Real-terms English HE funding ‘down 9 per cent since 2012’

Spending per student in English universities is now almost 10 per cent lower than 10 years ago in real terms as inflation continues to erode funding from tuition fees, according to a report.

It means that the amount of resources per student going into higher education in the country last year was only about 7 per cent higher than it was 30 years before, according to a report from the Institute for Fiscal Studies.

The figures come in the latest edition of the IFS’ annual report on education spending, which looks at real-terms public investment at a range of levels from early years to university.

In higher education, the analysis considers the total amount of money going into the sector per student from tuition fees and direct government grants, rather than the long-run taxpayer cost of the system from subsidising student loans.

It finds that in 1990-91, the resources going into higher education were the equivalent of £8,900 per undergraduate student in today’s prices. The introduction, and then increases, in tuition fees over the following years boosted university funding per student to more than £10,000 by 2012, but it has since fallen back to about £9,500 in 2020-21 – or a drop of 9 per cent since 2012 – with the steepest decline coming in the past few years.

A separate analysis by Times Higher Education using Higher Education Statistics Agency data also suggests that 2019-20 saw a substantial drop in the resource available per student, even when including all university income such as for research.

In 2019-20 prices, total university income per full-time equivalent student fell from about £20,400 in 2018-19 to £19,500 the following year, a drop of about 4.5 per cent and the biggest decline for several years.

Both analyses suggest that the freezing of the undergraduate tuition fee cap, which has been raised only once, to £9,250, since the trebling of fees in 2012 is beginning to hit the “unit of resource” in England.

It comes as the sector is still awaiting announcements from the government on the direction of higher education funding and whether there will be any change to the undergraduate fee cap or student loan repayment terms.

The IFS report says the outlook on the future of university spending is “mixed”. Cost pressures on universities suggest that a higher fee cap might be required, says the report, which also points out that uplifts in research spending could “allow the government some room to dampen increases in teaching funding”.

It also models some of the possible routes the government could take, including reducing the fee cap to £8,500 – something that was reported as being under consideration – and changing the terms of repayment on loans.

The report says that if teaching grants were raised to compensate for a lower fee cap – “but with greater differentiation by subject” – then it could “play an important role in rebalancing funding across different courses and thus aligning incentives for universities with government priorities”.

“In contrast, a cut in tuition fees without adjustments in teaching grants would be counterproductive; it would further squeeze universities’ finances and likely increase their incentive to cut provision in high-cost subject areas.”

Ben Waltmann, senior research economist at the IFS, said the current higher rate of inflation in the UK economy – the consumer price index hit 4.2 per cent in October – was also a factor in considering the future trajectory of university funding.

“Inflation is expected to be high in the coming year, but the tuition fee cap is set to remain frozen in nominal terms at £9,250 until at least the 2022-23 academic year,” he said.

“As a result, university resources per student are likely to decline in real terms – and at a faster rate than in recent years – at a time when university finances are already squeezed, partly due to ever-rising contributions to staff pensions.”

simon.baker@timeshighereducation.com