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In this episode of the World of Higher Education podcast, Alex Usher discusses the financial challenges facing higher education in the UK, focusing on England, with Nick Hillman, Director of the Higher Education Policy Institute in London. They explore the impact of the Conservative Party's 14-year rule, the policy directions of the new Labour government under Keir Starmer, and what this means for universities and students. The conversation highlights funding issues, strategies universities are employing to cope, and the potential future scenarios for the sector. Tune in to hear an in-depth analysis of higher education policy developments and the prospects for UK universities.
Creators & Guests
What is The World of Higher Education?
The World of Higher Education is dedicated to exploring developments in higher education from a global perspective. Join host, Alex Usher of Higher Education Strategy Associates, as he speaks with new guests each week from different countries discussing developments in their regions.
Produced by Tiffany MacLennan and Samantha Pufek.
Alex Usher (AU): Nick let's talk about where the new government is starting from. The previous conservative government had 14 years to put their stamp on higher education. What were their signature policies?
Nick Hillman (NH): That's a very good question. I actually separate those 14 years into two though because the first five years of that was under a coalition government. I think their approach to higher education was rather different to what came later. In the early years of those 14 years, very quickly a decision was made to nearly triple tuition fees for home students, putting our fees at arguably the highest level of anywhere in the world, around 9000 British pounds per year, per home undergraduate, for full time students. But what that did was lead to very well-funded universities and it meant the government felt the pressure was off public finances. So, they could also remove, what I think was a very pernicious feature, which was student number caps, which limited not only the total number of students in the system, but also the number of students at each university. So, in those early years, there was reform of fees. There was a removal of the student number cap. There was good funding of research as well.
But after the coalition fell and we went into the period of multiple prime ministers in a short period of time, I'm not even sure I can remember them all. David Cameron, Theresa May, Boris Johnson, Liz Truss, and then Rishi Sunak. The world got worse and worse for universities. Fees were fixed back at that 2012 level pretty much. They went up once in 2017. But even today, 10 years on, they’re 9,250. Pounds. There was lots of negative rhetoric about cracking down on student places and courses that the government didn't rate and the policies on international students went back and forth. They were quite tough actually under David Cameron, then liberalized under Boris Johnson, and then toughened up again under Rishi Sunak in the run up to this year's election. So we toughened up our international student rules in January of this year prior to the July election.
AU: You mentioned that there was a big burst of funding at the beginning of the Cameron government, but it's been 14 years since then. So you've had a long freeze, not just on tuition fees, but on institutional resources generally. How have institutions chosen to cope with this development?
NH: Yes, there's been a big freeze, as you say, in relation to home student fees. And that was okay because 9,000 was pretty high back in 2012. It was okay, until the period of high inflation that we had around the time that Russia invaded Ukraine and energy prices and everything went up. So pretty much inflation went up pretty swiftly to 10 percent in the UK. Then that really did start affecting universities.
They've coped in a number of ways. Prestigious older, traditional universities that appeal to international students took in as many international students as they felt able to do and only high fee paying ones. Other universities are doing a range of things to save costs. More than half of UK universities now are going through voluntary redundancy schemes. There's always a time lag in the data, but I'm confident we're now seeing an increase in the staff student ratio. Buildings are becoming more tatty. Now our physical universities states aren't too bad in reality. But, universities are also meant to be helping deliver net zero, and you can't deliver net zero unless you decarbonize your estates. So that's very costly, and their money isn't there to do it. Then the other thing that's suffering is support for cultural institutions and regional institutions that universities often provide a lot of support for. Then also, support for the non-academic features of university life. So recently, British governments have expected, for example, universities to do things like provide lots of mental health support to their students, lots of career support to their students, all good things, but they cost money. They're one of the first things to get cut back when funding is short.
AU: The Labour Party was clearly aware that institutions had a big financial challenge ahead of them. They would have known this since 2019. Now, in the previous election, Labour's signature pledge was free tuition, which I guess, makes the financial problems worse at a certain level. What happened in the evolution of the Labour Party's thinking about institutional financing between 2019 and 2024? What's the Starmer approach if there is one?
