The Russell Group of large research-intensive universities says it could by 2013 face a deficit of more than £1 billion that would force it to make large cuts unless action is taken to boost funding.
In its first submission to the review of student fees and higher education finance led by Lord Browne of Madingley, published today for the first time, the group also warns that raising fees for international students and making efficiency savings are unlikely to tackle the shortfall.
Instead, it suggests increasing the speed at which students repay their loans or applying a real rate of interest to repayments.
The document, which has been kept private for months to the anger of student and other groups, talks of “serious shortcomings” in the current system of funding and student support.
“This paper presents evidence that the financial sustainability of Russell Group universities is severely at risk,” it states.
“We have conducted an analysis which forecasts the overall financial sustainability of Russell Group universities over the next few years.
“It predicts that Russell Group universities could be faced with an overall deficit of more than £1.1 billion by 2012-13. Universities will be forced to make significant cost reductions, which are likely to involve reducing staff numbers and cutting back on investment in vital infrastructure.
“In the absence of additional funding, these measures could result in a serious impairment of the student experience and jeopardise the long-term quality of higher education delivered, with serious consequences for students, employers and wider society.”
The submission argues that variable tuition fees have helped create a “world-class student experience” since their introduction, through better investment in staff, infrastructure and materials. It also states there is “clear evidence” that fees have helped bolster participation in higher education.
Although it does not explicitly call for an end to the present fee cap, the paper suggests that there are only three ways to offset the projected deficit among Russell Group members: cutting staff numbers, raising fees for home undergraduates and increasing fees for students from outside the European Union.
The document then goes on to explain how cutbacks and fee hikes for non-EU students would fail to remedy the situation.
With foreign students’ fees, the group claims it would have to increase them by more than 200 per cent to make a difference, “placing in jeopardy the stability of the UK international student market”.
“Given this context, it is clear that, although income from non-EU students will continue to be an important revenue source for Russell Group universities, it cannot be relied upon as a solution to the financial difficulties we predict they will face over the next few years,” the report says.
On the potential for cuts, it states there is a “limit to how far gains in efficiency can be made before staff reductions or reduced investment in infrastructure begin to have a severe impact on the student experience, and eventually on the international reputation and success of the university”.
In its final section, the submission turns its attention to student loans, stating: “The high cost of the current system largely results from excessively high subsidies.”
“The system is one of the most generous in the world, providing all students with in-built insurance against spiralling debt and inability to repay.
“Therefore, it is also immensely costly, includes excessive and unnecessary subsidies supported by the taxpayer, and includes some regressive features.”
Suggesting either a real rate of interest or a higher repayment rate for student loans, the submission concludes: “The current system of student support could be made more sustainable through addressing some of the poorly targeted and excessive subsidies provided.”
Aaron Porter, president-elect of the National Union of Students, said the Russell Group’s suggestions were “highly regressive”.
He said: “In this submission the Russell Group has casually advocated cutting the repayment threshold and increasing monthly repayments, plunging graduates into greater hardship at a time we already know will be tough.
“There are more progressive ways to address inefficiencies in the student loan system, which Lord Browne needs to consider – but he should rule out this highly regressive approach to student finance.”
Sally Hunt, general secretary of the University and College Union, said: “We desperately need to overhaul how universities are funded and move away from the idea that the current review of student funding is merely a question of how much student fees rise.”
The Russell Group’s second submission to the Browne review, which is expected to include more concrete proposals on what changes it feels are necessary to fees and funding, is due to be published next week.