Keen observers of universities in the UK have long warned of an impending crisis. Yet the government’s response is looking very flimsy and paper-thin. The House of Commons looks like a bleak house overlooking a bleak landscape of Higher Education. Although promises have been made to reform university funding soon, it seems little is likely with graduates bearing the increased costs over time. Soon, a comprehensive spending review will emerge, but no one is holding their breath. Efficiencies are being called for that will impact students and the experience and support they were promised or expected. Whilst increased funding should depend on greater efficiencies, there is a better and fairer way to share the costs amongst those who benefit. This includes graduates, employers and the wider public. Student numbers should be capped to match the available resources in universities and ensure quality and standards are maintained. Continuing with the current models across the UK is no longer tenable, and a solution that levels the field across the whole of the UK is needed.
Back in November of last year, Jacqui Smith, the Minister of State for Skills, Women and Equalities (aka the Rt Hon Baroness Smith of Malvern) made a key statement in the House of Lords on Higher Education reform. Essentially, students will have to pay higher fees in line with inflation and can expect more in maintenance loans. The reason being,
“…..it is no use keeping tuition fees down for future students if the universities are not there for them to attend”.
However, the rise in the number of universities with mounting deficits, leading to plans to lay off more staff, can only point to insolvency in some cases.
As of this month, eighteen universities have yet to file their financial data with HESA (Higher Education Provider Data: Finance 2023/24). Overall, many universities are hovering on the brink with net liquidity measured in a few days (latest HESA Key Financial indicators)
The regulator in England, the Office for Students (OfS), is preparing for this possibility with ‘takeover consultants’ hovering in the wings. There will be no bailout, just ruthless cuts to any institution in this situation. The only possibility for universities is to restructure and cut costs. Any hope they had that a new Labour government would improve funding has evaporated.
Efficiency, efficiency, efficiency.
The old mantra of ‘education, education, education’ is a mere whisper in the corridors of government. Efficiency is now king.
Hiding in the statement by Smith was a comment on efficiency.
“Lying beneath those challenges must be a further transformation: a renewed drive for efficiency. Students and taxpayers support the costs of our universities. They are right to expect that every penny is spent effectively. We will not accept wasteful spending”.
More recently, writing in the Telegraph this month, Smith reinforced the call for greater care of public money with,
“We ask students to make a considerable investment in their degrees. Universities have huge revenues and must be more transparent about where this money is going”
“They ask government to do more to support them, but seem to have lost sight of their responsibility to protect public money.”
What does efficiency mean in terms of a university?
In simple terms, it means maximising outcomes while minimising costs. It usually refers to how well time, money, academic staff, facilities, and administration are used to achieve a complex mix of education, quality research, and student success. Yet we have a government that thinks universities are inherently wasteful and inefficient. Also, they are not shy about broadcasting this to the world. However, this becomes complex when looked at more closely and can be divided into five competing goals that must be balanced:
1. Operational Efficiency in administration with more automation, fewer staff and cutting all ‘wasteful ‘spending, such as training.
2. Academic Efficiency in graduating students as fast as possible with fewer staff. This means changes to the teaching time and cuts to the curriculum.
3. Resource Efficiency means funding strategic priorities only and rationalising the campus estate and selling buildings.
4. Cost Efficiency means delivering affordable education and reduced cost. Hopefully, without sacrificing quality.
5. Outcome Efficiency means high employability rates of graduates and delivering more to society and local economies.
The key measure of efficiency is the student: staff ratio (SSR). This shows the total number of students per member of the academic teaching staff. This figure has been rising across most universities up to 2021. Since then, the HESA ‘New student data model’ leaves this measure clouded in some mystery. However, universities are well aware that they are trying to cope with an acceleration in the SSR in the last three years. In February of this year, Times Higher Education reported ‘Class size increases ‘inevitable’ amid financial crisis, say v-cs’. The differences between institutions are stark, with post-92 universities working with SSRs well above 20. Conversely, the research-intensive universities, such as the Russell Group, work with around half of that overall. However, they have a considerable number of research-only staff who contribute little to teaching. The teaching staff are therefore taking most of the load and under as much pressure.
Some research-intensive universities (Russell Group in particular) have been accused of shedding staff unnecessarily. However, they will already be looking at uncertainties around REF2029. The exercise is expensive in terms of resources, but the implications for future income are important. Many managers will seek to ditch older, more expensive staff in favour of lower-cost younger staff. The recent cuts by the government to the ‘Strategic Priorities Grant 2025/26’ might herald more cuts on the way and a further sting in the tail when REF 2029 funding is revealed. The lack of certainty means fewer staff over the intervening time.
Lessons in efficiency from around the UK.
