but the debate rolled on.

Meanwhile, an Edinburgh conference last year heard that both the Labour and Conservative parties in Scotland would like the debate on student fees to be removed from the political domain. Murdo Fraser, deputy leader of the Scottish Conservatives, and Rhona Brankin, then education spokeswoman for Scottish Labour, agreed that an independent consultant should be appointed to advise all parties on the matter before any further discussion took place. This was something of a volte-face for the Scottish Tories. Just a few years earlier, they had been vociferous in their opposition to student contributions.

ÖйúAƬ

There was even a suggestion that it was time for a "comprehensive independent review" of funding. This came from Anthony Cohen, former principal of Queen Margaret University, in an article in The Scotsman titled "Only certainty is change for funding universities".

Brian Sloan, professor of the built environment and director of research and knowledge transfer at Edinburgh Napier University, is an advocate of free education, but he admits that "this seems increasingly untenable in the present economic climate".

Even the NUS Scotland is coming round to the notion. Its president, Liam Burns, says the union is now officially open to discussion about a graduate tax after a motion passed at its last conference.

"We're willing to look at the idea," he explains. "We have said for quite a while that the review down south is going to have implications for Scotland. It's not in our interests to not have well-funded institutions. If we leave this too long, we will end up with top-up fees - and that becomes a sensationalised debate. Our policy has always been that a progressive taxation system should pay for education, but other forms of graduate contributions are something we will consider."

Unfortunately, he says, the issue has been shrouded in a "conspiracy of silence". The sector must face up to the question of how to ensure sustainable funding and start discussions before the 2011 Scottish parliamentary elections.

"There has to be a tangible promise to students at the next election," Burns says. "You can't take on a four-year mandate without being clear on how you get more money into students' pockets and deliver a sustainable sector. That will put the pressure on the government to start the debate. Although nobody wants to be the first, there will come a point where it becomes clear that we can't stick our heads in the sand when it comes to funding, or we're going to end up in a position where ... our universities are left far behind."

With regard to comparisons with the English sector, it is not just on the bottom line that universities could suffer if student contributions remain off limits. Davena Rankin, commercial manager at Glasgow Caledonian University and Conservative candidate for Glasgow South, fears a brain drain of the best Scottish academics to a better resourced sector south of the border.

"I think there is a growing problem. In the past, what we have seen is that our academics have gone overseas for a year or two but come back to this country. With the way funding is going, they may not come back at all."

Rankin believes there is already a funding gap between Scottish and English universities, and that this will only widen if politicians and policymakers do not grasp the nettle.

"Universities throughout Scotland are losing staff. The ones that are left behind are going to have to do more. Academics have always traditionally been mobile creatures. It's quite easy to move a research team from one university to another. I think that will increase. A few academics I know, who are some of Scotland's brightest minds from a research point of view, are thinking of leaving."

If they and others like them were to depart, Rankin says, Scotland would suffer. "It's a problem for our institutions, but it also affects the Scottish economy. If we lose our best researchers and our research standing falls, it becomes harder to recruit overseas students. Then they'll have even less money, and that problem just perpetuates itself. We also lose important local contacts, valuable connections with industry."

When Scotland threw out fees in 2000, just two years after the Blair government introduced them, it was hoped that the move would lead to wider participation. Yet data from the Scottish Funding Council released last year indicate that participation rates have remained much the same throughout the past decade, and the abolition of fees cannot be shown to have had any impact at all.

In fact, figures from the ÖйúAƬ Statistics Agency, presented to an Edinburgh conference last year by Jim Gallacher, emeritus professor of lifelong learning at Glasgow Caledonian University, demonstrate that Scotland has only a 26 per cent participation rate from the poorest social groups, compared with 30 per cent in England and 41 per cent in Northern Ireland. Free ÖйúAƬ for all has done little to improve social mobility in Scotland so far, according to these statistics.

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The advocates of tuition fees, or at least some form of student or graduate contribution, are building a compelling case. It is unclear how much truth there is in the claim that Scotland is, and will increasingly remain, underfunded when compared with England. Although it seems intuitive, there is debate over whether English tuition fees have proved the "cash bonanza" universities had hoped. In fact, the Browne review has already found that fees have done nothing to reduce ÖйúAƬ's demands on the public purse in England.

To find out where they stand, the Tripartite Advisory Group, a body comprising the Scottish Government, the SFC and Universities Scotland, undertook in March this year to examine whether the funding of Scottish universities remained competitive with others, especially those in England.

A spokesman for Universities Scotland says universities are "reconciled to the likelihood that the outcome of that work is unlikely to show the apocalyptic gap in funding between Scotland and England that some previously predicted".

He continues: "Universities in Scotland had most of their funding protected in the Scottish Budget, and so we are not facing the real-terms cuts others in the UK will face this year. We are now working hard to build a case for further protection of that funding in the 2010 Spending Review."

