Can higher education’s golden age of plenty continue?

The next five years will be worse for English universities than the past five years have been. And the five after that could be worse still.

Future-gazing is, of course, a pursuit for the deluded. But government commitments have clearly set universities on a road to fiscal stress and declining quality. And there is no sign that anyone in power recognises this.

For most of the country, the past five years were a time of declining or flat incomes; headlines reported cuts in benefits, social care, defence, public sector employment. But they were golden years for higher education, as the government’s favoured child.

Since 2010, tuition fees for home students, paid via the Student Loans Company, have soared in real value – and not just in total, but per student as well. The recurrent teaching grant, which provides direct support for teaching, has fallen as loans have cut in, but its value in real terms is still about half what it was in 2000, when student fees were just £1,000 a year.

Overall, government support for a “home” undergraduate – that’s any UK or other European Union student – has almost doubled in real terms since this century began. Of course, that includes the loan book, and student loans are meant to be repaid, back to the government. But it is increasingly clear that a very large part will never be repaid – a good half on current reckoning. So most of this is “real” government spending, as well as real money in the universities’ accounts.

Research council funding has more than doubled in real terms since 2006, with sharp rises in the past few years. Quality-related research funds have fallen in real terms, but only slightly. Overseas student numbers are only a little below their all-time highs.

These figures show that we have been uniquely favoured. Where can we go but down? They also and more importantly underline how totally universities still depend on the state. Overseas student fees are sometimes discussed as meaning that we could cut free. But it is the generous funding for science and the growing levels of support for home students that underpin English higher education’s global success.

Students everywhere go for the best they can afford, not the cheapest on offer, and rationally so. Students come to the UK, and pay high fees, in large part because of our reputation. High fees themselves signal quality – we’re expensive, therefore we’re good – but the signal needs to be plausible. You can’t carry on indefinitely if you are sinking in the global research tables or if your buildings are falling apart.

If the state is good to us, why worry? Because this system is being seriously destabilised.

Although per student funding has been rising in higher education, the opposite is true in all other forms of post-18 education. Further and adult education are dominated by courses offering cheap, low-level qualifications. In further education, average funding for a full-time student is about £2,200 a year. Technician (level 4/5) enrolments total only about 40,000. Meanwhile the 1.1 million full-time students in English universities are bringing in at least £9,000 a year apiece.

Why would anyone enter further education post-18 when they could go to university? In many countries, they do so because of the practical relevance of other institutions, their link to local labour markets, their use of practitioners to teach technical subjects, and synergies with apprenticeships. The English reality is simply that university places were capped, and, at a time of plenty, universities have not recruited aggressively among “non-traditional” students. So some tertiary-level students have gone elsewhere – if they could find anything good on offer in a cash-strapped sector.

But now two things are happening. First, the cap is off: higher education institutions can recruit as many students as they like, not just in England but EU-wide. And they will get £9,000 a year for each one. Second, funding for adult skills and further education is being slashed yet further as one of the few “unprotected” areas of government spending.

We can predict with confidence what will happen. Further education will seem even less attractive: why go somewhere funded at £2,000 a student when somewhere funded at £9,000 is wooing you? Universities will expand their intakes rapidly. The academic record of new entrants will be lower. As participation rates rise higher, the average salaries of graduates will fall and so will loan repayments.

How, in this situation, can real levels of government support possibly continue? Maintenance grants are already a casualty, replaced in last week’s Budget by loans for all. Can payments to the universities be far behind? We have, after all, been here before. The huge expansions of the 1980s and 1990s led to a halving of the real-terms amount spent per student. Last time we hauled ourselves back by introducing student fees. But this time? If the government has another trick up its sleeve, it certainly isn’t telling.

Baroness Wolf of Dulwich is professor of public sector management at King’s College London and author of the report Heading for the Precipice: Can Further and Higher Education Funding Policies Be Sustained?, published by the Policy Institute at King’s.