What can be done to address the funding crisis facing universities?

Little has thus far been said by those in power about the dire situation gripping the UK’s higher education sector. Sean O’Grady looks at what the government is, and isn’t, doing to protect these institutions in the light of the part they play in sustaining a healthy economy

Academics have warned of the threat to higher education institutions if the number of overseas students falls (PA)

Two independent reports and a letter to the prime minister this week have highlighted the severe challenges facing Britain’s universities – with potentially major political consequences. Earlier this week, in answer to a request from the home secretary James Cleverly, the Migration Advisory Committee said that in fact there is no widespread evidence that a post-study visa awarded to international students is being “abused” (such behaviour is often cited as a reason for cutting the number of visas issued to foreign students and their families, despite the loss of income for the universities affected).

That was followed up by an open letter to the prime minister from the chief executives of Rio Tinto, Siemens and Anglo American, saying that curbs on overseas student numbers threaten investment in the UK. And the Office for Students has now echoed the warnings from some academics that a number of universities will have to cope with substantial cuts to their activities, or mergers, or even “a material risk of closure” over the coming years. Yet, despite the central place in national life that universities now hold, the coming crisis has hardly featured in political debate.

What’s the problem?

Money, mainly. For example, for most UK universities outside the financial elite of Glasgow, Edinburgh, Cambridge, Oxford, the London colleges, Manchester and Warwick, the fees that come from an increasing number of overseas students (eg Chinese students seeking an MBA) are the only way that they can absorb inflation, make up for a lack of funds from the Treasury, subsidise tuition for British undergraduates, and pay for research activities. If the number of foreign student visas and the concomitant fee income are to fall, then some places will find themselves insolvent.

Do the universities matter?

Yes. First, despite some flaws in the system, they represent a considerable investment in the human capital of the nation, boosting long-term productivity and prosperity. Ireland and Finland, two nations with relatively little in the way of natural resources, have demonstrated how a national focus on education can transform the living standards of society as a whole and not just the graduates. British universities are also a major export earner, which is good for everyone.

A healthy higher education sector remains crucial to maintaining a civilised society, and for Britain’s future as a technologically advanced economy – they are engines for invention and innovation in new fields such as AI and biotech. The prestige of British universities is an important component of the UK’s “soft power”: the foreign students who spend their formative years in Britain may go on to be political, business or military leaders in their own countries.

It’s also true that many of the new universities have played an important role in “levelling up” their communities, mitigating the loss of youthful talent to London, and generating well-paid jobs. For the towns and cities in question, the closure of their universities would be devastating.

What is the government doing to help?

Not that much, and the language has been getting hostile. In practical terms, the ministerial drive to reduce immigration and the number of overseas student visas issued has the inevitable effect of damaging these institutions’ incomes and their business model. The fees paid by foreign students are used to subsidise the tuition of “home” students and to support research activities.

Higher and further education has also become another battleground in our ceaseless “culture wars”, with the prime minister and the education secretary, Gillian Keegan, sneering at what they regard as places offering “rip-off” courses that lead to poor-quality degrees and qualifications that are “not worth the paper they’re written on”. As a result, the Office for Students will be limiting courses with high dropout rates and poor employment prospects.

Most UK universities outside the few that comprise the financial elite are dependent on fees from overseas students (PA)

The emphasis on post-school learning is being tilted towards further education, more vocational courses, training and apprenticeships. According to Keegan, who was once an apprentice herself: “There are too many universities offering poor courses that don’t help people get well-paid jobs or offer skills that are needed in the real world.”

Neither Keegan nor Rishi Sunak has directly addressed the growing financial problems facing the sector.

What does Labour say?

Not much. In his leadership campaign, Keir Starmer pledged to scrap university tuition fees, but a year ago he dropped that because of the “difficult financial situation”. He says the present system is “unfair and ineffective”, but has only committed to as yet unspecified reform: “We do need to change that, and we will come up with a fairer package for students that helps them with the money they have to outlay.”

What happened to the 50 per cent target?

The idea of getting half of the country’s under-30s into higher education was proposed by Tony Blair in 1999, and the figure was achieved in about 2018. Since then, the admittedly arbitrary aim has come under criticism from the right, and in 2020 the then education secretary, Gavin Williamson, effectively ditched it, albeit when it was a bit too late to make much difference.

Williamson “weaponised” what should be a matter of objective economic judgement and created another culture war, stoking up a bit of class resentment: “I don’t accept this absurd mantra, that if you are not part of the 50 per cent of the young people who go to university, you’ve somehow come up short. You have become one of the forgotten 50 per cent who choose another path. It exasperates me that there is still an inbuilt snobbishness about higher [education] being somehow better than further, when really, they are both just different paths to fulfilling and skilled employment.”

Successive governments of both parties used to be proud of expanding the universities, and the proportion of young people who attend them has steadily risen from about one in 20 six decades ago to about half now. The Wilson and Heath administrations founded new universities, John Major upgraded the polytechnics, and New Labour oversaw the introduction of yet more new institutions, sometimes developing out of colleges of further education or as new campus extensions of older institutions.

What are the electoral politics of the universities crisis?

The financial crunch will probably arrive after the next general election, and only then will the issue move dramatically to centre stage. Plainly the present situation is not sustainable, but none of the parties want to dwell on that fact. Neither, in truth, have they come up with any quick or easy answers, and there’s a kind of conspiracy of silence as a result.

If universities were to shut down in, say, the smaller cities and towns where they once offered some hope of regeneration, the (presumably) Labour government would suffer the political fallout – but it will also be vulnerable if student “immigrant” numbers remain high. One logical way out of this would be to formally recognise that most students leave the UK not that long after their studies end, meaning that most students can be removed from the immigration statistics.

Keir Starmer previously pledged to scrap university tuition fees but has now abandoned that promise (Getty)

Some other, highly problematic courses of action would include attacking the wages and pensions of university staff; allowing the more prestigious universities more freedom to set variable (and very expensive) fees; relaxing the process around student and postgraduate visas; and “federalising” some universities across regions, potentially reducing costs. (Relaxing visa restrictions on Indian students would also make it far easier to strike a free trade deal with Delhi).

Restricting access to higher education in a society that has come to expect it as a right would have dire electoral consequences for any party that loudly advocated such a move. The Conservatives currently have an astonishingly low share of the vote among 18- to 24-year-olds – 6 per cent to Labour’s 60 per cent, according to the latest YouGov poll. While that may merely mean that they have nothing to lose in regard to this age group, any party that proposes to be properly representative, and is looking to its future, ought to be doing better than that.

One wildcard in this debate would be if Labour, in power, lowered the voting age to 16, with reassurances about university access. That might yield a useful electoral bonus for Starmer, and he has said he is a “big believer” in votes at 16... but needless to say, that will not be the case if he finds himself closing universities down, sacking the lecturers, and reducing student opportunities.