Flagging fee income ‘consistent factor’ in university deficits

Almost all the English universities and colleges with larger financial deficits last year appear to be struggling to find enough income from tuition fees, a Times Higher Education analysis has suggested.

A total of 32 institutions in the country – nearly a quarter of the whole sector – recorded a deficit last year, with about 20 of those seeing a shortfall of 2 per cent of their income or more.

According to an analysis of Higher Education Statistics Agency data by THE, all but two of these institutions with larger deficits have seen income from fees fail to keep pace with the 12 per cent overall growth in England from 2015-16 to 2017-18. At seven institutions, fee income fell over the period.

There was also some evidence that many of those in deficit – which are mainly specialist colleges and post-92 universities – have had to cope with large losses in grant income from England’s funding body.

Overall, funding body income, which primarily refers to grants from the Higher Education Funding Council for England (now the Office for Students), fell by 1 per cent across the sector from 2015-16 to 2017-18.

However, this drop was larger at all but four of those with deficits above 2 per cent of income, and such grant income shrank by more than 10 per cent at half of them.

Meanwhile, some of those with larger deficits appear to have been responding to declining incomes by cutting staff costs, with five institutions seeing a decrease in spending on staff over the two years even though the sector as a whole saw such spending rise by 12 per cent.

Rachel Hewitt, director of policy and advocacy at the Higher Education Policy Institute, said part of the problem for English universities – which have in effect been competing for students since limits on recruitment were fully lifted in 2015 – had been the decline in the 18-year-old population in recent years.

This was forecast to rise from 2020, offering a glimmer of hope for institutions struggling on recruitment, but Ms Hewitt warned that the Augar review of post-18 education could throw a spanner in the works if it recommends limiting student loans to those with certain school-leaver grades.

“This policy would hit those universities with lower entry requirements the hardest and, at a time when they may have been looking to expand again based on predictions of increasing student numbers, may leave them financially vulnerable,” she said.

Alan Palmer, head of policy and research at MillionPlus, the group representing many newer universities, said the fact that fee levels had failed to keep pace with inflation was another factor that should be considered when looking at institutions’ finances.

“Not only has funding not kept pace with inflation, but for the past couple of years universities have had to also take into account feverish speculation about what the future may hold, whether [that is] fee cuts or new entry barriers for students.

“It’s no wonder that investment in long-term, sustainable higher education in such a volatile political landscape is challenging.”

simon.baker@timeshighereducation.com