“A properly run market has to have scope for market entry and market exit,” said Jo Johnson in 2015, when he was minister of state for universities, science, research and innovation. “If you don’t have scope for market exit, you don’t really have a market because there is no incentive for institutions to ensure they are competitive.”
Johnson’s comments came as the English higher education sector was undergoing fundamental change: number controls on undergraduate recruitment had just been abolished in line with a seminal White Paper published by Johnson’s predecessor, David Willetts, and business secretary Vince Cable in 2011 called Students at the Heart of the System. Published ahead of the tripling of domestic undergraduate tuition fees to £9,000, that document said the government would “tackle the micro-management that has been imposed on the higher education sector in recent years and which has held institutions back from responding to student demand. We must move away from a world in which the number of students allocated to each university is determined in Whitehall. But universities will be under competitive pressure to provide better quality and lower cost.”
In further pursuit of that market dynamic, Johnson was in the process of drawing up the Higher Education and Research Act which, when passed in 2017, introduced the Teaching Excellence Framework to help students select between institutions and established the Office for Students (OfS), with a remit, among other things, to “encourage competition between English higher education providers…where that competition is in the interests of students and employers”.
Since then, that competition has largely seen higher-tariff institutions expand at the expense of lower-tariff institutions. But the rise of the tuition fee to £9,535 announced by education secretary Bridget Phillipson earlier this month was only the second time tuition fees have risen since 2012, during which time high inflation has severely eroded their real-terms value. Moreover, vice-chancellors have warned that the latest rise – of £285 – will not even cover the nearly £400 million that it will cost universities to meet the higher employers’ national insurance contributions announced in the recent budget.
The result is a funding crisis so severe that many university leaders are predicting the kind of market exit that Johnson anticipated – and worries abound about the potential effects of that on students, local communities and the wider sector.
Accordingly, increasingly loud calls are being made to restore the student number cap as a way to protect lower-tariff institutions and restore a level of central oversight to a market that many consider to be dysfunctional. But is that really the right solution for a complex problem? It is fair to say that opinions are divided.
Caps were fully lifted in 2015-16, limits on recruiting top-performing students having been lifted the previous year. Willetts, who is now president of the Resolution Foundation, tells Times Higher Education that there were three main motivations behind the policy change: to increase social mobility, economic growth and student choice.
The policy was introduced 60 years on from the influential Robbins Report, which established the principle that English higher education should be available “for all those who are qualified by ability” and all those “who wish to” access it. “Turning away a student who had applied for university and who the university wished to admit because someone in Whitehall had set a cap on the number of people who could go to that university I regard as a clear breach of the Robbins principle,” Willetts says.
The removal of numbers caps was “revolutionary”, according to Mark Corver, founder of dataHE (now part of THE), taking England out of line with other parts of the UK, where effective number caps remain. But Willetts argues that participation differences between England and Scotland point to the success of England’s policy.
Participation rates for the poorest quintile of the population between 2018-19 and 2022-23 rose by 29.2 per cent in England, compared with 16.1 per cent in Scotland, where tuition is fully funded for domestic students but the budget is predefined. “It’s clearly the effect of the control on numbers that the marginal students who miss out tend to be the students from a more disadvantaged background,” Willetts says.
Those in favour of the uncapped system often place it in an ideological framework: a cap on students is a cap on “aspiration” and social mobility, they argue. But those against the system point to the quantifiable decline in the unit of resource as student numbers in England have grown from 359,000 in 2010 to 414,000 in 2023 and political considerations meant the previous government was unwilling to raise the tuition fee above £9,250 in a high-inflation era.
In 2020, analysis by the OfS estimated that after rising between 2012 and 2016, the unit of resource was falling and, by 2023-24, would be similar in real terms to its level in 2011-12, when it was “particularly low” because of cuts related to the 2007-08 financial crisis. Last year, a report published by the Policy Institute at King’s College London suggested tuition fees of £9,250 were already “worth materially less than £6,000” in 2012 prices, and recent analysis by dataHE, carried out before the announcement of the fee hike to £9,535, suggested that per-student funding would soon fall below the low point of £8,800 in the mid-1990s: roughly half the per-student resource of 2012.
This is not just an issue for students. With more than 75 universities having recently undergone redundancies or restructuring programmes, according to an influential list compiled by Queen Mary University of London’s branch of the University and College Union (UCU), the issue cascades on to academics, who are expected to meet the demands of growing numbers of students with ever fewer colleagues. Notwithstanding the tuition fee rise, one vice-chancellor expects 10,000 job cuts by the end of this year across the sector, amid a "cataclysmic" financial climate.
“The removal of controls on student numbers in higher education, as part of the previous government’s obsession with a marketised education system, has resulted in unpredictability, harming staff and students alike,” says Jo Grady, general secretary of the UCU. “Under-recruitment in some places has meant course closures, job losses and a lack of choice for students, while over-recruitment in others results in overcrowded learning environments, stretched resources and overworked staff.”
