A one-off inflationary tuition fee rise will do little to resolve the financial instability in the English higher education sector, with much of the increased funding already being swallowed up by growing costs.
Education secretary Bridget Phillipson announced on 4 November that fees will increase with the retail price index of inflation to £9,535, ending a long fee freeze that started in 2017.
While universities have long pushed for the uplift, the increase will add only £285 each to a student’s annual fee, a figure dwarfed by the near £400 million in extra costs brought by the rise in national insurance contributions announced in last week’s budget.
Nick Hillman, the director of the Higher Education Policy Institute, said the fee rise needed to be more ambitious for universities “even to stand still – unless there are also to be extra government grants via the Office for Students”. Otherwise worries about “financial instability will continue”, he added.
Sir Steve West, the vice-chancellor of the University of the West of England, said that for his institution, the national insurance increase would cost an additional £4 million against a fee rise that might deliver about £1.5 million in the first year.
“The sums are stark – we are looking for an additional cost saving of £2.5 million on a 2025-26 projection of a £22 million gap on a £400 million turnover which we are currently managing down through a transformation programme,” he said, adding that the university has already had to pause the development of a new £120 million health facility because of the cost pressures.
Universities have long accepted that a rise of anything above inflation would be politically toxic, even though if the fee had been increased yearly by inflation it would have now reached between £12,000 and £13,000. The £9,250 fee is currently worth £5,924 in 2012-13 prices.
A blueprint released by Universities UK earlier in the year called for an inflationary increase, but the sector has been pushing for such rises to be baked into the system, with the fee eventually reaching £10,500 by the end of the Parliament.
Labour has stopped short of mandating such a move although it is understood that future funding settlements for the longer term will be outlined in next year’s spring statement.
Diana Beech, the chief executive of London Higher – which represents universities in the capital – said the uplift was “welcome news for universities trying to offer a world-leading education to students against a backdrop of eight years of continuous fee freezes”.
“While the inflation-linked rise is both sound and reasonable, it still risks being engulfed by the hike in employers’ national insurance contributions that comes into force in the spring,” she added.
She said that its impact on prospective students’ considerations whether to embark on higher education “must not be underestimated”.
Warnings that higher fees would put young people off entering higher education have seemingly been proved unfounded in the past, with the participation rate increasing steadily even after fees tripled in 2012.
Students enrolling next autumn, however, face a cost-of-living crisis that is already thought to be taking its toll on the desire of people to go to university. Projections of a rise in student numbers of 350,000 by 2035 were recently labelled “unrealistic”.
Although fee rises have been accompanied by increases in maintenance loans, even a small additional cost to the price of going to university may yet prove the difference for some applicants.
Dr Beech said it was important people “do not feel priced out of the opportunity to embark on higher education and succeed.
Sir David Bell, the vice-chancellor of the University of Sunderland, said the announcement was a “positive development but, of course, cannot – and is not intended to – shape the longer-term direction of the higher education sector”.
A substantial rethink of how the system works for students, universities and society as a whole was needed, Sir David said, adding that he hoped a more significant review would be announced in the next few months.
Jess Lister, associate director of consultancy Public First, said the announcement had given “a little but asked for a lot” with Ms Phillipson making it clear that there was an expectation universities must do more in various aspects of their operations, especially widening access, civic engagement and providing value for money.
Any more significant reforms – expected to be announced in the spring – will therefore likely require universities to “fundamentally rethink their approach in a number of areas”, said Ms Lister.
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Print headline: Fee rise ‘fails to stabilise institutional finances’
