New reports shed light on differences in higher education fees and funding systems across the UK

As part of a research project funded by the Nuffield Foundation ahead of the next general election, London Economics have undertaken a range of in-depth analyses in relation to higher education fees and funding arrangements across the four parts of the United Kingdom. The Higher Education Policy Institute (www.hepi.ac.uk) is working with London Economics and the Nuffield Foundation to publicise the results, including on a series of discussion events around the UK (more details below).

Disagreement over how higher education is funded has resulted in significant political tensions across the UK since the 1990s. Most major political parties have made significant manifesto commitments at successive elections or following unsuccessful electoral campaigns. This year looks set to be no different.

There is a widespread lack of understanding of higher education funding systems. As a result, many election pledges or post-election system amendments have been poorly thought through, and there have been significant unintended and adverse impacts on different groups of students and graduates.

Higher education is a devolved matter. As a result, there are fundamental differences between the four home nations in their approaches to funding higher education institutions (HEIs) and students. Given these differences, the unit of resource available to institutions, the overall costs to the Exchequer, students’ debt on graduation and graduate loan repayments and the balance of contribution between the Exchequer and students/graduates all vary markedly across the home nations.

• In England, the average Exchequer cost of the system per student in 2023/24 stands at only approximately £1,630. This compares to £9,130 in Scotland, £3,780 in Wales, and £4,810 in Northern Ireland.
• English HEIs receive approximately £10,220 in net income per student, while Scottish universities accrue 23% less (£7,870). The corresponding levels of net HEI income per student stand at £9,290 in Wales (9% less than in England), and £7,620 in Northern Ireland (this is the lowest level across the four home nations, and approximately 25% less than in England).
• In aggregate, the Exchequer contributes approximately 16% of the total cost of higher education provision per cohort in England, while students/graduates contribute the remaining 84%. This compares to an Exchequer contribution of 113% in Scotland (ie students are effectively paid to attend higher education), 44% in Wales and 51% in Northern Ireland.

Dr Gavan Conlon, Partner at London Economics, said:

In a general election year, all political parties are considering how to approach the issue of higher education fees and funding. The challenge is that the economics doesn’t always align with the politics. Universities are generally underfunded, but increasing the tuition fee is electorally challenging. Raising maintenance support is critical, but expensive.

Political parties across the home nations really need to better understand how their funding systems operate so that the consequences of any manifesto commitments are fully understood.

Dr Emily Tanner, Programme Head for Post 14 Education and Skills at the Nuffield Foundation, said:

London Economics’ analysis is supported by the Nuffield Foundation as part of a wider programme to inform policy, pledges and public debate in the run-up to the general election. Today’s report provides an invaluable resource for understanding how the fees and funding systems compare across the UK and what explains the difference.

Maike Halterbeck, Divisional Director at London Economics, said:

There are huge differences in how higher education is funded across the home nations. While a lot of the debate has been focused on England, this is the first time this type of analysis has been undertaken for all home nations. The effects of changes in each system can be counter-intuitive – what looks good on paper can have the opposite effect in reality – so it is essential that policy makers across the UK make evidence-based decisions based on a proper understanding of how higher education funding work.

The reports associated with the research project are available here: https://londoneconomics.co.uk/blog/publication/general-election-briefings-examination-of-higher-education-fees-and-funding-across-the-uk/. They cover:

• a short cross-country comparison
• ENGLAND: a slidepack on current fees & funding arrangements, alongside three alternative scenarios: lower fees and higher teaching grants; more generous maintenance loans; and the reintroduction of real interest rates on student loans
• SCOTLAND: a slidepack on fees & funding arrangements, alongside three alternative scenarios: the use of tuition fees; more generous maintenance support; and the introduction of real interest rates on student loans
• WALES: a slidepack on fees & funding arrangements, alongside three alternative scenarios: higher fees; faster uprating of the earnings threshold for loan repayments; and reduction of real student loan interest rates
• NORTHERN IRELAND: a slidepack on fees & funding arrangements, alongside three alternative scenarios: higher fees and lower teaching grants; more generous maintenance loans; and the introduction of real interest rates on student loans

Notes for Editors

1. As part of this work, the Higher Education Policy Institute (www.hepi.ac.uk) is working with London Economics and the Nuffield Foundation to host four free in-person events on the research in each of the four home nations: London event (28 February 2024 2pm); Belfast event (1 March 2024 1pm); Edinburgh event (4 March 2024 2pm); and Cardiff event (6 March 2024 2pm).
2. London Economics is one of Europe’s leading specialist economics and policy consultancies. With a dedicated division of professional economists specialised in education and labour markets, we have unparalleled experience across the education sector. As a result of our independence and the quality of the analysis we undertake, we are considered sector experts, and often deliver economic insight to key policy makers and stakeholders. Our experience covers a wide spectrum of clients – including UK central Government Departments and Non-Departmental Public Bodies, Devolved Governments, university Mission Groups, university and college membership associations, think tanks, unions, individual higher education and further education institutions, and regulators. For more information, visit londoneconomics.co.uk.
3. London Economics gratefully acknowledge the support of the Nuffield Foundation(Grant FR-24390), which is funding this project. The Nuffield Foundation is an independent charitable trust with a mission to advance social well-being. It funds research that informs social policy, primarily in Education, Welfare, and Justice. It also funds student programmes that provide opportunities for young people to develop skills in quantitative and scientific methods. The Nuffield Foundation is the founder and co-funder of the Nuffield Council on Bioethics, the Ada Lovelace Institute, and the Nuffield Family Justice Observatory. The Foundation has funded this project, but the views expressed are those of the authors and not necessarily the Foundation. Visit www.nuffieldfoundation.org. Additional information in respect of the scope of the Nuffield Foundation funded project are available here: https://londoneconomics.co.uk/wp-content/uploads/2023/08/LE-Nuffield-Foundation-Examination-of-HE-Fees-and-Funding-Summary-Overview-14-08-2023-Web.pdf