Sally Mapstone spells out what universities want from this week’s autumn statement
In the political back and forth of this parliament, sometimes the more cyclical, ‘business as usual’ events punctuating the Westminster calendar fall into the background.
This week will see what may well be the final autumn statement of this government and perhaps its most important. With the nation still gripped by a cost of living crisis, battling high interest rates, and with the Bank of England predicting flatlining growth throughout 2024, competing priorities will give the chancellor, Jeremy Hunt, limited room for manoeuvre.
Enlightened forward-thinking is needed. Department for Education research shows that between 2007 and 2019, skills and labour—driven by an increasing share of graduates in the market—were the only factors making a consistent contribution to UK productivity growth.
Our universities are a national asset, essential for economic growth and global competitiveness. They are major employers and businesses in their own right, contributing to communities locally, regionally and nationally, and generating and supporting jobs across multiple sectors the length and breadth of the UK.
Supporting higher education should be seen not as a cost to the public purse but as an investment in future prosperity.
Universities UK’s members are striving to manage their finances in the face of a turbulent economic environment, but collectively we incur an annual £1 billion loss in teaching domestic students and a £5 billion loss in the delivery of research. For a globally leading asset, this is bad news.
Some of the financial challenges facing the sector are immediate and pressing, such as the five-percentage point increase in employer contributions to the Teachers’ Pension Scheme (TPS), which is estimated to cost every institution in the scheme somewhere between £2 million and £6 million.
We have called in our autumn statement submission for further discussion with HM Treasury on the decision not to award universities—unlike other centrally funded TPS employers—additional government funding to help manage this increase.
Many of the challenges are systemic, with universities facing an increasingly serious problem over their longer-term financial sustainability. Clearly, with funding per student in England set to be the lowest in nearly 25 years by 2025-26, and worth only £5,800 in 2011-12 prices, something needs to be done.
Similar declines are being seen in Wales and Northern Ireland, where funding per student already lags that in England. In Scotland, the situation is even more acute; there, funding per student will be nearly £2,600 lower in 2023-24 than in 2014-15.
To put finances on a sustainable footing, we need to reverse the long-term decline in universities’ overall unit of resource for teaching. This could take the form of increased government grants and index linking the fee cap from 2025 onwards in England.
In managing their income challenges, universities have become increasingly reliant on income sources that generate a surplus, such as international student fees, which can then cross-subsidise other activities. These income streams are critical to the sector’s financial sustainability.
So, another key ask we make of government is that it continues to support the stable and managed growth of international students (and its own International Education Strategy) by protecting the graduate visa route and ensuring the UK maintains an internationally competitive visa regime.
A crucial piece of the puzzle is the affordability for students of funding themselves through their studies in a cost of living crisis. The student maintenance package in England is at its lowest value in seven years (in real terms). UUK has long called for a reinstatement of maintenance grants for students who need them the most. It would be hugely welcome to see this appear in chancellor Hunt’s moment at the despatch box.
Investing in research
It is singing to the choir in this column to reiterate that the UK produces world-leading research and ranks highly in important measures of research impact. Every £1 invested to help businesses and academic partners collaborate on research and development reaps a benefit of between £7 and £8 of net gross value added.
The problem is, we aren’t currently investing to support that. Indeed, UK investment in research and development as a percentage of GDP lags behind many competitors. UUK would like to see the government commit to increasing the target of 2.4 per cent of GDP invested in R&D up to a number closer to the target set by international innovation superpowers such as the US, Germany and Korea. We also argue that R&D should be treated as a long-term capital investment through 10-year funding cycles, which would maximise the ability to secure private investment. It was good to see Labour recently promise that this would be its policy if elected to government.
Both the current government and the opposition have undertaken reviews of university spinouts and startups. This demonstrates the consensus on the important role of university startups in capitalising on the UK’s world-leading research and developing businesses of the future. It is a move in the right direction.
It is also time to address the decline in real-terms value of quality-related research funding (and although it won’t be covered in this autumn statement, the devolved funding equivalents).
The UK’s economic puzzle is a difficult one, but a necessary ingredient to solve that puzzle is growth. So much evidence shows the central, and almost unique, role universities can play in generating stronger growth.
Let us hope Wednesday’s statement recognises that.
Sally Mapstone is principal and vice-chancellor of the University of St Andrews, and president of Universities UK.