Education Secretary warns universities against “scaremongering” over the sectors overall financial position

Following media reports that a small number of universities could be on the verge of collapse, Damian Hinds has today (25 May) warned the sector over claims surrounding the wider sustainability of the sector, which he says could alarm students and the public unnecessarily.

Setting the record straight on university finances, the Education Secretary has said that while he recognises the challenges the higher education sector faces, he is calling out reports and conjecture that all institutions are in serious financial trouble.

In April the regulator, the Office for Students (OfS), concluded that the higher education sector overall was in reasonable financial health, and currently it has 350 providers registered which have satisfied the registration conditions, including on financial sustainability and viability.

While there are challenges facing the sector over the next few years, including increased competition over students, the current decline in the number of 18-year-olds and uncertainty over the impact of leaving the EU, Mr Hinds has highlighted that the Government’s changes to tuition fees have resulted in an increase in university income.  

Education Secretary Damian Hinds said:

“The financial sustainability of our universities is clearly important to the staff and students of those institutions, as well as the local economies and communities they serve. But with the vast majority of universities in a good financial position, hyperbolic warnings from some on universities’ finances are distorting the overall picture.

“Following the financial crash most sectors have had to tighten their belts whereas universities have enjoyed rising student numbers and increased tuition fee income. Since our reforms in 2012, resource per student is around an historic high.

“It is not universally understood that, although we have tuition fee loans, the system is deliberately designed in a progressive way – students repay an affordable amount based on their income and the taxpayer picks up about 45% of the cost. On top of that, there is further taxpayer funding of higher education through government grants. Universities are independent institutions – rightly so – but there is legitimate public interest in both their financial health and their value delivery.

“I do understand universities are facing some challenges, but reports of financial hardship across the entire sector is scaremongering. Most universities have healthy balance sheets. We’ve been seeing growth in international student admissions, with much further potential. And the number of 18-year olds in England is soon to enter a period of sustained growth.

“I will do all I can to ensure the sector is financially stable now and in the future, but of course institutions need to act responsibly and develop sustainably.”

Alistair Jarvis, Chief Executive of Universities UK, said:

“It is good to see the Education Secretary highlighting the importance of a financially sustainable university system for students, staff and local economies. Under this government an overly restrictive visa regime has damaged international student recruitment, teaching funding has not kept pace with inflation, the Treasury has hiked up pension contributions for many universities and the sector is braced for further funding challenges linked to Brexit.

“If Theresa May’s review of post-18 education recommends a cut in tuition fees, the funding gap must be made up in full by a government teaching grant. A funding cut for universities would be a political choice which harms students, the economy and communities that benefit from universities. Funding cut could lead to bigger class sizes, poorer facilities, labs and libraries, a worsening student experience, job cuts and less money to support access and retention. It could damage research, reduces the number of highly-skilled employees that business needs and harm our international competitiveness.”

Statistics

The fees change in England in 2012 put university funding for teaching back on a more sustainable footing, reversing many years of cuts. The increase in the fee cap in England was largely a replacement for cuts in direct government funding, including the removal of significant capital investment.

The total income for universities in England since then has increased by around £6 billion, driven by rising student numbers and the amount of funding they receive.  Analysis by Universities UK has shown that the universities sector has higher annual turnover than the legal, and advertising & marketing sectors.

Tuition fee income has risen over the last five years, with nearly 49% of institutions’ total income now coming from tuition fees.

Trends show that if participation rates remain broadly at the same level, the number of full-time undergraduate students domiciled in England entering higher education in the UK will increase in the next five years. The number of these entrants is set to rise from 364,000 in 2018/19 to 371,000 by 2023/24, as the 18-year old population starts to increase.

Over the last three years, the majority of institutions have been increasing reserves and reporting surpluses. Universities have been investing more in their estates, which have been growing over the past decade.

Tuition fee income and enrolments from international students are also at a record high, and the Education Secretary wants universities to continue to grow their international student numbers with the help of the Government’s International Education Strategy.

In order for providers to be registered with the OfS they must meet conditions of financial viability and sustainability and there are now over 350 providers registered with the regulator. This demonstrates the OfS has judged those providers are not at material risk of insolvency over the next three years and are financially sustainable over a five-year horizon. The OfS has a duty to monitor that providers continue to satisfy the registration conditions.  

The Government is currently carrying out a review of post-18 education and funding, and a panel report led by Philip Augar will publish recommendations for the government in due course.

In April, the OfS concluded the sector was in reasonable financial health and the government will continue to work with the regulator to ensure this continues.

In March, the government launched the International Education Strategy, which included an ambition to increase the number of overseas students by 30 per cent to 600,000 by 2030.