Two documents from Universities Scotland, Making Every Penny Count and Paying Dividends, indicate that in terms of value for money, Scottish universities do as well as the best US institutions with the funding they receive, especially when it comes to academic productivity and knowledge transfer. Even without top-up fees, some estimates, including that of Universities Scotland, suggest that Scottish universities are up to 4 per cent better funded than their English counterparts (although others suggest they are up to 4 per cent worse off).

A recent report on schooling by the Centre for Public Policy for Regions (CPPR), a collaborative research initiative established by Strathclyde University and the University of Glasgow, concluded that the Scottish education budget could be cut by more than ?600 million without adversely affecting service provision for schooling. This indicates that there is still a surplus in the public funding system.

Public funding for universities in Scotland is still on the up. Some fear that reintroducing tuition fees could lead to a devastating drop in investment levels. One ÖйúAƬ policy expert, who refused to be named because the issue is so sensitive, said English universities had "sold their soul" to the government for a meagre return through tuition fees. With Lord Mandelson now talking about degrees of two years - or even one - "anything is on the table", he says, stressing that Scottish universities do not wish to follow in their English counterparts' footsteps.

When Mark Batho was appointed chief executive of the SFC in 2008, he called for more research into Scotland's comparative financial position. "There are all sorts of claims and counterclaims about how good or bad the situation is, and different institutions have different views. We've got to get closer to an understanding of whether there is a differential, and if so, what it is."

This work is still under way, but the SFC has undertaken some modelling around the average cost of delivering an undergraduate degree. Tuition costs (money passed to the university by the SFC) for 2009-10 looked like this: a high-rate undergraduate degree costs ?1,820 a year; lower rate ?1,285 a year; medical degree ?2,895 a year. THE understands that Universities Scotland is privately accepting that it will be necessary to look at alternative models for funding.

With the left-leaning SNP in government, it is no surprise that ideological opposition to tuition fees is still a powerful force in Scotland. Although job cuts across the sector are now a very real threat, the University and College Union Scotland remains resolutely committed to free education.

The union believes that Cubie's calls for a greater student contribution to the cost of university are "out of touch with the rest of the political consensus" in Scotland.

Nonetheless, it says, it may be time for a full review of university funding. Mary Senior, a UCU Scottish official, says: "While we would welcome a comprehensive review of ÖйúAƬ in Scotland, we are very clear that tuition fees, and other student or graduate contributions, impose prohibitive barriers that put many potential students off considering ÖйúAƬ. There is no political consensus in Scotland for the introduction of tuition fees, and we are pleased that the government has ruled out that possibility."

Times are changing, however, and the UCU cannot rely on an unwavering political consensus against student contributions. At the beginning of the year, Mike Russell, Scotland's education minister, told THE: "We have made it clear that access to ÖйúAƬ should be based on the ability to learn, and not the ability to pay. That's why fees are not on our agenda and why we announced ?30 million in additional funding to increase student income."

By last month, he had told the NUS Scotland conference that he ruled out tuition fees but admitted that he was now open to the idea of a graduate tax. It is clear that there has been a shift in thinking.

Russell has proposed a series of discussions with the sector to discuss the funding and student contributions. Although the timescale is unclear, the indications are that it will be mid-2011 before any decisions are taken.

Ultimately, this means that the real debate will be postponed until after the 2011 election. According to government statistics, there were 2,625 registered students in Scotland in 2009, more than 5 per cent of the total population. The student vote is strong, and all parties will fear making any bold statement about student contributions before polling day.

It is telling that the only principal willing to stick her head above the parapet is a personal advocate of free education. "As a German, at a personal level, I'm against fees because it was written in the German Constitution that education at all levels should be free," says Petra Wend, principal and vice-chancellor of Queen Margaret University. "However, given the financial realities facing the sector, we need to consider all options. Indeed, fees have now been partially introduced in Germany because it was realised that public funding is not enough any more to keep their universities competitive in the world."

No doubt the majority of more reticent university heads will publicly agree when the debate finally breaks the surface.

PAY, DON'T PAY: A SHORT HISTORY OF STUDENT CONTRIBUTION IN SCOTLAND

The history of student contribution in Scotland is complicated.

Tuition fees were scrapped by the Scottish government in 2000, two years after they were introduced by Tony Blair, then prime minister. This meant that university education was free for students in the country.

The following year, after an independent review led by Sir Andrew Cubie, the Scottish graduate endowment came into force. This required graduates to repay ?2,289 when their earnings reached ?15,000, and the money was redistributed to poorer students in the form of bursaries. Students became eligible to pay the endowment in April 2005, and about 70 per cent of them simply added it to their student loan book. This generated ?26.3 million in additional student debt.

But in 2008, Fiona Hyslop, who was education minister at the time, repealed the endowment and wrote off the debts of those students it had affected. "The government believes that access to education should be based on ability to learn and not on ability to pay," she said.

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"We also believe that opening up access to ÖйúAƬ for everyone - irrespective of their location, background or personal situation - is a key component of fully releasing the potential of Scotland's people."