NH: Yeah, it is very different to what came before, as you say. Prior to Keir Starmer, there was Jeremy Corbyn who is on the far left and is no longer even a member of the Labour Party because Keir Starmer has kicked him out and he's now an independent MP. His policy in both 2017 and 2019 was free higher education. It was popular among some people, but it wasn't popular enough to win him an election. What happened after 2019 was the Labour Party just took a completely different course of direction. They veered back towards the centre. They junked a lot of policies. Even though during the leadership election when Keir Starmer was made leader of the Labour Party, he promised to maintain the policy of free education, it was one of the things that got but it got junked slowly and gradually and subtly. It wasn't replaced by a very clear alternative policy. So when the labor party went to the country as an opposition party at the election in July, their manifesto didn't say very much at all about how they would fund universities. They criticized the current funding model, but they didn't have a clear replacement, but it was clear. But that whatever their policy was, it wasn't going to be the same as the 2019 commitment to free education. But we still don't really know what it is.
AU: During the election itself, was higher education much of an issue? Did people talk about it? Obviously, there are a lot of issues that come into play in a general election but was higher education even close to the center of attention?
NH: No, it wasn't. It wasn't really in any of the main political parties interests to make it a big feature. So the Labour Party wanted the votes of young students, for example, but had obviously changed their policy away from free education. The conservatives wanted to fight a bit of a culture war against universities, but didn't really have much in the way of constructive alternatives. So in the conservative manifesto, the main thing it said about higher education was how many courses they wanted to close and shut. They did do something on lifelong learning that we might come back to but essentially neither labor nor the conservatives really wanted to talk about it. The Liberal Democrats, our third party who actually did very well in the election, don't like talking about higher education either. Because back in 2010 when they went into coalition with the Conservatives, they promised to oppose fees and then helped fees be tripled. So, it really wasn’t really an election about higher education at all, really. It was an election about the economy, about the lack of growth, about whether or not the country felt ready for change politically, about the National Health Service. Higher education really did take a back foot.
AU: I want to turn now to the new government and how it's structured. The UK is a little bit different than other countries. It has an inner cabinet and an outer cabinet. It has an inner cabinet with a minister of education and an outer cabinet, of about a hundred, which usually includes a position just to deal with higher education, but technically the new minister does not have that title, right? There used to be a minister of higher education, Joe Johnson who was the ex-prime minister's brother, Willetts, there've been many of those kinds of people. But, the Starmer government brought in a minister for skills and put higher education under that title of skills. What's been the reaction to that within the sector? Do they like not having their own ministries? Does skills sound too reductionist?
NH: I think most of your listeners will know Britain's been through a pretty chaotic political time in recent years. One of the ways that has shown itself has been multiple reshuffles of ministers and multiple reorganizations of government departments. So, I think it's been even more complicated, perhaps, than your question implies. When I worked for the minister for higher education, David Willetts, he was the minister for universities and science. So he was minister for two areas: higher education/teaching and learning and also research much of which happens in universities. That now feels a very long time ago.
We now have a minister that is in charge of higher education and skills, which would include education below what we currently classify as higher education and doesn't include the research function of universities. How do universities feel about this? It's too early to say. The Labour Manifesto did talk about more coordination between further education, skills, and higher education. On paper that sounds very nice and actually universities are willing to engage with that. Sometimes, however, it means less autonomy for universities because it's coordination from the top and our universities are very autonomous and don't like people encroaching on their autonomy. So they're worried about that.
When it comes to Jacqui Smith, she's a very experienced politician. She was once our home secretary back in the previous period of labor government. So they're pleased. They've got a big figure and a big name with policy responsibility around the cabinet. She's not around the cabinet table, your point is right. It’s the person above her, the secretary of state for education, who's around the cabinet table. Jacqui Smith is not around the cabinet table, even though some of her predecessors like David Willits did sit around the cabinet table. David was not officially a member of cabinet, but he was allowed to attend cabinet. So, they're worried with that. They know they’ve got a big figure as the minister, but they don't quite know what she thinks or how much power she'll have in Whitehall.
AU: That brings me to the question about personalities. You have Bridget Phillipson, who was the minister of education. If anyone outside the country knows her, it's probably because she was the first person to speak on election night because Sunderland always comes first the counting list. So there's Bridget Phillipson, there's Jacqui Smith. Do we know anything about what they believe about higher education? And I guess, does it matter? Or is this the kind of policy issue where Keir Starmer and his team at number 10 are likely to override whatever the ministers think?
