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The threat to higher education quality from underfunding imperils the entire Scottish economy, the Committee of Scottish Higher Education Principals has warned.

COSHEP has made a submission to the Scottish Office Education Department as part of the higher education review initiated by Gillian Shephard, Secretary of State for Education, having won an assurance that English ministers will not take decisions about the future of Scottish higher education.

John Arbuthnott, convener of COSHEP, said: "We wish to get across the message that higher education is at the heart of, and is indivisible from, the economic prosperity as well as the cultural and material well-being of Scotland."

It contributed to the country's impressive track record in attracting inward investment, and was respected internationally for its quality, which the current Government funding strategy would undermine, he said. Extra resources were needed, and student support should be repaid through National Insurance.

COSHEP said that the combination of higher public esteem of tertiary education and a broad and flexible education system had led to higher participation rates in Scotland than in England. Since student demand showed no sign of slackening it was folly for the Government to continue its present consolidation policy.

COSHEP proposes measured growth rather than a dash for expansion, given cumulative funding cuts of per cent between 1989/90 and 1994/95, with the prospect of a further 9 per cent cut by 1997/98.