Turning back the apparently inevitable decline in university quality

We think of universities as stable social institutions. Until the full fee market was installed in England 2012, they were government backed, and, fortunately for degree holders it is unlikely even now that a government would let a university go to the wall. Yet if the institutions are stable, the quality of teaching and learning within them has long been highly unstable and is now rapidly trending downwards. This decline is locked in by the politics of student tuition, with no end in sight, unless a wholly new financial framework is introduced.

How do we know quality is falling? There is no direct measure of the composite quality of higher education. Surveys of student satisfaction or tables of graduate earnings are no help whatsoever. We can know quality only by inference. Yet it is a compelling inference that cannot be ignored. While many factors determine students’ learning experiences, the educational unit of resource is key. At any given time, the quality of teaching and learning is at least partly dependent on the material resources that sustain those functions, the total public and private funding which underwrites staffing ratios and total teaching hours, learning spaces and materials, and technological infrastructure and equipment.

With England’s student fees capped at £9250 since 2017-18, in an inflation-riddled environment the unit of resource (and hence quality), has inexorably trended downwards. ‘Inexorably’ because that decline has become locked in by the political settings.

Dramatically changing finances are not new to the university sector. Over the years the educational unit of resource has fluctuated markedly, reflecting the politicised nature of decisions on university funding and student fees, big swings in policy, recurring inflation, and the Treasury’s habit of tweaking policy and regulation to secure short-term savings. The Thatcher years ushered in a 20-year slide in funding per student. New Labour supported mixed public and private funding introducing a £1000 fee in 1998, which led to a divergence within the UK nations (Scottish universities are still free to home students). Funding per student in England increased slightly, and there was a larger boost following the hike to a £3000 fee in 2006, though this was subsequently eroded by inflation.

After the Conservative/Liberal Democrat coalition took office in 2010 the policy ideology and funding system were radically recast. The 2010 Browne report, entitled (ironically, given the present situation) Securing a sustainable future for higher education, proposed a full fee student market. In 2012 the coalition government established a £9000 full-fee student market supported by income-contingent loans on the study now pay later principle. The funding for most student places became solely dependent on student fees with no direct government subsidy, implying that teaching and learning created no public benefits, only private benefits. Limited subsidies were maintained only in some STEM-based disciplines. Government also provided finance to underwrite unpaid tuition loans. This soon ballooned out to a major public cost, and, because future debts are unknowable, has since become a primary source of fiscal instability: another reason why the 2012 system is unsustainable. But the subsidy of unpaid loans in itself does nothing to improve quality. The point is that since 2012 the headline tuition fee has set the educational unit of resource.

The influx of high fee income triggered a large short-term increase in total university funding. According to the IFS, funding per student in 2012-13 was £11,800 in today’s prices. However, that was the beginning of another long slide. Total funding per student in 2023-24 is £9,600 and this will keep on falling as the level of tuition fees has been frozen.

Why is decline in the unit of resource now locked in? Why can’t the pendulum swing back, as it did before? Previously governments could increase their direct funding of the unit of resource. But that funding is now minor. Student fees set the unit of resource. And politically speaking, increasing student fees is a different matter to increasing direct public grants.

There was a small increase in the maximum home student fee to £9250 in 2017-2018. But in the 2017 election the then Labour leader Jeremy Corbyn made an uncosted promise to abolish tuition fees, triggering an avalanche of youth votes for Labour. The lesson sunk in: fee increases were political poison. Since Corbyn’s electoral gesture no political party has supported an increase in home student fees, despite inflation, and both Labour and the Conservatives have floated reductions. The December 2023 report on education spending by the Institute of Fiscal Studies showed in that from 2017-18 to 2024-25 the value of the maximum home student fee will decline by 24 per cent in real terms.

At the same time the direct grants for selected STEM places, as noted a minor item, have struggled to keep abreast of inflation. The only discretionary source of funding for teaching and learning, on sufficient scale, is international student fees. Universities are rapidly pumping up international student numbers. However, there is a limit to this.

In 2021-22 total institutional income from non-EU international students in England was £7.8 billion (19.2 per cent of income) compared to £4.4 billion (13.5 per cent) four years before in 2017-18. In some institutions financial dependence was much higher: for example, 28.0 per cent of income at City University London, 24.6 per cent at LSE and 23.6 per cent at Coventry University. UCL had 19,745 non-EU students (42.2 per cent of all students), Manchester 15,720 (34.1 per cent) and Coventry 13,210 (34.6 per cent). At LSE the ratio is 50.5 per cent! All are highly vulnerable to a sudden change in migration policy or in the geo-politics of global student flows. At the other end of the scale, half the designated higher education institutions in England, including 13 titled ‘university’, earned less than £2 million from non-EU students in 2021-22 see here. They do not even have the option of the risk.

What is the way out? What could a new government do? What are the key elements of a reworked public funding framework for universities in England? There are many issues, such as the income threshold for loan repayment, interest rates, and the reintroduction of maintenance grants which unlike maintenance loans are not subject to borrower resistance, but the key moves on the unit of resource, and hence learning quality, would be as follows:

1. Shared public and private funding would be reinstated. Universities produce both public and private benefits. A core principle would be a 50/50 split in the cost of the educational unit of resource, between direct government grants and reduced student fees underpinned by income contingent loans.
2. Tuition fee determination and the public/private funding split would be depoliticised. Government would continue to determine the total funding available for financing the educational unit of resource. The funding system would be supervised by an independent public agency whose remit would be to sustain a stable 50/50 split.
3. The tuition loans system would be restructured to ensure that most loans are repaid, with the money saved in unpaid loans used to finance direct government subsidies, reducing the fiscal instability fostered by high and unknowable levels of student debt.

This blog was previously published in the Academy of Social Sciences website