Could regulatory changes address years of financial trouble in the sector?

So, universities are facing a financial crisis.

It’s not exactly news to those who work in or follow the fortunes of the higher education sector. As far back as 2020 there was a chunk of well informed discourse, and even a list of thirteen providers in imminent danger of collapse doing the rounds – but the fundamental issues were visible in the years prior to that.

The lived experience, too, is widespread and familiar. Staff are being offered voluntary redundancy ahead of compulsory redundancy, restructuring and course closures are everywhere, terms and conditions are worsening, and the quality of experience offered to students is becoming increasingly variable. The sector has lived this story for five years.

Because of the way that the sector is structured, there are some providers with a historic financial and reputational strength that will allow them to ride out this crisis. This is not to say, as was seriously suggested just over a year ago, that the sector is “swimming in cash” or that analysis that pointed to what we are now agreed is the true picture was flawed.

Jo Grady, the general secretary of the University and College Union, spent much of 2022 and 2023 making similar arguments in the media. Her position now is that:

Anything short of an emergency rescue package for the sector will be insufficient to stave off catastrophe

We are to hope she raised these points, drawing on her organisations’ new position, when she met ministers and officials last week.

Likewise, the Office for Students has moved gently from a broad confidence in the sector’s financial position, to pushing for structural change to limit the risk of provider collapse. The HESA open data speaks as eloquently and as clearly as ever.

It is worth reminding ourselves of the “perfect storm” of financial pressure facing the sector:

• Fee caps have been frozen since 2017 in England, and have remained so during a period of very high inflation
• These inflationary pressures have greatly increased the cost of doing business – pushing up the costs of consumables, maintenance, and other running costs
• The cost of pension provision has risen, particular among the providers required to participate in the Teachers’ Pension Scheme
• Providers have stepped in to support students with hardship payments and mental health provision, in both cases in the absence of national funding to do so
• Students themselves are struggling to support their learning with a student loan system, that – in England – remains largely unchanged since 2012, and does not reflect the true cost of living and studying
• International student recruitment – the growth of which has sustained both home teaching and research – has begun to fall due to changes in visa policy for students and their dependants.

These issues have been widely understood for years by the higher education sector. There is no new crisis, there is a continuing crisis.

On the Today programme on Monday morning, the Secretary of State for Education – Bridget Phillipson – said she had been working with officials to find a way to shore up the sector:

I am determined to deliver a brighter future for our universities, to secure them in terms of their finances into the future

Initial steps to be announced later this week will deal with regulation, specifically the Office for Students, but there are no firm plans for a cash injection. Phillipson noted the responsibilities of autonomous bodies like universities to manage their own finances, and committed to retaining the graduate route. However she batted back the idea of the government being a lender of last resort.

We can expect an interim chair for OfS, and there were hints that previous work (I wonder about the Data Reduction Task Force and the parallel work on burden) would be taken forward.

Other than that, we’d be in the realms of guesswork. It is possible, for instance, that a ministerial letter of direction to the regulator could give it a new duty to preserve the (subject and regional) breadth of the sector – this would counteract earlier messaging about no bailouts and market exit being a part of a healthy sector, and may make for cheaper external finance.

It is possible there could be further work on regulatory burden – perhaps a pause in forthcoming new requirements around freedom of speech and international funding, or the widely-expected delay to the lifelong learning entitlement – but these are unlikely to generate specific short term savings. It is also possible to imagine a sudden change in government priorities for funding (a little under £1.5bn), and revised allocations that could selectively support key parts of the sector that are at risk. More broadly, we are expecting key secondary legislation on fee limits – which would include a cut to classroom-based foundation provision fees alongside some more LLE underpinnings.

We’ll only know for certain when information is released to the house – it feels likely that this will come alongside the Common’s discussion of King’s Speech measures covering education and skills on Wednesday. If you are hoping for a magic wand, you will be disappointed, but we will learn a lot from what we do get.