Skip to content
The UK's only independent think tank devoted to higher education.

The Importance of a Differentiated Sector

  • 11 February 2022
  • By Saskia Loer Hansen and David Phoenix

This blog was kindly contributed by Saskia Loer Hansen, Interim Vice-Chancellor and Chief Executive of Aston University, and Professor David Phoenix, Vice-Chancellor of London South Bank University and Chief Executive of LSBU Group.

While it was a disappointment that higher education funding was left out of the autumn budget, it was also to be expected. Since the Augar review was published in spring 2019, the Government has repeatedly deferred a substantive statement on the future direction of higher education funding. In the interim, with tuition fees frozen for their fifth consecutive year and inflation reaching 5.4 per cent, the need for fresh thinking on university funding is pressing.

Hopes are now pinned on a potential Higher Education White Paper, which might set out a clear vision of how the Government sees the future of tertiary education and how the Lifelong Loan Entitlement agenda might play into delivering a sustainable funding solution for higher education.

It is easy to get bogged down in the minutiae of the policy detail as universities rightly crave answers to many questions, but we would argue that it is also time to take a step back, and to assess the shape and diversity of the sector in which we operate. We contend that there is real value in having a truly differentiated sector, and that greater differentiation may also be the key to unlocking some of the funding and quality questions with which the Government has been grappling. 

What do we mean by this? One of the major drawbacks of our current higher education funding model is that it drives homogenisation. Universities are seeking to be better at the same things while potentially losing touch with their origins, locations and the purposes for which they were each created.

Technical education is a prime example of our point. Numerous governments have enacted policies to create technical institutions through the foundation of the Redbrick institutions, colleges of advanced technology and two separate waves of polytechnics. Although many of these universities of technology have maintained the technical provision for which they were founded, funding incentives have pushed them to become more ‘comprehensive’, broadening their portfolios beyond their original purpose. The Dearing Report acknowledged this issue back in 1997, stating that:

We heard from those who lead and work in the institutions that they consider that current funding arrangements are tending to promote homogeneity, and that institutions, whilst autonomous, are increasingly making similar choices in response to the range of funding options available to them. We were told that … institutions perceive no explicit financial reward or incentive for pursuing a distinctive mission …

The financial disincentive to specialise (aside from those few specialist institutions which receive additional funding to do so), has, if anything, grown over the last two and a half decades. One of the consequences of the 2012 fee reforms was that the levels of funding for most courses were equalised, regardless of how much they cost to deliver. While the Government provides a top-up grant for high-cost STEM subjects, it often fails to cover the full cost of their delivery. Analysis by the Russell Group has shown that lab-based subjects, such as Chemistry, Physics and Engineering, faced average deficits of £1,848 per student per year in 2019 to 2020. This often results in the need for internal cross-subsidies and can provide real disincentives for expanding STEM provision.

Significant attention has been paid to quality, standards and value for money in recent years, but the question of specialisation has rarely been touched upon. While it would not be appropriate for every institution to specialise, it feels equally inappropriate to have a funding system which prevents those universities that wish to have a narrower focus in some areas, in order to truly excel in others, from doing so. 

Inevitably, once institutions depend on this ‘balanced portfolio’, there is a risk that when income is reduced, for example through standstill tuition fees, then the balance shifts away from those technical subjects the Government claims to support. 

In its new Levelling Up White Paper, the Government rightly recognises the important role that both technical education and HE institutions have in supporting regional economies. In addition to maintaining their previous commitment to open ‘nine new Institutes of Technology with strong employer links … to boost higher technical skills in STEM subjects’, one of a handful of proposals in the White Paper concerning new funding is £100 million of investment in three new Innovation Accelerators to support the adoption of research by allied industries (exactly the sort of applied R&D that universities of technology undertake). But if the Government truly wants ‘technical skills provision to better meet local labour market needs’, they will need to put their money where their mouth is. They must provide universities which have long histories of delivering technical skills with the funding they need to maintain and grow their technical provision, rather than drive them, through underinvestment, to water down a core offer that is their raison d’être, and which can be at the heart of thriving business and a more productive UK economy.

Get our updates via email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Leave a Reply

Your email address will not be published. Required fields are marked *