What’s in the Budget for universities and research?

Though by any standards Rishi Sunak's first Budget was full of spending promises, the main financial levels affecting higher education remained untouched.

The Westminster government’s conclusion of the Review of Post 18 Fees and Funding (the “major review”), which would incorporate the long-awaited response to Augar will take place alongside the spending review - which will now be in the summer. As expected, fee caps remain at their current levels for 2020-21 entry - offering some stability for providers in a very complex world.

Universities will already be concerned about the impact both Brexit and coronavirus Covid-19 will have on international recruitment. But one measure in the budget will make that recruitment a little bit harder - the premium paid by international students for access to the NHS will rise from £300 to £470 a year. There’s a rise too for those coming to the UK to work - EU nationals will now be liable to a charge of £620 per year per person for using the NHS.

Research funding

There was one piece of specific news for (some) providers - an investment of £80m over 5 years in world-leading specialist institutions - with the London School of Hygiene and Tropical Medicine, the Royal College of Art, and the Institute of Cancer Research specifically mentioned.

It was generally accepted that we would see the most action in research funding - and with investment rising to £22bn each year the measures announced by Rishi Sunak amount to the largest year on year growth on record. Funding will grow by 15 per cent next year.

Full detail will be announced at this summer’s spending review - but we were offered the following glimpses:

• £200m for life sciences research
• £900m for nuclear fusion, space sciences, and electric vehicles
• £300m for experimental mathematical research
• £800m for carbon capture and storage
• £800m to the much-discussed UK ARPA - a “blue skies” project-based funding agency as trailed in the 2019 funding round announcement
• £400m to high-quality research outside of the “golden triangle” of Oxford, Cambridge, and London - covering research, infrastructure, and equipment.

The cost of loans

We’ve been following the government’s attempts to sell pre-2012 (income contingent) loan books for a while now - and buried in the Budget “Red Book” we spotted that there will be no further sales. If you’ve been following the story carefully you’ll recall that a review published at the last budget concluded such sales (at markedly below the face value of the loan book) represent good value for money, so to see it unambiguously stated that the government had decided not to pursue further such sales based on this advice was unexpected to say the least.

Interest on student loans is calculated using a formula involving the Retail Price Index (RPI). This is a largely discredited measure of inflation, and currently runs about a percentage point higher than the consumer price index (CPIH) more commonly used. The government has launched a consultation about technical changes to RPI to bring it more closely in line with CPIH (using, for example, the same source data) - all of which could represent a considerable lifetime saving on graduate repayments.

Launched alongside the budget, the Office for Budgetary Responsibility (OBR) March forecast offers some changes to the way students loans are estimated. The rise in loan take-up and a reduced likelihood of repayment adds £1.3bn to capital spending by 2013-24, with the number of eligible students adding a further £1.6bn (this due to the addition of more students at alternative providers). Interest rate changes repayments push receipts down £0.2bn a year on average, with the reduction in long-term average earning growth meaning capital spending (based on projected write-offs) will rise by an average of £0.4bn/year. We are, of course, still waiting for detail on finance availability for EU nations beyond 2021, so no changes to outlay here are factored into these forecasts.

VAT on digital publications

The big eye-catching announcement was on removing VAT from digital versions of books, newspapers, and academic journals by 1 December. Opportunistically described as a “reading tax”, this rate cut would kick in from the point the UK is projected to leave the European Union. There would be an effect on university library spending that is best described as complex - institutions do pay a lot of VAT on such publications, and even given progress towards open access publication this is likely to continue. However, that same progress means that spending on article processing charges are rising, and these continue to attract VAT.

There is, however, a clear benefit to students who choose to buy digital over hard copy textbooks, a small saving but something that cash-strapped students will welcome.

Covid-19

In reality, measures in the budget will be overshadowed by details of the government’s policy response to coronavirus Covid-19. There have been changes to Statutory Sick Pay (SSP) eligibility, meaning that it will be payable to all eligible individuals with a diagnosis from day 1, rather than day 4 of self-isolation. For SMEs (less than 250 employees) this will be recoverable from the government) There are roughly equivalent changes to benefits for those earning below the SSP earning limit (£118/week) and a £500m locally administered hardship fund for others affected. We’re still awaiting full details of these measures - but there is a clear impact on staff and students who work during their studies.