- This blog was kindly authored for HEPI by John Raftery, Principal of John Raftery and Associates and former Vice-Chancellor at the University of Wolverhampton and London Metropolitan University.
English universities are, by many measures, consistently among the very best in the world, outperforming most if not all other competitors. For example, take the pace at which the English population can acquire higher education and skills. Bachelor’s degree completions in the UK after 4 years are 72%, against an international average of 39%. Many of the UK’s competitors have systems of higher education where the time taken to achieve a Bachelor’s level is much slower, which itself is a problem for them. The UK is world-leading in the time to completion and graduation into the skilled workforce.
Yet, public discussion of universities is predominantly ungenerous, mostly critical and based on perceptions quite removed from the international reality. This Summer for example, rather than highlight the internationally competitive successes of English HE, the UK Prime Minister instead chose to highlight so-called ‘rip-off degrees’ offered by institutions predominantly focused on providing higher education to citizens of modest means, from neighbourhoods characterised by relative poverty. That’s a group of institutions and voters one would have thought the politicians would want to cherish not criticize!
The complex interactions among globalization, global imbalances, and a dangerously fragile financial system have been framed and analysed by Martin Wolf using his three ideas of shifts, shocks and fragility. To what extent can ‘shifts, shocks and fragility’ be useful concepts in thinking about the conditions in which English universities find themselves in 2023; how they got to this place; and what might lie ahead?
The last 25 years have seen a series of shifts in fees charged to students, regulation and the ceding of student number controls from Government. The cumulative effect of this is to move English universities assertively to a ‘marketised’, demand-led sector. The facts are these:
- In 1998 the Blair Government shifted responsibility for payments from public to private and introduced the £1000 pa fee which had to be paid upfront.
- In 2006 the fee increased to £3000 but was to be paid after graduation and was accompanied by a loan.
- In 2012 the fee was increased to £9000 and in 2017 to £9250. As fees from students went up, Government funding to universities went down.
- The Dearing report in 1997 had acknowledged that both state and individuals benefit from higher education and both should bear some of the cost and risk, (as should employers in Dearing’s view). These shifts amount to a slow transfer of costs from the state to the individual. It has been argued (Nick Barr and Simon Marginson) that this shift has gone too far towards the individual.
- A new, more distant, and permanently dissatisfied, regulator, the ‘Office for Students’ was set up in 2017 with no apparent understanding of the internationally outstanding performance of English HE. It was a clear indication of the shift in direction in education policy when the preparations for the new regulatory approach involved consultations, not with the universities but with the Competition and Markets Authority (CMA) and the National Audit Office.
The shifts of the last 25 years have also resulted in some startling and progressive advances. The chances of an 18-year-old from an under-represented neighbourhood in England going to university have increased by over two thirds between 2012 and 2021. The power of the student voice has been amplified. The totemic target of 50% of 18-year-olds getting higher education was passed in 2019. The HE ‘system’ across the UK has grown in scale by about 50%, from graduating some 600,000 students each year in 2003 to over 900,000 in 2022.
There is unarguably better public information about the outcomes for students and universities, including, but not limited to: the National Student Survey (NSS); The Teaching Evaluation Framework (TEF); the Graduate Outcomes Survey (GOS); and the Research Evaluation Framework (REF).
More system shock than shift, the removal in 2016 of student number controls imposed by government or funding council is leading to structural change in the system as higher tariff institutions grow unfettered save by the limitations of fixed fees per capita domestic student. Lower tariff institutions producing maximal social value-added are struggling to maintain numbers and in turn solvency in the face of student decisions to ‘trade up’ the brand of the university they attend. The English Government at the time had been very clear about its priorities in HE for ‘Choice’ and ‘Competition’. One of the other consequences was a change in the pattern of demand as the proportion of older (over 25) students entering part-time fell by 65% between 2008/9 and 2019/20.
Repeated, unfunded increases in pension costs outside the control of the HEIs, gave rise to unplanned, multi-million-pound additions to payroll costs entirely outside of the control of Chief Finance Officers, VCs, and the Boards responsible for steering universities, but with no apparent benefits being felt by the staff dealing with many years of below inflation pay awards.
The Brexit referendum result in 2016 followed by the UK’s departure from the EU in January 2020, led to a drastic fall in the number of EU students, a closing of access to appropriately funded EU schemes for research and economic development, and the need to terminate the positions of many staff previously funded through such means.
The Covid 19 Pandemic of 2020-23 was sudden, intense and consequential. By 2023 most higher-tariff selecting univerisites were, financially at least, back to a new normal while the inequality, poverty and strains in poorer communities caused the pandemic to cast a longer shadow. Many, if not most, universities still struggle to find consistent, effective approaches for hybrid working and teaching.
Students entering British universities in 2023 will pay annual fees of £9,250 until they graduate in 2026 – some 14 years after the £9,000 fee was introduced. By how much will a university’s costs have increased in that time? I have so far failed to come up with a similar example from any other industry or organisation.
In 2021, a third of UK HEIs – in one of the most successful HE systems in the world – returned an in-year deficit. There is significant deterioration of financial resilience for a growing proportion of English universities. Some HEIs have sought to overcome this fragility by substituting higher-paying international students for price-fixed domestic students.
Are English universities on a sustainable course?