Becca Harrison, a senior lecturer in film and media at the Open University, agrees that growing student numbers and falling staff numbers have resulted in unsustainable working conditions, with lecturers expected to “mark more essays per hour” and offer greater pastoral support than ever, “even though there are only so many working hours in the day”. The consequence of this, she says, is that research “gets more and more squashed”, while teaching quality also declines.
“We’re not schools. We’re not there to teach some kind of mandated curriculum. We’re there to teach cutting-edge thinking,” Harrison says. “How can we possibly do anything creative or imaginative if we don’t have time to be creative or imaginative ourselves?”
A big part of the problem is the ban on most international students bringing dependants to the UK, announced last year and which the Labour government has declined to reverse. Even before the effects of the ban were known, vice-chancellors were very concerned. Two in five of those who responded to a THE survey in January, when the ban came into effect, expected their university to be in financial deficit this year, and nearly all expected some institutions to breach agreements with banks. In the event, the ban has resulted in a 17 per cent decline in the number of UK student visa applications in the year to the end of August and a 44 per cent drop in the number of study visas issued by the Home Office in the first six months of this year.
The latest domestic recruitment round therefore became particularly important for universities’ bottom lines, with some institutions, including Durham University, advertising courses on clearing for the first time. As usual, such high-tariff universities hoovered up the greatest share of students, accepting 175,690 at the end of the cycle, up 7.8 per cent on 2023. Meanwhile, low-tariff universities saw their intake drop again, by 4.4 per cent to 161,190.
This is particularly bad news for the latter because they generally have much smaller proportions of international students than higher-tariff institutions do, according to dataHE’s Corver, “so there’s very limited opportunity for them to cross-subsidise using higher international fees”, resulting in a lower unit of resource per student at such universities. There is also evidence that the dependants ban has hit lower-tariff institutions’ international recruitment particularly hard.
Nick Hillman, director of the Higher Education Policy Institute and Willetts’ former special adviser, says the coalition government was “surprised” by the extent to which many Russell Group universities responded to the lifting of the cap by significantly increasing their undergraduate enrolment. “There’s the tendency in higher education to just say anything that’s happened was inevitable,” he says. But while “it probably looks obvious” from today’s perspective that high-tariff universities would benefit most from the policy, this was not always the view.
After all, the Russell Group “venomously” opposed the abolition of the caps at the time, Hillman recalls. The group’s then director general, Wendy Piatt, called in 2014 for the policy to be abandoned for fear that the cost of ballooning overall student numbers could prompt the government to cut the research budget.
The demand for Russell Group places is no doubt driven by the common popular conception that any “good” university is a member of the group. But that isn’t a perception that Willetts sought to encourage. He says one of his “worst” disagreements with then education secretary, Michael Gove, was over the introduction of school performance metrics based on how many students went on to study at Russell Group universities (a policy recently scrapped by the Department for Education), creating incentives for schools to send students to such providers. “That is completely contrary to my view of how students should be thinking of university and what’s best suited for their needs,” Willetts says. Where a university “fits on some externally set ranking model” should not be part of their calculus, he believes.
But David Hitchcock, a historian of poverty at Canterbury Christ Church University, who has been campaigning for a local cap on student numbers, thinks this is unrealistic. For him, the expansion of the most prestigious universities is a “structural predisposition” of the uncapped system, coupled with a funding model that is tied to student intake.
“All the money which universities collect to educate students is basically tied to the students coming to the university,” he says. “If there’s no cap, then there’s a strong financial incentive for Russell Group universities and a handful of others [with prestige] to do exactly what they did this summer and recruit as many students as possible.”
This is why “any attempt to…save the system as a whole which doesn’t look at the distribution of resources across the system won’t work”.
One factor that enhances the political palatability of number controls is that the rapid expansion or contraction of universities can have a heavy impact on their local communities and economies. On the one hand, falling demand can depress the student economy that grows up around universities, particularly in the housing and catering sectors. On the other hand, rapidly expanding demand can put huge strain on local housing markets – so much so that the student housing provider Unipol argues there is now a “crisis” in student housing in some English cities as supply fails to keep up with demand, pushing up rents and seeing students forced to live far from campus.
For instance, the University of Bristol’s 58 per cent growth in student numbers between 2010-11 and 2022-23 – from 18,965 to 29,992 – saw rents in its local vicinity rise by 24 per cent between 2021 and 2023 alone. Even before that, there were reports of Bristol students being housed in Newport, 30 miles away, and in Bath, 13 miles away. In that same year, 2021, it was reported that students at the University of York had been housed 36 miles away in Hull.
But England should also look to Scotland to see that number caps are “no silver bullet” to fix local rental markets, Willetts argues. Indeed, a report by the Scottish Parliament’s Cross Party Group on Housing, published in September, says thousands of students in Scotland are at risk of homelessness. It estimates that there is a shortage of 13,852 student beds in Edinburgh, 6,093 in Glasgow and 6,084 in Dundee.
