Higher Education: Financial Pressures

Lord Davies of Brixton Excerpts

Thursday 30th March 2023 Lords Chamber

[Lord Davies of Brixton (Lab)]

My Lords, central to this debate is the failure to invest enough in our higher education system. Consequently, we have to restrict the number of domestic students relative to the number of those from abroad, because universities lose money on domestic students. In other words, UK universities are supporting the nation’s science and further education ambitions through the income that they receive from international fees. This is inherently an unpredictable and risky platform on which to provide a higher education system.

There are more particular problems. The noble Baroness, Lady Garden, referred to the uncertainties surrounding the Turing scheme. This particularly affects students from disadvantaged backgrounds, who are particularly vulnerable to this uncertainty. Universities face myriad funding pressures in pursuing their mission and sustaining academic excellence, but having fees frozen at £9,250—which, as my noble friend has already explained, in real terms is now equivalent to only £6,500—means that they simply do not have the money to cover the cost of courses, in particular the cost of STEM subjects. The fact that student fees have been stuck at this level for some years, for the reasons that we understand, coupled with inflation, mission creep—additional responsibilities being placed on institutions—the pressure from industrial action, and so on, means that universities are experiencing a damaging squeeze on their finances. Coupled with the cost of living crisis, the lack of resources means that that there is inevitable damage to the important objectives of increasing social mobility and local community engagement. This is despite universities’ regulatory requirements to spend part of their tuition fee income on widening participation.

There is a growing risk to social mobility if, for pragmatic reasons, universities have to make hard decisions to recruit fewer domestic students relative to international students or have to spread their limited bursary and hardship funds over a thinner entry. The ability of universities to collaborate with local government and third-sector partners is also being strained, in large part by the budgetary pressures on would-be partners, particularly in deprived communities with lower social resilience capacity, during this cost of living crisis.

Turning to research and innovation, there are intense funding challenges on universities in sustaining their infrastructure and talent pools. The challenge that we face is that virtually all forms of research run as a loss-making activity that must be supported by teaching and, in turn, as has been explained by myself and other speakers, that is dependent on overseas students. Having an internationalised learning community brings immense cultural and academic benefits to campuses, but there are systematic risks of universities becoming overly dependent on particular countries’ markets at a time of rising geopolitical tension and geostrategic competition. The risks are clear. For example, if relations with China were to deteriorate, we would be in a very challenging position. Does the department have a plan to cope with this situation if we hit such problems?

Sir Paul Nurse’s recent review recommended increases in the full economic cost recovery provided by competitively allocated research grants and an uplift in the block grant QR funding. He also highlighted underlying issues with the precarity of early career research pathways that are in large part a corollary of short-termism in the way public funding works, leading to pressure and stress on those involved.

As the Financial Times has reported, universities are having difficulties in the initial phase of the Turing scheme, with shortfalls in expected annual allocations and delayed payments, in some cases leading to places not being taken up. The inability of universities to provide certainty about funding to students only compounds the problems for those from more disadvantaged backgrounds, undermining their willingness and ability to pursue opportunities.

Finally, it is vital to a world-class UK research and innovation endeavour that the UK enjoys broad access to Horizon Europe. The real prize here is not access to the funding pool, but the huge, collaborative multiplier benefits of working with leading scientists and researchers across Europe and leading on multi-country researcher consortium bids. As the House will be aware, British universities have already experienced challenges in recruiting world-class researchers because of the enduring climate of uncertainty over participation. It is not just Horizon that has given problems; the sudden withdrawal from collaborative research funded by the Official Development Assistance programme two years ago also hit the UK’s reputation. As has been pointed out recently in the Times Higher Education supplement, much of the damage, coupled with the broader effects of Brexit, has already been done and will be hard to recover from. Nevertheless, a return to Horizon in a timely and efficient manner is vital to the UK’s ability to attract and retain leading British and global research talent and investment.