Budgets for colleges and universities should be allowed to fall but spending on primary and secondary education must be protected, Coopers amp; Lybrand, a leading management consultancy, has advised.
As arguments rage about reform of student support and the introduction of tuition fees, ministers are certain to draw comfort from the findings, which come in a study on European funding commissioned by the Educational Institute of Scotland and the National Union of Teachers.
The unions asked for an independent investigation but the results have proved less devastating than they probably anticipated. Britain comes out well in contrast to its European neighbours and between 1985 and 1992 Conservative administrations continued to boost overall spending. The only serious gap is in pre-school education, now being addressed by Labour.
One of the key conclusions is that spending on higher education and vocational training has risen significantly due to rising participation rates. However, the report questions whether expansion should be at the expense of other sectors.
It contends: "From an equity perspective, there is a strong argument for primary and secondary level resources to be protected given that attendance is compulsory and the benefits are therefore more evenly distributed across society. By contrast, higher education is still consumed by the minority.
"From an educational perspective, there is plenty of evidence to suggest that inputs during the early learning years are critical to a child's capacity to succeed at the later stages. The implication is that any reduction in the quality or volume of primary and secondary education may reduce the capacity of students to benefit from higher education provision."
The consultants also emphasise the high levels of private finance that are injected into universities. "It therefore can be argued that there is more scope for cost-sharing in higher education than in the lower levels of the system. The implication is that in the context of scarce resources, higher education institutions are better placed to generate income through fees than schools."
The authors believe there is a case for school spending to be protected "either proportionately or absolutely" and acknowledge the sensitivity of their recommendation amid calls for the expansion of higher education.
In an equally controversial recommendation, they question the balance of funding between primary and secondary sectors. Some countries, including Ireland, say primary education generates at least as high a return as the traditionally better funded secondary sector. The authors urge more research.
Ronnie Smith, the EIS's general secretary, said: "They are tilting towards the view that you cannot look on it as a hierarchy. A lot of teachers would have sympathy with the view that if you do invest at the starting end of the process that greatly influences achievement further on through the system, but that requires examination and debate. "