Higher Education Funding

Baroness Warwick of Undercliffe Excerpts

Thursday 12th September 2024 Lords Chamber

[Baroness Warwick of Undercliffe (Lab)]

My Lords, looked at objectively, the crisis facing universities seems inevitable, given that the two key elements of their income have been undermined. Government grants have been cut by 78% over the last 12 years, and the level of fees paid for tuition in 2012 has not been revalued since then, so inflation has reduced £9,000 to £5,942 in real value. It is scarcely surprising that the sector regulator expects at least 40% of providers to be in deficit this year. As the noble Lord, Lord Krebs, and others have highlighted, research excellence is also at risk, as the funding method for our universities’ world-class research has been undermined as well.

Fees from international students, who pay the full cost of their tuition, have been the mechanism for trying to bridge these ever-increasing gaps in funding, and this helped while the numbers remained buoyant. But the numbers are inherently unstable and subject to, among other things, political changes in immigration policy. The drop in numbers this year reinforces this. I hope that the Minister today will undertake to change the previous government rhetoric on international students to restore confidence that the UK will be an open and welcoming place for them.

Recent independent scenario-planning shows that a significant proportion of universities are vulnerable to reductions in international student numbers, increased expenditure, and reduction in growth of undergraduate students—what UUK has called “a perfect storm”. At the same time, it is important to recognise that students, too, have been directly hit. Frozen household income thresholds and inadequate maintenance increases mean that the maintenance loan falls £582 short of covering living costs every month. Pressures on staff are leading to demands for pay increases to mitigate rising living costs.

Universities have not yet sunk under these pressures. Most have introduced restructuring and efficiency programmes. Some very unpalatable course closures have been made, which will inevitably restrict student choice; estates are being neglected; and carbon reduction plans are stalled. This cannot continue without irreparable damage being done. I am glad to say that our Government have recognised this; they have said that they are committed to a sustainable funding model which supports high-value provision. They are not short of suggested approaches as to what that funding model should look like, including from Members of this House.

The Secretary of State has said that she intends to “reform the system overall”, which may be eminently sensible, but it will inevitably take some time, possibly considerable time. In the meantime, all the pressures on higher education will continue, to the detriment of students, institutions at risk, and

“powering opportunity and growth and meeting the skills needs of the country”,

to quote Minister Janet Daby.

I urge the Secretary of State urgently to talk to Universities UK to ensure that her longer-term ambition does not mask the need to stabilise the system now. UUK has proposed measures that will

“create … space for a wider review of university financing”,

and I hope that my noble friend will ensure that the Government respond speedily.

I have focused on universities, but we have received some telling evidence from the FE college sector, where higher education is a relatively small but strategically important part of the provision. It, too, is facing increasing financial pressures. I refer specifically to the fact that demand in key areas such as construction, engineering, and health and social care is outstripping the funding that it has available to provide them. I hope that my noble friend the Minister will refer to this in her response as well.