Universities: Funding and Employment

Rebecca Paul Excerpts

Wednesday 2nd April 2025 Westminster Hall

[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.

[Stephen Gethins]

Will the hon. Member give way?

[Rebecca Paul]

I will in a moment.

Such a reform could begin by addressing the unacceptable lack of transparency around the student loan system. The public have a right to know how the system is operating, who is borrowing, who is repaying, and where there may be a risk of fraud or misuse. I understand that a paper on this very subject, compiled by the IFS and commissioned by the last Government, remains unpublished, despite efforts to obtain it via freedom of information requests. I hope the Minister will explain why that is the case, and will understand that transparency builds trust, while withholding data only fuels suspicion.

On a related theme, questions have rightly been asked about the eligibility criteria for student loans, particularly for non-UK nationals and EU citizens with settled status. It is surprising to many that, even several years after Brexit, more than 180,000 individuals were granted settled status in the first six months under this Government. That figure deserves scrutiny, and it is legitimate to query the implications for access to taxpayer-funded support for accessing higher education. It has been widely reported that the Student Loans Company is now accepting a mere certificate of application for settled status in order to approve loans. If that is the case, I urge Ministers to review that policy as a matter of urgency. We must ensure that eligibility checks are robust and that the system is not open to exploitation.

[Stephen Gethins]

Will the hon. Member give way?

[Rebecca Paul]

I am going to continue because of the time.

On the concerns about the quality of some higher education provision, the Government have said they are considering changes to the regulation of franchise providers, some of which have been implicated in cases of poor-quality provision and potential fraud. Although I welcome the consultation launched by the Department for Education, I caution that many of the largest franchise providers are already regulated by the Office for Students, so the key question is not simply whether they are regulated, but how well the regulatory framework is working and whether it is actually driving up standards.

Finally, we have heard Ministers speak in recent months about “tweaking” the role of the Office for Students to strengthen its focus on value for money. In September, the Department said that it was

“developing options for legislative change,”

and the Secretary of State has since re-announced that commitment, but as far as I can tell no tangible progress has been made. When will we actually see legislation brought forward? We have also heard mention of the Public Sector Fraud Authority being brought in, but that sounds remarkably similar to the Internal Audit Agency investigation mentioned in last year’s National Audit Office report. What is changing, exactly? Are we simply hearing the same announcement robed in new language?

I conclude by emphasising that the largest losses to the taxpayer do not always come from outright criminal fraud, and can come from legally operating institutions that provide poor value. These providers operate within the letter of the law, but not within its spirit. They enrol students on low-value courses with high drop-out rates and weak earnings potential, while drawing down large sums from the student loan system—sums that in many cases will never be repaid. We cannot continue like this. Our goal should be a higher education system that is sustainable, high quality and genuinely life-changing. I look forward to continuing this discussion in the months ahead.