Higher Education: Financial Pressures

Baroness Warwick of Undercliffe Excerpts

Thursday 30th March 2023 Lords Chamber

[Baroness Warwick of Undercliffe (Lab)]

My Lords, like others I pay tribute to my noble friend Lord Knight for securing this timely debate. It is quite clear from it that a great deal is expected of our higher education institutions: excellence above all, in teaching and research, and certainly in providing students with a life-changing experience. Successive Governments have also wanted them to be engines for economic growth, to provide the skills needed for the economy, to be leaders and stimulators of innovation and a means of social mobility by widening access to opportunities for graduate jobs, to be anchors in their communities, and to be flexible in their response to changing needs while embracing new technologies, among lots of other things.

Not all can respond to all these demands and one of the hallmarks of the UK system is its variety. However, to provide all of these things and more, financial security is essential. To maintain what everyone agrees is our worldwide reputation for excellence, stability in policy-making, as well as resourcing, is fundamental. Universities UK has listed some of the sector’s achievements, as noble Lords have in this debate. They are certainly impressive: its £95 billion contribution to the economy; its outstanding international reputation for teaching, as we are the third most popular destination for international students globally; its excellent teaching and world-leading research. This debate has forced us to ask: are we in danger of throwing away this hard-won international reputation for excellence?

In a 2022 report on the financial sustainability of the HE sector, the House of Commons Public Accounts Committee expressed concern that the proportion of providers with an in-year deficit has increased in each of the last four years—from 5% to 32% in 2019-20, and that number is expected to increase. Fees are a key factor. They have been stagnant, with the £9,250 headline fee for English universities now worth £6,585 to them. The fee income available in Scotland, Wales and Northern Ireland is even lower. Yet England and Wales also have the highest domestic undergraduate fees in the OECD, including the semi-privatised US system. Looking at our international competitors, the UK has the lowest share of public funding in tertiary education among OECD member countries.

English universities have, so far, managed shrinking income

“through sensible and prudent financial management”,

according to the Office for Students. Part of this has come from generating income from other streams—particularly, although not exclusively, recruiting international students. It is clear, however, that under increased funding pressure and rising costs, as UUK has said, universities will be faced with

“compromises in teaching or research, damaging our hard-won international reputation and putting pressure on students and staff.”

This of course compounds other pressures on students. Just as the cost of living crisis is hitting students, their maintenance package in England is at its lowest value in seven years. Students are now also eligible for much lower maintenance loans than when the system was first designed. Under recent changes, more students will repay their full loan than under the 2012 system, with the highest earners paying less than before and low and middle earners paying more. On research, the HE sector provides the skills, talents and facilities that drive the UK’s capabilities in science and technology, yet without long-term and stable investment the UK is bound to fall behind.

Universities are having to use teaching funding to shore up a lack of investment in research, or to reduce or stop research activity altogether. Our universities generate growth and opportunity across the UK. They bring jobs, investment and facilities to our local communities, as we have heard right across this House, and they will be at the heart of addressing economic and social disparities. Yet increasing financial pressures are affecting universities’ capacity to engage.

I sit on the board of Nottingham Trent University, which has made superb efforts to maintain its financial stability. While the finances of some universities are stable in the short term, that cannot last. As this debate has made clear, many are now facing huge financial pressures, which will not be addressed without impacting significantly on the student experience and the capacity to undertake research and innovation. Many are located in the very communities where students need the most support to acquire the skills they need, and where companies most need research and innovation to grow. Given the long-standing freeze of fees for home undergraduate students, most universities are relying on increased international student numbers to deal with inflationary pressures, and any moves to restrict these would have a further major impact on the viability of the sector. Can the Minister confirm the Government’s commitment to both the graduate visa route—a real attraction to international students—and the international education strategy?

All these factors need to be addressed if universities are to be able to respond to the positive steps the Government are taking—for example, the lifelong loan entitlement, which could transform the adult education landscape in England. I hope the Minister can give the sector some reassurance that its excellence is valued, and that they recognise the vital importance of long-term investment.