For a long time, people have been saying, ‘this cannot continue’, but it did, and here we are. This time it really does seem different:
- Unhappy students, feeling overburdened by the costs of studying a university course (not only the fees but the whole cost of living, including rent);
- Unhappy students from the most deprived families, whose maintenance grants were abolished in 2015 by the Conservative government;
- Unhappy staff, feeling, with some justification, under-rewarded after many years of below- inflation pay raises;
- Unhappy universities, facing their 11th straight year of fixed fee levels for domestic undergraduates while their payroll and costs have increased by over 40% and many face genuine financial challenge;
- Unhappy taxpayers who see continual public media and political criticism of value for money in universities and the now 40 years of repayments to be made by their sons and daughters;
- An unhappy government that appears to be using universities as part of a culture war, seemingly unaware of how good the English HE system really is at delivering a highly skilled population ready for the jobs of the future.
What is to be done? Let us accept there is no pain-free, cost-free, risk-free way forward. Both government and opposition are avoiding the pain, cost and risk leaving us to the fate promised by extrapolation. Absent the magical appearance of ‘new money’ or any significant change of policy, the only realistic ‘best guess’ about the medium-term future is that it will be an extrapolation of the unhappy present.
Inequalities at birth and in early experiences become embedded in children’s lives with negative consequences for individuals and society. Tony Blair’s Sure Start was an early victim of the Osborne/Cameron austerity and Labour is surely right in 2023 to emphasise early years, as there is overwhelming global evidence of its benefits. In HE though, its reluctance to make spending commitments, while politically pragmatic, carries a heavy cost, limiting the possibility for desperately needed changes to the university landscape. It is delusional on a grand scale to expect to achieve the abundance of educated citizenry necessary to compete in the modern world without a healthy thriving higher education sector.
First, get our own house in order.
Universities in England have become more insecure than at any time in living memory. Bold, prioritised decisions are urgently needed which focus on moving resources to where they make the most difference. However, at this time when, in the words of a senior member of the civil service, schools are “literally about to fall on childrens’ heads”, it is important that universities themselves do not fall into impotent victimhood. While it is indisputable that the funding system for English higher education is not only unfit for the future, it is also unfit for the present, posing an existential threat to some institutions. It is easy to forget that universities and their VCs are not without some agency. The signalling from Government to universities could not be more clear. A spokesperson from the Department for Education was quoted on May 31 in this article on the unsustainability of university funding saying
“universities are independent from government. This means that universities decide their business models and oversee issues such as admissions, staff recruitment and pay.”
Prudent universities will continue to maximise, diversify, and de-risk their international student income and, for example, build global online business, but these steps alone are unlikely to be sufficient in the medium term. So, in this continuing and worsening situation, and in the absence of any material change in the funding base, it is the clear responsibility of some institutions to urgently design and seek Council/ Governance approval for alternative business models and staff contracts.
What, realistically, could be done for students and for universities?
First, it would be wise not to repeat mistakes made elsewhere. We are not alone, most big HE systems face something similar. The US, exceptional as in so many areas, has a different problem which we should also take care to avoid. Loan debt has become a big political issue now influencing decisions about whether to enter higher education.
For students in Britain, more than half of whom are forced to work while they study, what would make the most immediate difference is to increase the amount they can borrow in maintenance loans. Access to increased loan amounts would help students with the least means to survive while they work and study. Restoration of maintenance grants (not loans) to 2015 levels, for those who need them, updated and subject to a means test, would help the poorest and would be my policy preference.
For the universities that have limited options to increase their institutional income, what is needed most is permission to charge full cost recovery undergraduate fees. The government of 2013 was perfectly aware of this, which is why they set the fee at £9,000 then. Ten years later that fee at £9,250 is worth about £6,000 and undergraduate programmes are currently operating at a significant loss, causing financial insecurity for universities. The only options universities have to combat this are either to increase institutional income from international students and Postgraduate taught courses, or to cheapen undergraduate programmes and face the negative consequences. Low tariff institutions have little option but to do the latter. Over time this means poorer, more disadvantaged students will be channelled to institutions who can offer only what can be provided for the £6,000 pa equivalent current value of that capped fee. Given that these universities want to, and are obliged to, pay their staff living wages and completive salaries, the only thing that can be changed is to reduce the amount of staff time given to teaching on the programmes.
Lower tariff students, perfectly capable of higher education, who arguably need more support, will instead receive less.
Is this an ‘unintended consequence’, or could it be a policy intention? As we enter 2024, the country faces a desperate shortage of public figures and politicians with the courage to be honest with each other, and with the public, about the perverse outcomes of public policy on higher education. The longer the denialism goes on, the greater will be the work of repair.
Martin Wolf, (2015) The shifts and the shocks: What we’ve learned -and have still to learn- from the financial crisis, Penguin.
 Michael Shattock (2023) University Governance reformed: The transformation from a ‘self-governed’ to a ‘regulated university system, in HEPI, Report 161, pp 55-64.
 Mark Corver (2023) in his insightful, data rich essay, The perennial challenges of funding undergraduate higher education, in HEPI Report, 161, pp 65-70.
 This has the obvious disadvantage of increasing graduate indebtedness, but its impact is attenuated by repayment periods over 30 or 40 years and waivers could be put in place for nationally vital but lower paid public service professions such as teachers, social workers and others.