We need to break the impasse on higher education funding. Here’s how

The current higher education funding system in England is not sustainable.

Our current system of tuition fees has delivered real-terms cut to per student funding every year for almost a decade – with the £9,250 fee worth only £6,600 in 2012-13 prices.

Unless something changes, this decline in funding threatens to imperil the UK’s world-class reputation in higher education, the ability of our universities to continue to provide the outstanding teaching and support that is required to equip the next generation with the skills the UK need, and the progress that has been made in ensuring that access to higher education is on the basis of merit and the ability to benefit, regardless of background.

Early positives

The current model does have a number of positive characteristics. The fact that university is free at the point of delivery, such that admission can be on merit, rather than ability to pay, is fundamental to a fair system – and repayments are relatively progressive, with the amount repaid per month linked to earnings.

In its early years, it provided a cash bonanza for some universities, much of which was invested in reinvigorating the capital estate. The number of people attending universities from disadvantaged backgrounds has also risen significantly.

Yet the Conservatives, currently in power, have succeeded in raising fees by inflation only once since £9,000 fees were introduced, almost a decade ago. Whether or not Keir Starmer keeps his leadership campaign pledge to abolish tuition fees, it is difficult to see Labour actively raising fees.

A funding system that cannot reliably maintain pace with inflation is not one that is sustainable or fit for the long term.

Making progress

It is for this reason that Policy Exchange this week hosted an event, Breaking the Impasse: The Great Debate on University Funding, sponsored by Durham University, that emphasised the need to think beyond the current policy framework to deliver a long-term, sustainable and affordable means of funding higher education.

A recording of the event is available, or you can read Jim Dickinson’s commentary.

Increased fees, a graduate tax, making a success of the Lifelong Loan Entitlement (which promises more flexible, modular learning) and student number controls were all on the table for debate.

The purpose of the event was not to present any of these options as “correct”, but rather to establish the need for change, and to present and showcase credible options for change, with a view to promoting debate within government, parliament, the higher education sector and wider society.

Three years ago, the two of us collaborated on the Policy Exchange report Universities at the Crossroads, exploring what universities would need to do to regain the trust of their staff, their communities and the nation as a whole.

Industrial disputes and what is, at times, a fractious relationship with government demonstrates that this paper remains as relevant as ever.

New challenges

Today, however, universities are at a different crossroads – a crossroads of financial sustainability. Unless action is taken, the funding crises we have seen at UEA, Leicester and Birkbeck may yet become the new normal.

The new Lifelong Loan Entitlement offers much potential, but little that is concrete about appetite or affordability.

We do not pretend to have all of the answers. As the debate made clear, any change to the funding system will involve trade-offs, not only in terms of who pays and how they pay, but in the impact on the culture and operation of the higher education sector itself.

The increase in fees to £9,000 did not see the feared reduction in applications from disadvantaged students, but did lead to a reduction in mature and part-time learning – and to a shift in attitude amongst students, leading to a more “commercialised” approach to learning.

Is there a politically and publicly acceptable way to raise fees – perhaps by linking them to quality, or performance? Will taxpayers stump up the additional funding to support a higher level of grant support, even for STEM subjects and medicine?

Would a graduate tax cut the Gordian knot – or would it simply see the money raised snaffled by the Treasury? Could student number controls be imposed – and stuck to – at a time when a demographic bulge coincides with increasing demand for higher education? How will the Lifelong Loan Entitlement affect all of this?

These issues and more, were debated at our event. There was no consensus as to the solution, but what is clear is that the status quo is no longer an option. Real term cuts cannot be imposed indefinitely – not without real harm to universities, to students and to our national research endeavour.

What is clear is that we will need to think beyond the constraints of the current framework if we are to secure a long-term, sustainable and affordable funding solution for higher education.