Universities: Funding and Employment

Pam Cox Excerpts

Wednesday 2nd April 2025 Westminster Hall

[Pam Cox (Colchester) (Lab)]

It is a pleasure to serve under your chairship, Mr Vickers. I thank my hon. Friend the Member for Bedford (Mohammad Yasin) for securing this important debate. I draw attention to my entry in the Register of Members’ Financial Interests. I am a member of the UCU and a former professor in higher education.

As someone who dedicated over 20 years to teaching and research in higher education, I have seen at first hand the transformative power of that work. Students’ lives are changed, economies grow, communities are transformed and cities are lifted. Despite the challenging times facing the sector, I remain optimistic about the future of our universities and the vital role they play in our society, but we need to act before it is too late—which means sooner rather than later.

The current financial model for universities is the most challenging it has been since the previous Labour Government enabled so many to access higher education. Members will know that in 2012 a cap on the domestic tuition fee was introduced, which increased only slightly in 2017 and again this year. It has not kept pace with inflation, and the financial strain is felt across the sector.

Research funding is another area of concern. We cannot have universities without research, because the research informs the teaching. That is the nature of the beast and of the game. The UK rightly prides itself on being a global leader in innovation. Our universities are world class and attract people from around the globe. Research often runs at a loss and is subsidised by education provision, even though that research underpins our productivity and economic growth. That is the case in any sector I could name: AI, defence, health, life sciences and the creative industries. If the universities were taken away, where would we get that innovation—accessible innovation that is open to all—from?

As my hon. Friend the Member for Bedford said, international student recruitment has been severely affected. The University of Essex, where I taught, has seen a 47% decline in EU student enrolments post Brexit, and recent changes to visa policies have contributed to a 40% drop in international student numbers. The subsequent reduction in income exacerbates the financial challenges faced by the sector.

Despite the difficulties, universities have been proactive in seeking solutions—I was personally involved in creating those solutions over many years. At the University of Essex, we introduced efficiency measures, diversified income streams, invested in transnational education and merged departments. We have done an awful lot over the past few years—I felt myself slipping back into using “we” there, in a rather odd way.

The university also collaborated with local businesses. Indeed, I ran a doctoral training consortium that spanned 10 universities across the south-east of England, and my whole job was to get money in from business to support collaborative master’s and PhD programmes. Industry and business do need to step up in this regard. They benefit from universities and those who are educated there, and they need to step up and provide assistance.

The contribution of universities to economic growth is palpable. For every £1 of public money invested in universities, we get £14 back, so there is a good economic case to be made. I am encouraged that the Education Committee is to start an inquiry into higher education and funding on 8 April, and I urge the Minister to take seriously the issues raised. I encourage her to meet those of us who have worked in the sector to explore solutions that involve the unions, business and all the other stakeholders.

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[Rebecca Paul (Reigate) (Con)]

It is a pleasure to serve under your chairmanship, Mr Vickers. I thank the hon. Member for Bedford (Mohammad Yasin) for securing this important debate, which could not be more timely, and I am grateful to all colleagues who have contributed.

Our universities are among the most important institutions in our national life. They are centres of research, innovation and learning, and for many thousands of young people every year, they are the route to opportunity, economic independence and personal growth. Despite its great importance, the higher education sector has come under increasing pressure in recent years. The latest modelling from the Office for Students suggests that nearly three quarters of English higher education providers could be in deficit by 2025-26, and 40% would have fewer than 30 days’ liquidity. Indeed, as we have heard from many Members today, redundancy programmes are already under way in some institutions and, across the country, university staff are understandably anxious about the future.

I will say at the outset that I am deeply sympathetic to those who work in institutions that have found themselves in financial difficulty. Nevertheless, I believe it is past time for us to have a grown-up conversation about university finances, in which we look seriously at what is driving the pressures and what it might be possible to do to alleviate them.

I will begin by stating the obvious: decisions taken in recent years have increased the financial pressure on students and graduates, without necessarily addressing the deeper questions of value and sustainability. We have seen steady rises in student loan interest rates and tuition fees, which both fall heavily on students, and now, the spike in employer national insurance contributions is putting further cost pressures on universities.

Meanwhile, the Government’s proposals to cut funding for level 7 apprenticeships, which are essential qualifications in a number of fields, including education, health and engineering, risk further undermining key parts of the post-18 education ecosystem. Many university departments rely on that funding not just to sustain course provision, but to attract and retain highly qualified staff. The impact of the cuts will not be evenly spread, and it is right that we consider how they will affect institutions already under financial pressure.

[Pam Cox]

Will the shadow Minister take some responsibility, on behalf of her party, for the situation that many universities find themselves in?

[Rebecca Paul]

I suggest to the hon. Member that we need to deal with the situation that we have now, and that her questions should be targeted towards the Minister. We should make the right decisions to do the right thing for our country, and for our students and university staff.

We must confront an uncomfortable truth: there is mounting evidence, including from the Institute for Fiscal Studies, that a sizeable share of higher education courses simply do not provide good value for money either for the taxpayer or for the individual student. The IFS has concluded that around 30% of graduates, both men and women, would have been better off financially had they not gone to university at all. That raises important questions about how we can ensure that our higher education system delivers for those who fund it—namely, the students who invest years of their lives and take on significant debt, and the public whose taxes support the student loan system.

The current funding model is failing under the enormous weight of rapid expansion, marketisation and insufficient quality controls. The ability of an institution to prop itself up on the backs of overseas students who pay vast fees is coming to an end. Although fee income from international students has grown by an average of 15% a year between 2017 and 2023, the recent international recruitment environment has been challenging. Recent Home Office data indicates that 393,125 visas were issued to main applicants in 2024. That is down 13.9% year on year and down 18.8% compared with two years ago.

While some institutions have embraced innovation, strong outcomes and world-class research, others have pursued growth at all costs, adding courses with limited market value, often to attract overseas students or to maximise short-term income. We cannot and should not return to a time when university was accessible only to a wealthy minority, but we do need to have a serious conversation about the purpose of higher education, who it is for, and how it can be sustainably funded in a way that delivers for students, taxpayers and the wider economy. That means looking at systemic reform, rather than simply demanding that young people pay more without addressing the underlying issues. We need to examine course quality, graduate outcomes, student choice, and the role of further education and apprenticeships alongside traditional degrees.