The Scottish coalition government has produced a miserly formula on student tuition fees that will divide UK students and create additional financial difficulties for many.

At present, students across the UK can borrow up to £3,635 a year to live on whilst they study. Under changes introduced by Blair, many now also have to pay annual tuition fees of £1,000.

Tuition fees are deeply unpopular. During the 1999 Scottish elections the Liberal Democrats campaigned on a platform of abolishing them in Scotland. A Labour-Liberal Democrat coalition government was only assembled after the two parties agreed to refer the matter to a parliamentary committee.

The establishment of the “Cubie Committee” was framed by the need to preserve the coalition by giving the Liberal Democrats some measure that could be interpreted as the abolition of tuition fees. At the same time, the Labour government was anxious that this be restricted to Scotland.

Consequently, the Cubie report recommended that half the fees should be abolished for students from Scotland studying anywhere in the UK. Non-Scottish students studying in Scotland will have to pay in full. It further proposed that fees should be replaced by a “graduate contribution” that would recoup the cash when a graduate attained an annual income of £25,000. Bursaries of up to £4,000 a year would be available for the poorest students.

The final deal has technically abolished upfront fees, but it in no way alleviates the overall financial burden. Although the graduate contribution has been reduced from £3,075 to £2,050, the earnings threshold at which this will be clawed back has been slashed from £25,000 to £10,000. Grants for the poorest students have been reduced to £2,000, none of which will be available to students from families with a household income of more than £23,000. The whole package will cost the government around £50 million.

This will effectively discourage poorer Scottish students from studying outside Scotland, where they will face full tuition fees. It ensures that student debt repayments will begin almost as soon as a graduate begins full time work.

The vice-chancellor of Newcastle University in England, which is attended by many Scottish students, complained that the measure would lead to Scotland "becoming more parochial."

A spokeswoman for the Association of University Teachers said, "The wide range of courses available across UK institutions are simply not available in the dozen or so Scottish institutions, but students will be keen to go there because of the financial benefits."

The president of Edinburgh University Students' Association, explained that students taking out a full loan and studying for four years would leave university £16,000 in debt. In addition, they would have to pay back £2,000 for their Graduate Endowment making a total of £18,000 to be repaid, even if they were on an income of £10,000.

George Lyon, education spokesman for the Liberal Democrats, claimed that "it is a generous package and the tuition fees will be gone completely for all students in Scotland."

Labour was more circumspect. It had previously made it known that whilst it would accept the Scottish Executive developing its own solution to the fees issue, any extra spending would have to come out of existing Scottish budgets, and should not impinge on arrangements for the rest of the UK. This is in line with Labour's overall perspective for devolution. Regions should be allowed to cut and re-organise social spending in accordance with economic needs, provided the overall budget, set by central government is not exceeded.

Defending regional divisions, Scottish First Minister Donald Dewar noted that the deal was a "neat and good interface with the rest of the United Kingdom." Tuition fees could not be abolished for Scottish students over the whole of the UK, Labour claimed, because the European Convention on Human Rights would lead to European students studying at English universities taking the government to court, because their Scottish counterparts at the same universities were clearly better off.

Labour neglected to explain why English students studying at Scottish universities could not legitimately raise the same objection of regional discrimination, or indeed why the whole measure should not be thrown out on the same grounds.

Underlying Labour's smokescreen is the need to head off a unified push by students for better conditions. On Thursday January 27, students attending the School of Oriental and African studies in central London occupied one of the university buildings. The students demanded that the school stop collecting tuition fees, cease the expulsion of those unable to pay, and that the institution lobby the government demanding an end to fees. There have been a series of similar occupations across English universities.