Good afternoon. I’m Georgina Quach — you may know me from editing Inside Politics — and today I wanted to discuss the erosion of student “value for money” at UK universities, a symptom of a deep financial crisis in the sector.
The academic grind
One little-noticed story from the world of higher education caught my eye last week: 68 per cent of students are taking on jobs in term time, according to a UK-wide survey of undergraduates, up from 56 per cent last year (and 34 per cent in 2021). It came as the Education Committee announced a new inquiry into the financial pressures buffeting the sector and the steps required to “stop a university from becoming insolvent”.
Departments are being asked to do more with less money — whether that’s by cutting staff numbers, slashing courses, packing more students into lecture halls or moving teaching online.
At the same time, all the other costs associated with being a university student — rent, food, books — have increased so much that most students are sacrificing study time to fund their degree. Combine that with the potential cost of foregone earnings (what you might have earned if you hadn’t gone to uni) and it starts to raise questions about value for money, as the sector’s troubled funding model puts enormous pressure on its principal activity: teaching.
Mark Corver, former managing director of Times Higher Education’s DataHE, used a handy metaphor when we spoke about how the value of the higher education “content” has dwindled relative to the total cost of going:
Paradoxically the tuition fees are too low to make the experience good value for money . . . A sausage costing 1p would probably be harder to sell than a sausage costing £1, because people would think, what’s going into a sausage that’s less than £1 to make. We risk [a degree] being poor value and people turning off it.
This chart, displaying data from Unipol’s accommodation costs survey, which covers both university-provided and private purpose-built student housing, roughly illustrates one aspect of that.
The latest annual health check of the sector by the universities’ regulator Office for Students found 43 per cent of universities forecast budget deficits for 2024-25. Even Durham, a Russell Group university, faces troubling finances: its ratio of current assets to liabilities is 0.5, far below the ratio deemed healthy by sector body Universities UK (between 1.2 and 2.0).
It boils down to insufficient funding for British undergraduates. Fees from international recruits — on mostly postgraduate courses — helped plug the gap but that income has become more volatile. In real terms, the “unit of resource” (money per student) funding the core activity of teaching full-time undergraduates is at a record low. Inflation has eaten away at its value: it’s now worth less than £5,600 at 2012 prices, according to DataHE.
So what are universities spending their dwindling cash on? As a rough guide, staff costs — including salaries and pensions — account for half of university expenditure. These expenses tend to rise gradually and predictably, which is why the Budget increase in employers’ national insurance contributions (due to appear in next year’s accounts) threw a spanner into already tight budgets that sector leaders say were only partially helped by Labour’s rise in tuition fees from £9,250 to £9,535 after an 8-year freeze.
But dig a bit deeper and you get a sense that the core teaching part — the reason why any of us pay for a degree — is being hollowed out. In some cases, it might not be well enough resourced to justify all the other costs of attending university. I was shocked to see that at the University of Manchester, only 21 per cent of expenditure is on academic staff costs, compared to 49 per cent on “other operating expenses”.
When you strip away university staff costs and financing costs, you see that huge pressure comes from “other operating expenses” — the cost of keeping the lights on, sewage and other maintenance services and not capital spending on new buildings. On average these expenses have risen from below 40 per cent a decade ago to nearly half in 2023-24.
Under that umbrella of “other expenses” is the growing burden of marketing and payments to overseas recruitment agents who funnel the majority of international students into UK universities. As cash-strapped universities compete for lucrative foreign income, agents are charging higher and higher commission rates to get students in. Take Durham: its spending on agency fees has risen from £1.5mn in 2015-16 to £5.2mn in 2023-24, according to a freedom of information request I sent.
The quality of student experience has become far more uneven across universities. Institutions with lower entry thresholds are most vulnerable to the squeeze on teaching resources.
The long tuition fee freeze is why many low tariff institutions rapidly expanded their offering of postgraduate courses — that are relatively cheap to deliver — to diversify their income and attract international students for whom a one-year programme often appeals more than a three-year course.
It’s also why some universities became more reliant on franchising (licensing a typically private partner to deliver their degree courses). That model allowed institutions to raise revenue without increasing in-house capacity, but it has come with risks for the student experience and value for money. The OfS fined Leeds Trinity university £115,000 for failing to properly oversee the quality of franchised courses, after it initially lowered English language requirements for students at subcontracted partners.
The creep of mediocrity
Let’s be clear, despite the challenging circumstances universities do a huge amount for young people. Many towns thrive because of them.
But the fact remains universities cannot get sufficient cash from the main thing they do: namely, teaching full-time undergraduate students. There are concerning numbers of academic staff reporting on Reddit of a “slow decline in teaching quality” as workloads have increased and they are forced to continue beyond contracted hours. This can lead to burn out and the loss of institutional knowledge as academics leave the profession. The result is a worsening experience for students too. One anonymous tutor — at a university which they say has avoided the worst financial turbulence — said:
They cut down our teaching time; we get 30 mins less per class with students. We also don’t get to hold an office hour for students; we get “admin time”.
Another consequence is that universities lack the resources to fully support disadvantaged students: in a survey by Universities UK last month, almost half said they may have to consider their investment in student hardship and bursary funding in the next three years.
As a result, some students opt out of higher education altogether, with the disadvantaged being disproportionately hit by rising costs.
Other students take on part-time work or choose to study remotely. This shift leads some institutions to reduce in-person teaching to just two days a week, risking a drop in academic standards and a curtailed curriculum. In some cases, staff are having to adapt classes to support international students with poor English ability, as two anonymous professors at Russell Group institutions wrote last year:
Open questions to the whole class are often met with silence, while group tasks are typically conducted using translation apps . . . We both recognise that this can be an extremely stressful and challenging environment for these students.
So there’s a structural worry that what you’re buying (the tuition) is not well resourced enough to make all the other costs stack up, as Corver says. Growing use of AI, among both learners and tutors (see this staggering story about US professors’ undisclosed use of ChatGPT) may further compound this “what am I gaining at university?” question.
In the short term, the Education Committee and the government need to set out how to handle a university that runs out of money. In the long term, they need to get universities’ core job of teaching on to a firmer financial footing. Streamlining course offerings — directing universities to provide more vocational programmes with employer input — could help. Otherwise, as the tuition fee becomes a smaller component of the overall cost of attending, universities may start losing their shine among prospective recruits at home.
Britain in numbers
Better buses — Britain’s most commonly used mode of public transport — could be the most visible legacy of the Starmer administration.
After bus service deregulation in 1985, which meant a loss of public control, usage outside of London severely declined, particularly in disadvantaged and rural areas. That has cost us dearly, according to the Institute for Public Policy Research, as lack of investment constrained economic growth and emissions savings.
Labour’s Bus Services Bill, currently progressing through Parliament, aims to reboot bus networks in several ways: first, by expanding franchising powers to all local transport authorities, not just mayoral combined authorities.
Second, the bill would require councils to identify “socially necessary” services and, working with bus operators, put in place strict requirements before these routes can be cancelled. As it stands, commercial operators can change or cut routes whenever, often with no formal accountability mechanism, leaving squeezed local authorities struggling to plug gaps.
The bottom line? The IPPR reckons every £1 invested in buses returns at least £4 in economic benefits.
The State of Britain is edited by Gordon Smith. Premium subscribers can sign up here to have it delivered straight to their inbox every Thursday afternoon. Or you can take out a Premium subscription here. Read earlier editions of the newsletter here.
