What Budget 2017 means for universities

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The Chancellor, Philip Hammond took to the Commons chamber today to deliver what has been dubbed the ‘last ever Spring Budget’ (last until some time in the future when another enterprising occupant of Number 11 changes it back).

In addition to the Budget itself, we have also been treated to the usual slew of additional document – the detailed workings out – and the parallel judgement of the Office for Budget Responsibility.

While many of today’s major announcements on education were trailed in the press over the past few days, including funding from new free schools and the deployment of T-levels, there are some interesting points of detail to note.

Universities and schools

Education is firmly back on the agenda as Theresa May appears to determined to push through her (and Nick Timothy’s) agenda with respect to expanding selective education through grammar schools, with reiteration of the £50m per year announced in the Autumn Statement.

Universities will now be facing potentially difficult decisions as to which schools to sponsor, and exactly the mechanism which suits them best, and is compliant with the new expectations. There may be opportunities to grab a slice of the £320m announced for new Free Schools. While there appears to be no let up in the pressure to sponsor or establish schools yet, we still haven’t resolved the questions of whether this will support school-level attainment, widening participation or even improve school management. And the policy has proceeded apace in spite of a lack of response to the Schools that work for everyone consultation.

Skills, skills, skills

A renewed focus on technical education has also emerged, with the government looking to introduce T-levels, to sit alongside A-levels. These technical qualifications are – in theory – to achieve parity of esteem with A-levels. For the plan to work, there needs to be more than just rebranding and reorganising qualifications; without effective information, advice and guidance, or meaningful employer engagement the plans will be empty words. Read more on the challenges for delivering the Sainsbury Review plans here.

The Chancellor has also guaranteed the introduction of further education maintenance loans for students who go onto higher level (FHEQ 4-6) technical education, which means an expansion of the student loan book. But the loans only extend to a small number of institutions – National Colleges and Institutes of Technology – so it’s unclear how useful this proposal will be in practice.

Loans for part time postgraduates and doctoral students

Loans for part-time undergraduates and doctoral students have also been announced, which may redress the eye-watering fall in the number of part-time students entering higher education. Originally announced in 2015, the part-time undergraduate maintenance loans won’t now be available to distance learners until 2019-20. There’s also an ominous statement that: “the Government has told that us it intends to reduce the level of support for distance learners, but the precise extent of that reduction has not been settled.” The government has now published its consultation analysis on the part-time loans and an equality analysis outlining expectations that it would increase participation.

While doctoral loans were previously announced in the Budget 2016, the government has now confirmed the loans will come into action, and provide up to £25,000 for doctoral study, with a repayment rate of 6% for those earning over £21,000 – which has been revised down from the initial proposal of 9%. Total contributions for students with an undergraduate, master’s, and doctoral loan will be capped at a 15% contribution deducted from annual earnings. There has also been an equality analysis published here, as well as the government’s consultation response, and an external analysis of consultation responses. The loans will come into effect in Spring/Summer 2018, ready for the application cycle.

Meanwhile, DfE has been awarded £40 million in funding to spend up to 2018/19 to develop pilots on new approaches to lifelong learning – a welcome measure for the sector and a positive step for putting lifelong learning higher up the HE agenda.

Research funding

While the £300m in funds had already been announced for science and innovation, the allocation of this funding for 1,000 new PhD places and fellowships for STEM subjects will be welcomed. £50m of the National Productivity Investment Fund (NPIF, one to add to the pronunciations guide) funding will be specifically ring-fenced for fellowship programmes to attract global talent, and international scholars will be able to access over £50m from existing international funds for fellowships that attract researchers to the UK from emerging research powerhouses like India, China, Brazil and Mexico.

Funding has had a boost – in some areas – with funding of £270m confirmed for biotech, robotics, and driverless vehicles, an area that the government is looking to seize on as it attempts to become a leader in the field post-Brexit.

Elsewhere, the review of the R&D tax regime announced in the Industrial Strategy Green Paper has led to some very minor tweaks to the Research and Development Expenditure Credit.

No news for business rates

There’s little of substance for universities with respect to business rates – while Hammond has unveiled measures to support smaller businesses and pubs, this will have little impact for the higher education sector.

Sterling and inflation figures

One area that may help fend off concerns over EU student migration is the news that the pound remains at a relatively low level. Students could take advantage of this while there seems little recovery in sight for the pound – and in the meantime, current students will be getting more for their money.

However, volatility in the pound also means that inflation – both actual and projected – will have significant implications for tuition fees. Assuming that future fee levels continue to be based upon the OBR’s March RPIX projections, the top level of tuition fees for the 2018-19 academic year will be £9546 (perhaps rounded to £9550). This is based on 3.2% increase on the £9250 fees for the 2017-18 academic year.

An important side note is that the 2017-18 fees, based upon OBR projections made a year ago, are based on a 2.8% RPIX increase. Today’s OBR projections for that figure are now 4%, showing just how much the Brexit-induced volatility in inflation will cost universities (roughly £110 per student).

The main Budget documents can be found here and the OBR’s fiscal and economic forecasts can be found here.

2 thoughts on “What Budget 2017 means for universities”

  1. Brian says:

    Would you mind pointing out where the RPI-X forecasts can be found? I can’t see RPI-X anywhere in the OBR documents.

    1. David Morris says:

      Hi Brian – RPIX is in the ‘supplementary economic tables’, table 1.7. http://budgetresponsibility.org.uk/efo/economic-fiscal-outlook-march-2017/

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