Corver points out that this is because the main driver of rising accommodation demand in recent years, in Scotland as well as England, has been from international students – primarily, those on one-year postgraduate courses. The Higher Education Statistics Agency (Hesa) estimated that international student numbers increased by 72 per cent (276,110) between 2019 and 2022, with 63 per cent of the total being taught postgraduates.
Hence, Corver argues that number caps would be ineffective in easing student housing shortages unless they were also placed on international students. This, he points out, “has never happened before” in the UK – and he has “not heard anyone” propose it – although it is worth noting that concern about the effect of international students on the housing market has recently led Canada and Australia to introduce caps on international recruitment – much to universities’ dismay.
International caps elsewhere in the anglophone world could have the effect of redirecting even more international students to the UK, some experts predict. And that, ultimately, may be the only way out of a financial mire that, on current policy settings, will only get worse over the coming decade.
In October, a report by Hepi noted that after steadily increasing over the past two decades, the participation rate in England has gone into reverse in the past two years, while the number of 18-year-olds will decline sharply after 2030, resulting in a possible 20 per cent fall in overall demand for higher education between 2030 and 2040, “implying a very bleak outlook for many universities”.
The report’s author, Hepi president Bahram Bekhradnia, said: “It may already be too late for some, but universities are an essential part of the national infrastructure, and for the sake of the country and for the sector as a whole…some form of student number controls is required in order to ensure that perfectly good universities do not go to the wall because of the predatory – if understandable – behaviour of others.”
John Cater, the outgoing vice-chancellor of Edge Hill University and the UK’s longest serving university leader, agrees with Hitchcock and Bekhradnia that the growing gap between high- and low-tariff universities is “a natural reaction to a free market”, adding that action is needed to “help protect the student experience and the capacity of local economies to accommodate a rapidly growing or shrinking student population”.
He stresses that he does not believe that there should be a hard cap on overall numbers, but he does believe in a “managed market”.
“I think there is an argument that [the government should] restrict growth in a specific university to a certain percentage in any given year,” he says. “This, in turn, would spread demand a little further and lessen the speed of decline in less prestigious but excellent universities…Slowing the pace of change would give institutions – at both ends of the spectrum – more time, and more resources from fees, to adjust.”
Julie Hall, vice-chancellor of London Metropolitan University, would also like to see a more managed market, as the current system makes it “impossible to plan” as a university manager. She notes that certain high-cost courses, such as medicine, already have student number caps and says that it is getting ever harder for nursing and teacher-training students to obtain work placements in hospitals and schools respectively.
“We’re hearing the government talking a lot about workforce planning, saying we need more people to work for the NHS, we need more social workers, we need more teachers,” Hall says. “But it’s not a tap you can just turn on and the students will come forward and then we can just deliver. There’s a huge ecosystem around it, and that has to all be supported.”
However, she is pessimistic about the prospect of change: “There’s been an embrace of the market and the students as customers, and I just can’t see [caps] coming back. We’re too far into the world of the marketisation of higher education.”
Whether a government – particularly a new Labour government that has no political stake in the current system – would really permit a “market exit” is open to question – especially if that closure created a higher education “cold spot”: a part of the country with no higher education provision. The UCU’s Grady points out that this “could have a particularly damaging impact upon students from less advantaged backgrounds and disabled students, who are less able to relocate for study”.
However, Corver argues that while student number controls are an “attractive” mechanism to reach for in an attempt to stabilise sector finances – because they are “simple and have been done in the past” – they are not the “radical” solution that the sector arguably needs. And “there’s a danger, as always with higher education policy, of trying to get one policy to do too many things at once.”
Views on the efficacy of student number caps as a solution are, in large part, a function of opinions on whether their removal is the primary cause of the current malaise. Hillman, for one, does not believe that, dismissing talk about numbers caps as the debate “that will not die”. He argues that “a lot of these financial problems would not be there if tuition fees had been allowed to keep up” with inflation.
Andy Westwood, policy director of the Productivity Institute and professor of public policy, government and business at the University of Manchester, agrees that the sector ought not to get fixated on number controls as the magic bullet, pointing out that their abolition was part of a “suite of reforms that underlined a more market competition-based approach to the sector, on the assumption that was a good thing”. The new government therefore needs to decide whether “we can fix the current system” or whether “more fundamental reform” is necessary.
But before the government can decide, it must first ask itself: “what does it want universities for?” Westwood adds. Only then “come the questions about how you fund, incentivise, oversee and regulate them”.
For Corver, though, it remains clear that the shape of the sector should ultimately be driven by student preferences.
“I believe young people and the choices they make have a better view of what’s needed in the future than officials in central government,” he says. “I’d rather trust the choices of young people in terms of what skills are going to be needed in 2040, 2050 or 2060 than trust senior policymakers to make accurate predictions.”
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Print headline: Should student number caps be reinstated in England?
