Higher Education Funding

Ian Sollom Excerpts

Wednesday 28th October 2026 Westminster Hall

[Ian Sollom (St Neots and Mid Cambridgeshire) (LD)]

It is a pleasure to serve under your chairship, Ms Vaz. I congratulate the hon. Member for Sheffield Central (Abtisam Mohamed) on securing this debate. Sheffield is an excellent place to ground this debate because it has two great examples of the origin stories of many of our universities. The University of Sheffield is a civic university in the truest sense. When it sought its charter in 1904, steelworkers, factory workers and other local people raised over £50,000 in penny donations to support it. Sheffield Hallam traces its roots to the School of Design, which was founded in 1843 to train designers for the city’s industry, and became a university in 1992. One red brick, one post ’92: both serve the city and both embody the idea of universities as anchors of their community. That idea is now at risk.

Later today the Chancellor delivers his first Budget; every signal is that universities should expect very little from it. We cannot continue to ignore the stark choice before us when it comes to university policy. Either we carry on with a managed decline—courses cut, talent lost, places left behind—or we can choose transformation with universities as engines of learning throughout life, as innovation hubs driving economic growth and as civic institutions embedded in the places they serve. The Liberal Democrats would choose transformation, and I hope the Government will do the same.

At the moment, too many universities are fighting for survival. More than a third of English providers were in deficit last year. The Department’s own costing study found that universities lose about £3,000 on every home undergraduate they teach. Research is worse: universities now recover only two thirds of research costs. According to the Russell Group, universities put in £6.3 billion of their own money into research last year.

For many years now, the funding gap has been filled by international students, but that income is now also falling away. Visa applications in August—the peak month—were down by 17% on a year ago. Of course, education as a great British export is about much more than money, but the business model that has saved the Government from spending more on home students and research is being undermined. The Government have said that they intend, in the Finance Bill that will follow today’s Budget, to legislate for a £925 levy on every international student. Only a tiny sliver of that money will go to the maintenance grants put forward as a justification for it.

This crisis does not simply affect an ivory tower elite who sit apart from our communities: in many towns and cities, the university is one of the largest employers and the source of the next generation of teachers, nurses, engineers and members of many other professions. Such universities produce graduates who are likely to stay and work locally and serve the students who are often least able to move away to study. When a nursing course or engineering department closes in such a place, it does not relocate; it disappears from the region. With it goes a route into a profession for everyone who cannot simply up sticks and leave.

Post-’92 universities carry a burden that their older neighbours do not. For no other reason than institutional history, they are tied into the teachers’ pension scheme, for which employer contributions reached 28.7% last year—roughly double what many older universities pay, and about £8,000 extra a year for a typical member of staff. In July the Government ruled out any help, but part of solving this crisis in the sector must include working towards a single, fairer pensions framework.

There is also the question of what happens when one of these institutions does not survive. The Office for Students told the Education Committee that 24 institutions could exit the market within a year. The Committee recommended a special administration regime so that a failing university could keep teaching while its future was resolved, but the Government have said that they are “not currently persuaded” because legislating would be too complex. I would say that that is an argument for starting now, not for doing nothing.

Further education colleges have had a special regime since 2019, and having no regime has its own risks. With no orderly way to fail, many simply assume that the Government will step in. Sir Philip Augar has said that a handful of universities are already getting secret bail-outs. When I asked Ministers about that, I was told that emergency support is not provided, but also that officials meet universities and their banks regularly in confidence. Discussing potential rescues behind closed doors gives us all the moral hazard and none of the transparency.

Liberal Democrats see universities as essential national infrastructure, not cost centres to be squeezed. That means a new settlement: in the short term, reform the levy before it reaches the statute book; reprofile student loan fee payments to ease the cash flow; offer low-interest loans for restructuring; and remove the VAT penalty that stops universities from sharing back-office services, so that they merge finance and HR rather than cut teaching. We need to fund the breadth of subjects in every region and make sure that public research grants actually cover the 80% of costs that they are supposed to. But this needs to come alongside obligations on universities. The money alone will not fix the problem.

After 2030, the number of 18-year-olds will fall by 17%, yet 82% of the growth in priority occupations in the industrial strategy sectors will require a higher education qualification. Put those two facts together, and a model built around school leavers simply will not work in the long term. Many of those who will fill the jobs in that growth are already in work and will need to retrain as technology reshapes what they do. Universities need to open up to adults through modular lifelong learning, which we suggest needs to be through lifelong skills grants, not simply loans. Universities also need to work hand in hand with further education colleges, with credits that transfer between them, and they need to turn British research into businesses that stay in Britain.

[Dr Arthur]

The hon. Member is diagnosing the problem excellently and detailing all the issues. I do not want to go back too far, but we have to think about the role the Lib Dems played in the coalition Government and the decision to go back on their pledge not to raise fees but instead raise them to £9,000. The Budget this afternoon is not just about spending money; it is also about raising money to pay for policies. A range of policies—

[Dr Arthur]

It would be good to hear how the money would be raised to meet all those obligations.

[Ian Sollom]

A lot of the interventions that I have suggested on the university side are cost-neutral and would involve restructuring.

I have three questions for the Minister. First, will the Government update their impact analysis to reflect this year’s fall in international recruitment and publish the effect by region and type of institution of the international student levy before the Finance Bill is debated? Secondly, will they think again about special administration before rather than after a university fails? Thirdly, will the Government commit to working with the sector to end the pensions penalty on post-’92 universities? Universities did not get to this position overnight and they will not recover overnight, but today’s Budget is a chance to stop the managed decline and start the transformation. I hope the Chancellor takes it.