Ahead of a potentially seismic general election in the UK, a new series of reports warn that higher education funding is at a “crossroads” across the four home nations.
London Economics hopes to help solve the “widespread lack of understanding” of the current state of funding across the devolved nations – from both political parties and the electorate – and assess a range of policy options.
The consultancy said that disagreement over how higher education is funded had resulted in significant political tensions across the UK since the 1990s.
Gavan Conlon, a partner at London Economics, told Times Higher Education that any increase to the frozen domestic tuition fees was seen as “anathema” to many voters, meaning there were significant political constraints on any policy changes.
In addition, he said, among both politicians and the general public there was a lack of understanding of the issue, which was so complicated “it should be a Mastermind topic”.
“What may sound like a good idea from a political viewpoint is not a good idea from an economics viewpoint,” said Dr Conlon.
The research project, which was funded by the Nuffield Foundation, found that, compared with the existing Exchequer cost of the system of £2 billion per cohort in England, cutting tuition fees by approximately one-third and increasing teaching grants would increase these costs by £3 billion. However, it would be richer graduates who saved money on loan repayments, the project found, with the poorest students being essentially unaffected because they are not expected to pay off their loans in full.
Increasing maintenance loans and extending eligibility for these loans would cost the Exchequer an additional £495 million, the project found. In contrast, reintroducing real interest rates would reduce the cost by approximately £2 billion, thus making the system cost-neutral for the Exchequer.
Dr Conlon said something had to change because universities were facing a “triple whammy” of issues – capped domestic fees, some international students being “choked off” because of greater restrictions, and other overseas students being put off by the UK becoming less attractive.
“A lot of institutions are financially right on the edge,” he said. “It will get to the point where some institutions will be forced to merge or collapse.
“If nothing is done to the fee cap, the alternative will be how much [ministers] are prepared to bail out an institution.”
Matters are complicated even more by the fact that the devolved nations have completely different systems.
The project says that the average Exchequer cost of the system per student in 2023-24 is around £1,630 in England – compared with £9,130 in Scotland, £3,780 in Wales and £4,810 in Northern Ireland.
In aggregate, it says, the Exchequer contributes approximately 16 per cent of the total cost of higher education provision per cohort in England. By contrast, Scotland has an Exchequer contribution of 113 per cent, with students effectively paid to attend higher education, 44 per cent in Wales, and 51 per cent in Northern Ireland.
Maike Halterbeck, divisional director at London Economics, said the issue of funding was a “totemic” one in Scotland, and it was important elsewhere.
“Scotland is very unsustainable – it has the worst budget since devolution, and I think Wales is very similar. They’re both very much at breaking point in terms of financial sustainability,” she added.
“For some home nations there is no ‘do nothing’ option.”
With a UK general election looming, devolved ones to follow in Scotland and Wales, and a newly reformed executive in Northern Ireland, it is hoped that the report will help avoid some of the “unintended, but often deeply problematic, consequences” of past political decisions.
“Higher education funding is at a crossroads in all four home nations of the United Kingdom,” it concludes.
“The lack of economic growth has resulted in limited government budgets, which in turn has resulted in a widely acknowledged underfunding of higher education – both for institutions and students.”
