HE UNDER BIG FUNDING PRESSURE

HE  UNDER BIG FUNDING PRESSURE

Splits in Coalition approach evident

Comment

Universities generate £59 billion for the UK economy annually, including £32.4 billion created in other sectors through knock-on impact, making them larger than either the pharmaceutical or air transport industries.

Our universities are world leading, and we have an extraordinary record of scientific discovery. Many see the sector as  vital for the future of the UK as a leading knowledge-economy and want  spending on science and research  protected: other countries are pumping money into these areas because they are the key to future economic prosperity.

But the HE sector is in decline suffering from a lack of investment and with funding cuts in the pipeline ,this decline looks to continue. Most agree that the current funding system is unsustainable, which is why Lord Browne was asked to conduct a Review by the last Government.  David Willets pointed out in his Oxford Brookes speech this month that “  If fees were to go up, the Government would have to lend people the money to pay for them – and that would push up public spending. It’s not just that students don’t want to pay higher fees: the Treasury can’t afford them. So the arrangements we have now are clearly unable to respond to the current economic climate.”

While   most of our international competitors  invest heavily in universities, the Labour government   just before the election announced cuts (in England) of £449m to the planned higher education funding council budget for 2010-11, with a further £600m to be found from the higher education and science budgets by 2013. The Coalition  government  then added £200m of further cuts last month out of a higher education and science spend of around £14bn.

However, against the backdrop of the recession,  applications are up 16 per cent on this time last year, and there simply isn’t the capacity to meet such a surge in demand.

During the election the Lib Dems committed themselves to abolishing tuition fees over a six year time frame. Most recently Simon Hughes MP, just elected as  the Lib Dem  party deputy, reiterated his party’s commitment to this pledge. The Tories on the other hand  have shown their willingness to contemplate a fee rise rather than abolition. The coalition partners are awaiting Lord Brownes report which is likely to recommend more flexibility over fees but certainly not their abolition. The coalition partners look to be on a collision course over this. What the Lib Dems have not spelt out though  is how they will secure a robust, sustainable   funding model  and  protect the  global competitiveness of  our  HE sector.

What is profoundly worrying about this for the HE sector is that they envisage a series of  cuts lasting maybe four years. Even if Lord Browne reports ahead of schedule, this summer, his recommendations can only be implemented as each cohort of new students starts, beginning in 2013 or 2012 at a push; thus it will be 2014/15 at the very earliest before any increase in the private contribution reaches a steady state.

Universities UK has pointed out that an  analysis by the Institute for Fiscal Studies shows that under the current maintenance and fee loan system in England, the average taxpayer subsidy is 23% – in other words, for every £1 loaned in the form of maintenance and fee loans, the government must pay 23p.

“One of the options put forward would be for government to consider charging an interest rate on loans equal to the government’s cost of borrowing  (currently 2.2%) which would save the taxpayer money.” Universities UK said. They also   believe that the alternative models for leveraging private finance into the sector which currently exist should be explored in  much more detail.

This issue though is potentially  dangerous for the coalition and we shall have to see how it reacts to the Browne recommendations

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