Higher education: a study in turmoil

The University of Manchester’s announcement in May that it was to make 171 staff redundant took many higher education watchers by surprise. Its reasons for the decision were strikingly diverse: “greater global competition, reductions in public funding, exchange rate fluctuations, the potential decline in student numbers and research income, new private providers, the new teaching excellence framework, the uncertainties of Brexit and further increases in costs arising from pensions and inflation”.

Although other universities – including Aberystwyth, Bangor, Manchester Metropolitan, Heriot-Watt and Kent – also announced redundancies, no one expected Manchester, a thriving Russell Group institution, to be making cuts. The broad range of reasons it gave for the decision provides an indication of the turmoil the sector is in.

Since the then chancellor George Osborne removed the cap on student numbers three years ago, universities have had to contend with a fall in student applications (down 4% this year from 2016), uncertainties caused by the vote to leave the EU and a debate about the viability of tuition fees.

Dissatisfaction with the current regime appears to be hardening: the Labour Party fought the June election with a promise to abolish fees altogether, while former education minister Andrew Adonis has been leading the charge against excessive levels of vice-chancellor pay. Finally, the new Higher Education & Research Act has made it easier for private providers to set up business in the sector and introduces a new framework for assessing universities’ teaching quality. As Sally Hunt, general secretary of the University and College Union (UCU), says, the new act is “throwing a bomb into what was already a very unstable sector”.

Many of these changes – the removal of the cap, the introduction of private providers and the teaching excellence framework, which rates teaching quality – were intended to make universities more competitive. Originally, universities that scored well on the teaching excellence framework were to be allowed to raise their fees in line with inflation, but this is under review; many expect it to be quietly dropped after prestigious universities such as the London School of Economics ended up achieving bronze, the lowest rating.

To survive, universities must compete. They are faced with difficult choices over how best to do this. They can invest in new buildings, facilities and staff in the hope of attracting more students – but this carries the risk that, if students still go elsewhere, they will be left with a huge bill. Or they can hunker down, close unprofitable departments and focus on their core strengths.

Nottingham Trent University is one of many that has spent money on refurbishing its campuses. All the work has been financed through cash reserves, says Steve Denton, chief operating officer at the university. Other universities, he says, are “getting into bond deals and large capital finance deals – that does worry me slightly”.

The uncertainty makes decision making harder. It’s possible that the advent of private providers and the teaching excellence framework may motivate universities to up their game – indeed, Andrew McRae, head of English at the University of Exeter, argues that the framework has nudged some universities, such as University College London (a silver), into focusing more on teaching quality.

However, the framework could have damaging consequences. The UCU’s Hunt points out that UK universities are a “world-class brand that gives huge amounts of money back to the economy in terms of both research and development”. Why she asks, would the government “destabilise” the marketplace and “degrade” the sector’s reputation by “introducing providers who aren’t going to come up to standard?”

The removal of the student cap was intended to help the sector expand. However, figures on university admissions show a more mixed picture.

Between 2011 and 2015, admissions to the 24 elite Russell Group universities increased by 17%. Admissions to MillionPlus universities (representing 19 of the post-1992 universities) dropped by 19%, while admissions to University Alliance institutions, representing another 19 post-1992 institutions, plus the Open University, stayed the same. It seems that the Russell Group universities are benefiting most from the removal of the cap, and expanding to take students who would otherwise have gone elsewhere. Unless universities fish in a bigger pool, some will simply lose their students to other, more attractive institutions.

The obvious response to decreasing numbers is to drop entry requirements and, when the Guardian collected data for its university guide earlier this year, it found many universities had done just that. Denton notes the temptation to reduce the tariff but adds: “If you bring more people in at a slightly lower tariff level, you might have to support them more in key skills and they might need more investment.”