NH: So Bridget Phillips and the Secretary of State for Education represents, as you say, Sunderland, a very deeply red, very Labour part of the country, which is why they can count their votes so quickly on election night. I think it's fair to say that in private, she'd probably admit this herself that she's more interested in schools than she is higher education. She's more interested in early years than she is higher education. There is a tradition in the UK of the Secretary of State for education leaving higher education to the next level down. So, I suspect she will do that. When she has spoken out about higher education, she's put a focus on access. Despite big expansion of higher education, we still have a big problem among, for example amongst groups white working-class boys who go to higher education in very small numbers. So she cares about access. But of course, part of the way of fixing that costs money and she hasn't yet found the money to do that. But mainly she cares about earlier in the system. Jacqui Smith’s job is to care about years 16 through 18 education. But as I've already said, she doesn't have a background in education. She was an education minister briefly once before, but not for this particular bit of the education scheme system. When she was home secretary, she actually slightly toughened up the rules for international students which is obviously irrelevant, but we feel like there is hope because it's probably fair to say that the UK higher education system, like higher education systems in many countries, there's more to the left and to the right politically. So there's hope. But there isn't a lot of knowledge yet about what they're going to do.
AU: Vibes rather than policies.
NH: And rhetoric. Rhetoric about how the UK is going to be more welcome to international students, for example, under the new government.
AU: Let's talk about those international students because I think they're a big part of what labor is hoping is going to happen, right? You mentioned that there's something like 60 universities that have had staff redundancies in the last year, just in the last couple weeks I’ve seen a number of articles suggesting that there are one or two universities who might be getting close to a liquidity crises over the next four to five months and what's going to save them if anything is a big group of international students coming in, but what options does the government have to deal with the possibility of a university bankruptcy? I know Bridget Phillipson has told universities not to bank on a bailout, but is a Labour government really going to allow a public institution to go bust?
NH: Your question is very pertinent. I'm nervous about talking about this issue because the last time we had a flurry of newspaper stories about universities potentially going bust was during COVID. Actually they survived COVID pretty well because they moved their teaching online, but they still had lots of students, their costs went down and they still have the fee income coming in. But it is a real possibility. In the history, 800 years of history of higher education in the British Isles no university has ever gone bust. Some have got close, but no university has ever gone bust. So nobody really knows what's meant to happen with that. We do have something called student protection plans, but they're probably not worth the paper they're written on. Students would be at the back of the queue if a university went insolvent. So we don't really know. But my view is that every color government we've ever had has said it's a market, these are independent institutions, if one falls over then the government is not guaranteed to step in and pick up the pieces and I just don't really believe that, if I'm honest. Maybe in London, where there's 40 plus leading higher education institutions, you could lose one or two or merge one or two and there'd still be lots of them. But, in lots of our towns and cities, the university is the biggest or the second biggest employer. It's crucial to the local identity of the town or city it's in. It's got hundreds of thousands of alumni who would be very angry if their university fell over because it might devalue the degree on their CV. Then the MPs and the local authorities and other political agents for that area would go crazy. So, I just don't believe it. Clearly there's a line somewhere where a very small, very specialist, maybe a private institution, would be allowed to fold but no big university. I don't seriously believe that. The problem we have is we know that could happen, but we don't know what process would be followed if it did happen. Even in COVID, they set up a rough process called the higher education restructuring regime. So we had a rough process where we knew what would happen. Now, we have no idea.
AU: Interesting. You talked about inflation and how that's been an issue for institutions. It's also been an issue for students, right? In the same way that you've had limits on, on increasing aid to institutions, inflation has eaten away at student aid. Now, I know one of the big things on the agenda in the late conservative period was the lifelong learning entitlement. And we had David Kernohan from WonkHE talk to us about that a few months ago, is labor likely to continue with the lifelong learning entitlement program or is this or is it going to junk them? What effect, if any, is this going to have on students being able to meet their living expenses?
