What are a future Labour government’s options to secure the future of higher education?

I have no idea what a Labour government might do on higher education, and that’s at least in part because the Labour party doesn’t entirely yet know either.

That’s not necessarily a bad thing though. While democracy is great, the sort of broad-brush policies that tend to feature in General Election campaigns (I refer you to the debate over “low quality courses” that the Conservative Party is trying to make a thing, again) aren’t really suited to the complexities of the problems facing the sector.

But think about it this way: there is a bunch of things Labour would want to do in government around skills, growth, productivity, and opportunity – ie more of all of these. It’s simply impossible that you can make any of it happen without universities playing an active role. Labour is also acutely aware of the risk of one or more universities getting into financial trouble to the extent of being at the point of, or close to, insolvency and collapse. And as yet we don’t have a well-established proper way of managing the closure of a large provider, even if such a thing were desirable, so there’s a serious political calculation to make there as well.

So for an incoming Labour government there are questions of scale and questions of timing. It comes down to the tension between the structure of higher education and whether that’s fit for purpose now and into the future, and the possible options for funding it.

Business as usual

The first question is whether the fundamental business model is right for what the country needs. This was essentially Augar’s critique – too many expensive three-year full-time undergraduate courses in a demand-led system that drives increasing numbers in courses that have higher margins in delivery but perhaps are less focused on developing specific skill sets that might be useful.

To Augar’s assessment you might add the relative inefficiency of higher education provision with lots of small-ish institutions all with their own systems and processes, and the relative lack of coordination that arises when you have a competitive market – meaning that subject provision that was designed to flourish in conditions of relative stability is now expected to adapt to peaks and troughs in demand, with the consequence that entire subject areas appear at risk, and subject areas or forms of delivery that could align well with regional growth objectives may not be offered at all because the raw demand is not there.

There are lots of counter-arguments to make about the ongoing evidence of the returns to a degree; the buoyancy of demand for the traditional HE experience; the impossibility of perfect skills planning; the value of students studying broad-based subjects they are interested in; the extent to which universities have frequently shown themselves to be rather good at working in partnership their locality or region even without being obliged by policy to do so; and the general inadvisability of government trying to steer university activity in a micro-managing kind of way. So a fair conclusion would probably be that while there are some faults with the system a fundamental restructure isn’t necessarily what is needed right away, though there could absolutely be a case for initiating one in the not-too-distant future.

However, working up a plan for what changes might be made to higher education provision takes time, and requires detailed consultation and analysis to work out what you might want more of, what you might want less of, and how best it can all be structured and funded. And in the meantime there is no money to throw at the problem.

Keeping the lights on

So the next question is whether the HE system could be made sustainable in the short term within the current funding envelope. Alistair Jarvis has set out some thoughts on what government and universities could each do to move the HE funding discussion forward, starting with confirming the continuation of the Graduate route and Labour’s general support for international students – possibly on the condition of demonstrably responsible and sustainable recruitment practice. There could also be options around reducing costs for universities – though it is hard to see how this could realise the savings at the scale that would be required.

One further option for a Labour government would be to buy time and stabilise the sector by essentially throwing government support behind universities at risk of failure, that could reassure lenders. The downside of this approach is that the universities whose business models are in a state might not be incentivised to look for the optimisation options that could make them financially sustainable. OfS has made it clear that there are institutions whose financial strategy seems to be founded on hopes of something turning up, rather than a pragmatic assessment of what might be needed if the something didn’t actually materialise.

It might be that any public backing would need to be tied to something like the now defunct higher education restructuring regime that the Department for Education created during the pandemic – but the point of failure is a less than optimal place from which to enter into a discussion about restructuring, and depending on the scale of institutions affected could lead to some perverse outcomes at system level.

Labour could, of course, simply increase fees – which as well as being a very publicly unpopular choice would not address any of the structural or efficiency issues. Something the sector would welcome enormously would be a moderate injection of public funding tied to medium term diversification objectives – one vice chancellor recently observed to me that he has plenty of ambitions for novel delivery models but the funding margins being so tight make them impossible to deliver.

And in all of this, the financial challenges that students are facing are very much part of the picture – it would be very much against the grain for Labour to inject funding into universities without doing something on student maintenance – and actually, a more generous maintenance package would certainly help to shore up university recruitment by making the prospect of study a bit less daunting to those likely to struggle financially.

All of this suggests that there are no easy answers – and in fact, the most likely outcome will be in the great British tradition of muddling through. If and when it does come down to a major review of some kind though, it’s worth remembering that in complex situations grand narratives about the merits or otherwise of marketisation, the effectiveness or inefficiency of university provision, the importance of student demand versus the value of courses that meet regional skills needs, or indeed whether apprenticeships are better than traditional courses, won’t be helpful. The system is most likely to thrive if it’s able to accommodate a mixture of approaches – some government-directed with a degree of protections and coordination, some market-led. The UK HE sector has been able to thrive because of its diversity; trying to make it be all one thing is always a recipe for disaster.