Fortunately, the impact of Brexit on student numbers may not be significant. Only 5% of undergraduates come from EU countries, so the sector may be able to absorb a drop in applications. The instability caused by Brexit so far is largely around a sense of unease among staff and students – Wyn Morgan, vice-president for education at the University of Sheffield, says that EU nationals among the staff “feel really vulnerable”.

A bigger problem when it comes to numbers may be the government’s decision to include overseas students in migration targets. Morgan says: “That has been very painful for us because the evidence suggests that students coming to study in the UK go away again. Yet we’re being held to account for something that we’re doing quite well on, so that has been extraordinarily frustrating.”

There are optimistic voices in the sector, however. Nick Hillman, director of the Higher Education Policy Institute, notes that the demographic dip that resulted in a drop in applications this year is about to go into reverse, as the babies born in the boom years since 2002 reach 18. Whether this cohort will apply to university or be put off by the increasing interest rate (about to rise to 6.1% for the highest earners) now attached to student loans remains an open question.

Some universities see the teaching excellence framework as an opportunity.

The fact that the LSE received a bronze will not dent its popularity, argues Hillman, noting that it is still “a world-famous university that is undeniably world class in its social science research”.

Equally, post-1992 universities awarded a gold can expect a reputational boost – one of those, Nottingham Trent, welcomes the new framework. “If you see any kite mark or external accreditation that’s something you take seriously as a potential customer,” says Denton.

Does that mean everyone’s a winner? Not quite. In the current landscape, some universities will continue to flourish on the strength of historic reputation. Others – Coventry is a good example – are known to provide excellent vocational degrees, having forged links with local industry. But universities offering neither the cachet of the Russell Group nor the ability to provide a strong vocational offering are likely to struggle.

Some institutions will decide to focus on more popular courses, or those that are cheap to run.

Modern language departments, which are finding it increasingly difficult to attract students, may be among the first to disappear, says McRae. “Modern languages are not cheap to teach. We used to get more money to teach modern languages than we used to get to teach English, say, but we don’t any more, so it becomes economically more sensible to take students into English,” he says.

Ultimately, we might expect increased competition to lead to less successful institutions closing. However, McRae is less sure: “If you think about the impact that has on a region, and you think about the government and local MPs standing by and accepting that, that’s where the logic of competition gets a bit more problematic.”

Universities facing a fall in applications will have to find other ways of making money. Dennis Hayes, professor of education at the University of Derby, points out that this will be more difficult for universities without a strong research income. Many, he says, are “looking for new income streams” by, for example, setting up technology parks for local businesses.

The other obvious option is to cast their nets wider, taking more students with disadvantaged backgrounds, who are still much less likely to attend university than their middle-class peers. As Hillman says: “If we think we live in a society where over time educational opportunities are going to become a little bit more even, then there is considerable room for growth.”

To attract those students, universities may need to be more flexible about their offer, organising evening or weekend lectures, for example, so students can work.

Liz Thomas, director and chair of the Widening Participation Research Centre at Edge Hill University and a consultant who advises universities about how they can widen participation, says they can be slow to change. “There’s been a lot of push around technology and trying to use more blended types of learning but, while there’s an expectation that all students learn using the virtual learning environment, there’s still a strong emphasis on face-to-face and being on campus several days a week,” she says. In many cases, she adds, there is a “lack of recognition of the complexity of people’s lives when they’re combining education with many other things”.

This is where private providers may rush to fill the gap, says McRae, particularly in disciplines such as law. “Private providers may be offering more flexible ways of delivery, and may team up with businesses so that they can offer internships and a promise of a job at the end, so different kinds of product might start to appeal to applicants with different kinds of anxieties,” he notes.

The only certainty at the moment is uncertainty. The most optimistic point to the positives – the world-class reputation of British universities and a historic ability to survive despite setbacks.

As Morgan says: “People talk about the early 1980s when there were big cuts in funding, and we talk about when we moved to fees. We really are quite resilient and we’ve been here a long time. We must be pretty good.”

This article originally appeared in Public Finance.

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