The responses are now in for the Department for Education’s consultations on higher education reform and lifelong loan entitlement – including proposals for minimum loan eligibility requirements and student number controls.
Although the overall funding envelope for universities wasn’t up for consultation, the Russell Group and others across the sector took the opportunity to voice and evidence concerns about government decisions that will inevitably start to undermine the future quality and international competitiveness of teaching and research.
Even before the decision to freeze tuition fees until 2024-25, teaching domestic students in universities had shifted from universities breaking even to making a loss, and deficits were already projected to increase. In 2021, analysis from the Office for Students found that the funding for teaching per full-time equivalent student (FTE) in England had declined by 19.3 per cent since 2018-19. Frozen fees but without a corresponding rise in the grant funding government provides to the sector, alongside a growing number of students, are all factors.
We don’t believe that the government is unsympathetic (or unaware) of these funding challenges. In fact, in the HE reform consultation DfE acknowledges the need to build a more sustainable system for students, institutions, and taxpayers. Despite this, and notwithstanding the welcome HE investment announcements accompanying the consultation document, the changes represented real term cuts for funding.
Our analysis shows that with tuition fees frozen for another two years until 2025 – at a time when cost pressures are multiplying – the average deficit universities in England would incur for teaching each undergraduate student would increase from £1,750 in 2021-22 to approximately £4,000 in 2024-25, with all subjects continuing to face deficits in some form.
While the government’s £750m investment over the next three years is welcome, it will be stretched pretty thin. The £450m capital pot is a continuation of existing annual capital funding, so the new money is actually more like a £300m uplift to the strategic priorities grant.
However, this will not cover the increased deficit pressures. Those working in arts and humanities subjects are likely to be particularly concerned as the government’s guidance for how the funding should be spent for the year ahead makes clear much of this additional investment should be focused on the highest-cost courses such as medicine, chemistry, and engineering.
In response to increasing deficits, universities will continue to be flexible, work more efficiently where possible, and look for new ways to generate other income. But like many other organisations – and most individuals – in this climate, university finances are being stretched and they are running out of levers to pull to make the numbers add up.
Erosion of quality
Without further support, the decline in the unit of resource will inevitably start to impact on the quality of teaching and learning in the longer term. Depending on the structure and priorities of the university, each will respond in different ways. Across the sector we risk seeing increases in class sizes, lower staff: student ratios, reduced investment in practical teaching, infrastructure, support services, and/or reduced intake onto courses with the largest deficits which are often STEM subjects.
Where budgets can be shifted around to cover the increasing deficits in teaching, universities will have less money to support other activities such as funding research supporting their students, their local communities and delivering on wider government ambitions. Without sustainable funding for teaching, it will be hard to justify the more ambitious spend we’d want to see on new government initiatives such as supporting raising attainment in schools or expanding modular provision through the lifelong loan entitlement.
Ultimately, the main degree of freedom universities have for covering teaching deficits is additional income they may be able to secure from teaching international students. However, it is not as if universities haven’t thought of this already; and with the world heading into some difficult economic, social and geopolitical head winds, a significant UK expansion in the international HE market may prove a challenge.
We understand the problems the government faces in managing the public purse and appreciate the need to focus on supporting the UK population. Looking to the future, we are hopeful for an opportunity to put the sector on a more sustainable footing, recognising the high quality and value of teaching and research at UK universities, and the importance of maintaining our international competitiveness as a strategic asset for the nation.
We are expecting a new funding settlement in two years’ time – post the next general election. But we urge the sector to come together now to support the government, and if possible garner cross-party support, to develop a funding formula from 2024-25 that will be fair to students and allow universities and the government to maintain the quality of Britain’s higher education sector.