DfE study of English universities’ costs seen as path to fee cut

The UK Department for Education has commissioned accountants KPMG to conduct a study of how much it costs universities to teach their students, in a move seen by some as a potential mechanism to lower the tuition fee cap in England.

Universities taking part in the survey by KPMG were set a deadline of 12 October to provide information on the costs of teaching undergraduates in different subjects. The survey asked universities for information based on their Transparent Approach to Costing (Trac) data on teaching.

A letter from the DfE inviting institutions to take part says the work is to “further inform” the review of post-18 education funding being led by Philip Augar. “Building on information already collected as part of the Trac exercise, the study will examine how tuition fee levels and institutional funding compare to the real costs of subject provision; what variation exists across the sector and between subject areas; what causes the differences in costs incurred and how this influences institution decisions around pricing and supply,” it adds.

The letter, from director of student finance Matt Toombs, says KPMG would initially seek to work with a small group of pilot institutions before the data collection exercise was “rolled out more widely to all participating providers”.

The DfE may be seeking to add context and better refine the existing Trac data.

One senior figure in the sector described the KPMG costs study as potentially “enormously significant”, and as having no possible purpose other than to gather evidence for the lowering of the fee cap.

“If you’re looking at options for reducing the headline fee, then having a view on what you think it costs to teach is part of your armoury,” said another sector source.

Some suggest that the DfE could use the results of the KPMG study to produce a sector-wide average cost across different subjects, and on the basis of that then lower the fee cap and offer students a guarantee that they would “not pay any more than the cost of their degree” (based on those average costs).

Although variable fees have not previously been thought to be on the Augar review's agenda, the KPMG study could also, in theory, support a move to such a system, by providing the figures for average costs of teaching across different courses and institutions.

If the Augar review and the government response did result in a lowering of the fee cap, the key question would be the extent to which public spending via teaching grant replaced the lost income for universities.

Increasing the level of teaching grant for high-cost science and engineering subjects is seen as one potential outcome by some in the sector; another is reintroducing teaching grant for part-time students.

However, the outcomes of the review by the Office for National Statistics of how student loans are treated in government accounts are likely to be an important factor. With the ONS having said that its review will be delivered by the end of December, the Augar review has been delayed and is now not expected to report until late January at the earliest.

The ONS work could potentially result in the funding status quo appearing more costly in terms of impact on the deficit than it does at present.

Nick Hillman, director of the Higher Education Policy Institute, said that he would be “very interested to see the KPMG work when it appears, but we already know the answer from Trac data”.

He explained: “Universities spend almost exactly what they receive from home and [European Union] fees, plus the teaching grant, on educating home and EU students. That is hardly surprising because universities respond to the level of resource available. If someone tells them they have to teach for less, they will – but the education will be commensurately worse.”

john.morgan@timeshighereducation.com