The other inflationary funding trap

The arguments against increasing student fees to fund providers are politically robust

David Kernohan is Deputy Editor of Wonkhe

However much providers are struggling with a multi-year real terms cut in the spending power of fee income, it is not the easiest argument to make that we should be balancing this deficit on young graduates.

The recent changes to fee loan repayments mean, that in repayment terms, fees have just risen sharply during a cost of living crisis – though the complexity of England’s fee loan system have largely hidden this.

However providers also get a small but meaningful income from the (yes!) funding council, the Office for Students. The vestigial recurrent funding covers the high-cost subject allocations, the specialist provider funding stream, and the student access and success funding that used to be linked to access and participation work but has now largely considered as a way to top up student hardship funds.

In all, 2023 saw £1.3bn of funding allocated this way. As a way of contextualising this, we could imagine this as an allocation of £1,011.05 per UK-domiciled undergraduate first degree student – though this seems counter-intuitive, the allocations are not ringfenced despite the use of particular students (defined by subject and characteristics) as factors within funding calculations.

The trouble is, in 2018, the total allocation was £1.2bn – and a similar calculation yields a per student figure (again UK-domiciled, undergraduate, first degree) of £1,054.43. So, on this admittedly very broad metric, we can see that the unit of resource has not only failed to keep place with inflation – it has actually dropped in real terms.

We could argue that parts of this are due to a change in student demographics or study choices. We could note the increasing importance of postgraduate taught students(although it’s been a good while since I’ve seen OfS think about PG students), or a change in targeting.

But the fact remains that the mechanism that was meant to round of the disparity between a single needs-blind fee and the varied costs of provision (by subject, by demographic, by provider type) has not kept pace with inflation or provider needs. Given the declining contribution to the fee loan – it fees worth asking for a part of the Plan 5 treasury windfall to return to the sector via the funding council.

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