It will not have escaped the Westminster government’s attention that there are large differences in ‘efficiencies’ across the UK. The fact that many universities appear to operate with a larger SSR than others in England will have initially drawn their attention to improving efficiency. But looking at other UK jurisdictions will have convinced them that further efficiencies are possible.
Last year, a series of pre-election reports for the Nuffield Foundation and the Higher Education Policy Institute by London Economics provided a detailed analysis of university funding across the UK (General Election Briefings: Examination of higher education fees and funding across the UK – February 2024). It highlighted the differences effectively, as noted here.
In England, universities have the highest net income per student, primarily funded through tuition fees, with minimal government contribution. There is free tuition for Scottish students with a government contribution per student. However, universities receive significantly less income per student when compared to England. Wales provides generous maintenance support to students, with a balanced contribution between tuition fees and government funding.
However, Northern Ireland gets the efficiency prize. It has lower tuition fees, with a small government contribution, resulting in the lowest net income per student among the four nations.
These disparities have prevailed for many years. I have first-hand experience of Northern Ireland as a member of the Governing Body (Senate) and the finance and planning committee at Queen’s University Belfast for several years. I concluded that the situation in Northern Ireland represents the bottom line of what is possible without erosion of standards and quality. But it means that universities elsewhere will need to shed estate, overheads and staff to achieve this. Those left behind will have to work much harder under considerable pressure.
Restructuring effect on students, quality and standards.
In the end, there is no getting away from the inevitable. Staff numbers are being cut, and the SSR is rising. This means staff will have less time for students who need help. Also, universities will have less money to help students in need. The House of Commons Library reviewed the student maintenance situation in March with ‘The value of student maintenance support: Research Briefing’ (pdf). It paints a sorry picture of a declining resource. A survey of the cuts by Universities UK updated today shows the extent of the contraction overall, with the following alarming conclusion.
“Universities are trying to protect investment in student hardship and bursary funding, this being the area least likely to have faced cuts so far. However, almost half say they may need to consider this in the next three years”.
Many universities are unable to plug the gap for disadvantaged students with two outcomes. Firstly, students will spend more time in part-time employment. Secondly, they will be deterred from attending in the first place. Those who do may commute from home in greater numbers.
Universities are already responding to this by shifting to teaching in person for only two days per week. There is an inevitable contraction of the curriculum that erodes standards. The rise of AI will further exacerbate the situation by providing a mirage of false hope.
Funding reform across the UK and who pays.
It appears that the current government is turning its back on radical reform to funding universities, despite promises last year to come up with something by this summer. The path taken by the previous government is being followed despite hints of change. Those hoping for an injection of more funding will be disappointed. Clearly, any solution must somehow pay for itself.
Meanwhile, the government is deliberately squeezing universities so that restructuring and efficiencies emerge. Yet there is a solution that lowers the burden on graduates in England who shoulder most of the costs.
TEFS has proposed in recent years a fairer system of sharing the costs across those who benefit the most. This means graduates, their employers and wider society. More recently, see TEFS 13th January 2025 ‘Who benefits? Who pays? Sharing the cost of degrees amongst those who benefit’.
The simplest way to do this is to add a graduate levy to National Insurance for both graduates and employers. This would be ringfenced for universities and apply across the whole of the UK. It would level the field for all jurisdictions and mean that fees were abolished. Maintenance grants would be offered and topped up by the government. Similarly, funding for strategic subjects would be subject to planning centrally and likely student number caps. Another trade-off would have to be greater involvement by graduate employers in universities. By the time employers find that graduates know too little from a reduced curriculum, it would be too late.
Capping student numbers.
The governments in Scotland and Northern Ireland cap the number of students they wish to subsidise. Elsewhere, the numbers are uncapped, and universities are trying to increase income by admitting as many students as possible. With fewer students coming from outside the UK, this means more home students on lower fees.
It is now inevitable that numbers must be capped in England. Universities are already admitting more students than their facilities can accommodate. Lecture rooms are too small, so staff must repeat lectures and record them for students working from home. Laboratory classes are repeated multiple times in science and engineering, and this cuts the laboratory time available to individual students.
TEFS proposes that there is a cap on the number of students so that they match the resources available. This should be enforced through better regulation that is more focused on quality and standards. Increasing student numbers would have to be matched by investment in facilities and staff. The ‘greater efficiency’ route could spiral out of control, with rigour, curriculum and standards being eroded too far.
This is a pivotal point in the future of our universities. Things can and must be improved. A laissez-faire approach from the government is doomed to failure.
Returning to bleak house.
“There were two classes of charitable people: one, the people who did a little and made a great deal of noise; the other, the people who did a great deal and made no noise at all.” Bleak House, Charles Dickens.
He might have added, “and those who did nothing and said nothing”.
The author, Mike Larkin, retired from Queen’s University Belfast after 37 years teaching Microbiology, Biochemistry and Genetics.