NH: You made two good points there. On inflation affecting students, you're absolutely right. Just to cut a very complicated story short, a student is expected very often to live on about 10,000 Pounds a year. We recently did a report where we went to a blank sheet of paper and said how much money does a student need to live with dignity, not plushly. But enough so they could at least join one or two student societies, they could at least afford the bus to campus, they could live in safe accommodation, not plush accommodation, but safe accommodation. We worked out they need about 18,000 pounds a year for that. They've only got about 10, 000 pounds a year, huge shortfall. Students are filling in the gap by doing lots of paid work, including during term time. That's fine until you get a very large numbers of hours of paid work and their studies become disrupted and they have no more time to join in those are extracurricular activities. Now you're right that the outgoing conservative government's big, constructive, positive idea for higher education was a Lifelong Learning Account and Entitlement. The minister's talked about it a bit like a travel card that you can use on the London underground, where you have a card that can let you use any line, any distance so long as you've prepaid it. They said it would be like that. You'll go through higher education, picking up a module here and a module there, maybe rolling it up into a stackable degree. You can do it at any age through your life. Sounds wonderful. I'm sure David Kernohan told you about how there's no huge evidence of demand for this and it was announced five years ago, and we still don't know all sorts of details about it. Despite what I've said, I hope the new government sees it through. But they won't feel obliged to because it is linked to the previous government and the current new government is saying, look, we'll tell you in the autumn just how bad the public finances are and what we can afford to stick with and what we're going to junk. So we're waiting for that.
AU: In terms of making public policy, one thing that makes the UK different from other countries over the last three, four decades is this tendency to just lob big policy questions outside of government to an external review where you just find a big name outside of government and let them deal with it. So we had Philip Augar, who I think is 2018-2019, and prior to that the Brown review in 2010, I think and then the Dearing Review in 1997. Is this a good way of making policy? Is it one to which Labor is likely to resort in its first term just as a way to get rid of all this mess and say let's hand it to someone else?
NH: Yeah, it goes back even further than that because we have the Robbins report of 1963, which is perhaps the most important of all of them. It is attractive to politicians who don't know what they want to do. Some of those reviews, like Brown in 2010 and Dearing straddled a general election. So they were specifically designed to take higher education off the electoral track radar and that hasn't happened this time. There is both, before the election and since the election, lots of rumors Labour may go down that route. The labour government in Australia went down that route when they came into government a couple of few years ago with the Australian Accord Process. It won't solve the problem for two reasons. If you actually look at what happened with all those reports, none of them were straightforwardly implemented. The main recommendation implementation in the Dearing report wasn't implemented for a good six or seven years afterwards on funding. The Augar report, lots of it still hasn't been implemented and it's sitting on shelves. The Brown report did lead to the tripling of tuition fees in 2010, but in a completely different way to the way Brown recommended. In fact, he recommended no limit on fees. So with these reports, you farm out your question to a report, but then real politics kicks in and you end up delivering something different. But the biggest problem is none of that. The biggest problem is, as Harold Wilson once said, reviews take weeks, but waste years. We don't have years because some universities are struggling financially now. If you put a review in train now would take minimum of 18 months, possibly two years. You then do a government consultation on the recommendations, and you lose another year. Then you spend a year implementing the recommendations and you probably must warn students what's coming maybe another six months or so. So you're talking about any review put in train now would not lead to changes until the end of this parliament. And we simply don't have that sort of time to play with.
AU: That sounds a little bit dire. Let me ask you just to end the interview. What's the good news in high English higher education? What are the rays of hope for the sector?
NH: Actually, I'm an optimist. I think we have a fantastic sector and so many people from around the world want to come and study in the UK because our universities are very vibrant, very lively, very good quality, and are very diverse with people from all over the world at them. They have been fairly well funded in the past and so the estates are good. The student life is good. Most students are satisfied. We've discussed lots of rather depressing things but actually, the fundamentals of the funding system we've got, in my view and not everybody would agree with this, are okay. We've had the same funding system since 2012. The problem is it's got ossified. And if only what we call the unit of resource, the amount of money a university gets to teach each student, had kept up in line with the real value of money, then we'd be fine. The problem we face maybe a very small number of universities will literally fall over and the government will have to step in. But the bigger problem we face is not that. The bigger problem we face is great university systems and great universities decline slowly. They don't decline fast. They decline slowly. And the risk is it will look back in 10 year’s time and go, why did we let this happen? We were world class in our university system, why have we let ourselves become second grade?
AU: Nick Hellman, thank you so much for joining us. And it just remains for me to thank our excellent producers, Tiffany MacLennan and Sam Pufek, and you, our listeners, for joining us today. If you have any questions or comments about today's episodes or suggestions for future ones, please don't hesitate to get in touch. Contact with us at podcast@ higheredstrategy.com. Join us next week when our guest will be once again, Brendan Cantwell from Michigan state university. And he'll be joining us to talk about the potential implications of a second Trump term on us higher education. Bye for now.