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Higher Education

Background

Since 1998 fees have been introduced and increased in English universities. As real terms government funding has declined precipitously, funding for universities via student fees has taken on increasing importance.

In England the 2019/20 government funding for university teaching was an astonishing 74% below the 2011/12 figure in real terms. While in Scotland, real terms Scottish Government funding for universities fell by 12% between 2010 and 2017.

As fee income has increased so universities’ funding models have become ever more reliant on overseas students, who pay higher fees. Universities have also increased “efficiency ratios” – packing in more students to lectures and seminars to lower relative costs.

Currently there are around 1.8 million undergraduates studying in the UK, of whom more than 400,000 are overseas students. Undergraduate students from outside the UK can be charged annual tuition fees of over £50,000 instead of £9,250 for UK-based students.

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The free market model in universities has seen students laden with debt and pay, ratios between senior university managers and frontline staff widen, and the increasing casualisation and outsourcing of university staff. Around one-third of academic staff who are now on fixed term contracts, rising to 42% among BAME academic staff. While many university workers are paid at the minimum wage, vice chancellors’ pay continues to rise, with the highest paid receiving £830,000 per year.

As in secondary education, this marketisation has led to increasing institutionalised and administratively draining regulation, e.g. Research Excellence Framework, Teaching Excellence Framework, and the National Student Survey. In recent years the proportion of university resources devoted to regulatory compliance has skyrocketed, this in turn has degraded the working life of university sector staff.

The funding model is fundamentally broken since a large percentage of student debt is never going to be paid back. According to the Institute for Fiscal Studies, 83% of post-2017 students will have some of their student fees debt written off and the government will be left with 45% of the cost.

Currently the UK spends less than other major economies on publicly funded research, and far less than the 3% of GDP on research and development that Labour pledged in 2015.

The level of economic resilience in UK universities varies greatly. Some have large reserves and legacies from wealthy alumni, while others do not.

Impact of the pandemic

The coronavirus has thrown the UK’s higher education funding model into disarray. It is estimated that universities will be hit by a £2.6 billion shortfall in the 2020/21 academic year as a result of the coronavirus pandemic’s impact, according to analysis for the University and College Union (UCU).

The Institute for Fiscal Studies estimates the sector could lose anywhere between 7.5% to 50% of its yearly income over the next four years.

The loss of income is twofold – some domestic and overseas students deferring their studies for a year, in the hope that universities will be back to normal by September 2021 with face-to-face lectures, seminars and tutorials. But there is also evidence that overseas students in particular will choose to study elsewhere because of the ongoing pandemic in the UK, which could permanently reduce the flow of overseas students.

The former creates a temporary financial pressure in the next academic year, whereas the latter causes a pipeline effect whereby universities lose three years of income.

International students are less likely to come to UK in September due to the ongoing restrictions and comparably worse handling of the coronavirus pandemic (US universities expect a similar drop in overseas applications, due to the similarly incompetent handling of the pandemic by the US government).

In addition to the loss of income from student fees, universities also faced lost income from student accommodation and on-site catering (hence the desire to have students back on campus, especially after the request for a Government bailout was rejected), and conference venue hire.

The Government has provided some limited financial assistance to universities to help with cashflow. The 2020/21 estimated £2.6bn of tuition fee income has been brought forward, as has a relatively insignificant £100 million of research funding will be brought forward. Universities are also able access the Treasury's support for businesses disrupted by coronavirus, which the Government claims is worth another £700 million in loans.

However, the Government has also been clear to the Education Select Committee that government bailouts for institutions are “very much a last resort scenario”, and that they would come with “conditions attached”.

Higher education minister, Michelle Donelan MP, has also talked about “restructuring” the sector, saying: “we’ve let far too many students down by pushing and promoting courses that don’t have that value, don’t lead to those graduate outcomes and jobs. But at the same time, get them into tens of thousands of debt, which I just don’t think is good enough.”

It appears the minister’s solution is not to cut the debt, but to cut courses and restrict access, as she added: “We don’t necessarily want everybody to go to university. That was very much the essence of the Secretary of State’s speech last week…. there’s been too much emphasis on getting students to the door of universities.”

Students have lost a term and a half of their tuition and some are out of pocket due to term-time rental accommodation in which they have not resided. Living in halls has become more expensive, as universities seek to increase margins, and more students are forced to live at home through a combination of rising living costs, declining support and fear of debt.

Deferring studies for a year at a time of rising unemployment and fewer job opportunities will not offer the same advantages as it otherwise could. As well as the loss of income for universities, deferring students are unlikely to be able to accrue savings as previous cohorts of undergraduates have done.

There are also concerns that some universities may have face bankruptcy or seek to merge with neighbouring institutions. This risks reducing university places in the short and medium term, potentially denying opportunity to thousands of young people, as well as resulting in job losses.

Post-pandemic solutions

The most important outcome will be to reclaim education as a right and a social good, essential for cultural, technological, scientific progress. This means the Government taking a more active and strategic role, and rejecting the prevailing market orthodoxy.

In many towns and cities, universities are major employers – anchor institutions that provide jobs for academics, administrators, librarians, technicians, security guards, cleaners, caterers and more – as well as supporting jobs in the local retail economy.

Neither students nor the economy can afford for market failure letting institutions collapse and educational opportunities vanish. Instead, the government must see universities as a crucial part of the pipeline for a skilled economy and a healthy and educated society. Any credible industrial strategy needs a co-ordinated education and skills strategy, but this is currently lacking.

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The Government should also be seeking to increase research funding going to universities that fit with its core industrial strategy – whether that is in health and medical research, biotechnology or greening the economy.

As Alice Gast, president of Imperial College London has said, “We need as a society to support research. This crisis has made that very clear. It will cause us to reflect on how we support research.”

Universities and colleges can also play a vital role in providing retraining opportunities for those workers left unemployed, and especially for workers in industries hardest hit by the crisis. Free university education removes barriers to gaining skills (as well as personal and social enrichment) and encourages workers to improve their skills and retrain throughout their working life. Any social security system should be encouraging those out of work to engage with university education, training or apprenticeships that can improve job prospects. This requires joined up government implementing an integrated industrial strategy, rather than the anarchy and inefficiency of the market, which has failed in education and social security.

University workers should – like all workers – be guaranteed secure jobs on a living wage. The government should introduce pay rations in higher education – something recommended by the Government commissioned Will Hutton review in 2010.

Removing tuition fees and restoring maintenance grants (and restoring the Education Maintenance Allowance) will encourage students to stay on in education, and encourage adult learners to continue to develop their skills throughout their working lives.

As the UK gradually emerges from lockdown, it is clear that unemployment will be significantly higher, with many of the sectors in which students find part-time work during term-time badly hit, e.g. hospitality and retail. This will have a significant impact on students’ finances and risks increasing personal debt levels, and damaging mental health.

The failed free market experiment in higher education needs to end, and universities integrated into a co-ordinated industrial strategy that invests in university research capacity and trains generations of students and returning students in the industries of the future.

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