Government Considering ‘All Options’ Amid Universities’ in ’Financial Peril': Minister

File photo of university graduates on Oct. 12, 2011. Chris Radburn/PA

The universities minister has acknowledged the “financial peril” faced by UK higher education (HE) sector and said that Downing Street is considering “all options” to mitigate risks.

Baroness Jacqui Smith said she wants to ensure that “robust plans” are in place to alleviate the financial strain on HE providers.

Speaking at the annual conference of Universities UK (UUK), which represents 141 institutions, Smith also noted that HE providers are responsible to plan their finances “prudently.”

“You cannot have independence and then also expect there to be a wholly state-funded system, or for example to be in the public sector which would be a very different place for HE to be,” she told the conference.

Smith acknowledged the financial strain faced by universities across the country, but reminded the conference that HE providers are “rightly independent from government.”

The minister will work with the Office for Students (OfS), the HE regulator, “to understand the sector’s changing financial landscape.”

“And we’re determined in government that the higher education funding system should deliver for our economy, for universities and for students, and we are carefully considering all options to deliver a more robust higher education sector,” Smith said.

The remarks follow an appeal to the government by the University and College Union (UCU) in July. The UCU asked the government to offer emergency rescue packages to universities struggling with their finances.

The response from Labour government was in line with the position outlined by Smith. Education Secretary Bridget Phillipson said universities are autonomous and are expected to manage their own budgets.

Struggling Sector

The OfS researchers have previously warned that many universities will need to make significant changes to their funding arrangements in the near future to avoid closure.

In its May report, the regulator estimated that by 2026–2027 nearly two-thirds of institutions will be in deficit and 40 percent will face low liquidity at the end of the year. The worst case scenario would see over 80 percent in deficit and nearly three quarters facing low levels of liquidity.

Among factors leading to the universities’ financial struggles are inflationary pressures and the decline in student applications.

The OfS has found “apparent” gaps in domestic and international student applications, which affects the universities’ projected income from student fees

In a bid to provide better support for HE providers, the government announced last week that the OfS will focus on regulating the quality of education and protecting how public money is spent.

The decision comes after an independent report said that the OfS should closely monitor the financial sustainability of all HE providers.

The report—“Fit for Future: Higher Education Regulation Towards 2035”—said that the government and the regulator should “continue to build an infrastructure to offer advice, guidance and support for providers experiencing financial sustainability challenges, considering options such as early warning identification, management of emerging risk and prevention of disorderly market exit.”

Tuition Fees

University leaders have been calling for an increase in the annual tuition fee for domestic students to help cash-strapped institutions stay afloat.

The OfS has previously said that undergraduate fees, frozen at £9,250 since 2017, don’t represent the same value today, given high rates of inflation in recent years.

If the trend continues, the regulator warned, universities will have to drop some of its research and courses. Some universities will have to leave the higher education market altogether, causing disruption for students and the sector as a whole.

But, according to the EDSK think tank, lower tuition fees would relieve some of the financial burden from students.

Capping university tuition fees is part of the EDSK’s wider recommendations to create parity between all streams of adult education, both in-class and in the workplace, and both academic and practical.

PA Media contributed to this report.