Gordon Brown is facing increasing demands to make a needs-based assessment of expenditure throughout the United Kingdom or risk feeding "the worm of separatism which is growing at the heart of the Union".

Following the Scottish Executive's decision to scrap fees for higher education on Wednesday, Lord Forsyth of Drumlean, a former Scottish secretary, warned last night that the present funding and voting arrangements at Westminster would fuel the growth of nationalism on both sides of the border unless urgent remedial action was taken.

Speaking at a parliamentary dinner to celebrate the Treaty of Union in its tercentenary year, Lord Forsyth accused the Scottish Executive of being deliberately provocative while urging the Chancellor, soon-to-be prime minister, to tackle the growing anomalies. To date the government has shown no enthusiasm for obviously revisiting the Barnett formula, preferring to let it wither on the vine, but that has not deterred its critics.

Lord Forsyth said: "The Nationalist Scottish Executive announced only yesterday that university education would be free in Scotland for Scottish, Italian, Spanish, French and all other EU students except that English and Welsh students would have to pay up to £2700 a year. This is highly provocative and intended to be so. The separatists were saying openly that if Scotland was independent the English could come for free too.

"The fact that Scotland receives an extra 20% per head in public expenditure compared to England has in the past been justified on the basis of need. A series of proposals for free higher education, care for the elderly and life saving and sight saving drugs which are not available on the NHS in England has made the case for a needs based assessment of expenditure throughout the UK unanswerable.

"Joel Barnett is right to call time on his formula and Gordon Brown is the man to do it. A failure to address these problems will feed the worm of separatism which is growing at the heart of the Union," he argued.

Lord Forsyth also took the opportunity to take a swipe at university leaders in Scotland, who may be prepared to criticise the Scottish Executive - past and present - in private for its position on tuition fees but have failed to make a row in public.

Fearing that Scottish universities will fall behind higher learning institutions in England and Wales, he said: "The silence of the university leadership in making these points, however unpopular, in public as opposed to in private, bodes ill for the future of these great institutions."