Loans and grants

Parties divided on best way out of the HE funding impasse


Clear blue water is starting to open up between the direction a future Labour government could be heading over funding higher education in England should they win the next general election and Conservative Party thinking about how to end the over-dependence on international students to subsidise growing numbers of home students and university research.

More and more universities in England claim they are making a loss teaching UK students as the freeze on home tuition fees, set at a maximum of £9,250 (US$11,800) a decade ago, means the value of these fees has dropped to £6,600 in comparative 2022-23 prices while inflation and rising costs force them to rely on raising foreign student fees to stay afloat financially.

To help find ways to balance the books without cross subsidisation, mainly from international tuition fees, the British rectors’ and vice-chancellors’ body Universities UK (UUK) has launched what it calls a ‘national conversation’, with growing evidence of the increasing financial pressure on higher education highlighted in a recent House of Lords survey.

On 15 June 2023 ‘thought leaders’ and stakeholders met in London to look at funding policy through the political lens during the UUK’s ‘Political affairs in higher education 2023’ conference.

Student number controls could return

Iain Mansfield, former special adviser to the Conservative government’s education secretary Gavin Williamson during the Boris Johnson COVID administration and previously political adviser to Jo Johnson and Michelle Donelan when they were universities ministers, kicked off proceedings by suggesting that number controls on full-time undergraduate students in higher education in England could return unless university leaders came up with a better alternative to control costs.

He said most people in the Conservative government, which first raised the maximum home tuition fees from £3,000 to £9,000 a year in 2012, and then up to £9,250 in 2013 – where they have remained ever since – understood that universities were doing a great job with science and research.

“That’s why the science budget keeps on going up,” he said, adding that the government was less convinced about the teaching side of higher education, with “worries about grade inflation and the increase in low quality degrees” and the graduate return in terms of future job prospects.

“They’re worried about universities dumbing down on exams for equity reasons,” he said.

Until those things are “fixed”, universities are unlikely to get any more money for teaching more students, Mansfield warned, at least from a Conservative government, as the increase in student numbers has failed to translate into an obvious boost to the country’s productivity.

“The 10% growth in student numbers in a decade has only been paid for by real term cuts in the unit of funding per student,” he said, adding that it had also taken 100,000 young people out of the labour market.

Mansfield is often seen as an outrider for right-wing thinking on higher education and became director of research and head of education and science at the Policy Exchange think-tank after leaving his role as a political government adviser when the Boris Johnson reign as prime minister was coming to an end.

Mansfield said he favoured number controls, which he pointed out had existed under previous governments, including the New Labour one led by Tony Blair, and suggested that if Keir Starmer’s Labour Party became the next government they were more likely to focus on student maintenance grants and reducing graduate repayment levels for student loans rather than boosting university funding.

Labour soul-searching

Labour has its own soul-searching to do over the funding of higher education and providing financial help to students, Eloise Sacares, a researcher with the Labour-affiliated Fabian Society think-tank, told the UUK political affairs event.

She said it was clear from what Sir Keir Starmer had said that Labour was set to “move on” from its previous position of abolishing tuition fees altogether.

While little detail had been announced so far, Labour would be focusing on “fairness” in any future policy, she said.

“The current system means students from low-income families, who don’t have parental [financial] support, have a huge level of debt from their student loans on graduation.

“They graduate with a higher debt than students from high-income backgrounds and a third of students from working-class backgrounds are having to skip meals and miss lectures to do part-time work because of the poor level of financial support currently available.

“The system is just not working for them,” she said.

Warning over soaring repayments

This was echoed in a report issued on 20 June from money saving expert Martin Lewis, the former head of the Independent Taskforce on Student Finance Information, who said his analysis of the new English student finance system, known as Plan 5 loans, for those starting university this September showed that the amount to be paid back would soar by 50% for many graduates, and double for a few.

He said: “The scale of change in September 2023 seems to have slipped under the radar. It will be the biggest shift in student finance for a decade.

“The changes are both subtle and massive. On the surface it looks like a tweak, in practice it will increase the cost by over 50% for many typical graduates and double it for a few.”

The key changes involve reducing the earnings level at which graduates start repaying their student loans – from above £27,295 to £25,000 – and extending the length of time that loans will be deducted through the payroll (just like tax) at the rate of 9% on earnings above £25,000 from 30 to 40 years.

After 40 years any amount left will be written off. Lewis estimates the changes will mean that over half of graduates will clear the loan in full, compared to only 23% under the current system.

Sacares told the UUK political affairs conference that Labour was looking at bringing back maintenance grants, but urged the party to be more radical and look at what (Labour-controlled) Wales has done to fund student life. “The grants there are structured, so you get more if you’re from a low-income family,” she said.

Bridget Phillipson, Labour’s shadow education secretary, was reported earlier this month by The Guardian and other media as saying that the tuition fees system in England was “broken”. She promised that Labour would overhaul changes to reduce monthly repayments for graduates.

Sliding scale possible alternative

One idea being examined in a study for the University of the Arts London whose vice-chancellor is James Purnell, a former Labour MP and secretary of state for culture in the last Labour government, is a sliding scale, or ‘stepped repayment’ alternative, as University World News reported in January 2023.

This would involve all graduates paying tax to pay something off their loans, but higher-earning graduates paying back more and for longer, with the possibility of generating additional funds to re-introduce maintenance grants for poorer students.

So perhaps it is along these lines that Labour is formulating its alternative plans for better student support, but that will still leave universities short of cash themselves and dependent on income from the higher fees international students pay to attend UK universities.

Relying on foreign fees is ‘unsustainable’

Dr Vicky Lewis, a UK-based international higher education strategy consultant, told University World News: “The growing reliance for most UK universities on fees from international students to balance the books is unsustainable.

“Given the volatility of geopolitical relationships, it is entirely possible that the flows of students from a particular country or region could reduce significantly overnight and have an immediate impact on universities’ ability to sustain teaching in some key subject areas and maintain current levels of research activity.

“There is also the question of the ethics of charging significantly higher fees to students from other countries in order to prop up our UK system and institutions.”

Nick Hillman, director of the Higher Education Policy Institute (HEPI) and a former special adviser to David Willetts (now Lord Willetts) when he was Conservative minister for universities and science, told University World News: “The model we have has worked well over the past decade and allowed more student places at a time of rising demand.

“Even the Labour Party in England, which has spent a decade fiercely opposing fees of £9,000 or £9,250 while its sister party in Wales has been implementing something similar, albeit with better student maintenance support, will probably keep the English fees system in place with a few tweaks to the repayment rules.”

System has not kept pace with inflation

Hillman said: “But the system has not kept up with the times with inflation and is close to derailment as a result.

“The simplest thing to do would be to increase fees to take inflation into account. Any politician who balks at that is ignoring the fact that the higher fees introduced in 2012 at £9,000 should be at the equivalent of £13,000 in today’s money.

“Our legislators should remember that the main alternatives, like introducing a graduate tax, are unlikely to be any easier politically – new taxes being notoriously unpopular – and others, like abolishing fees, would mean restricting student places and an even worse maintenance package during a cost-of-living crisis.

“In the meantime, while the politicians are dodging the issue, universities are left to grapple with less money to educate each home student.”

Nic Mitchell is a UK-based freelance journalist and PR consultant specialising in European and international higher education. He blogs at

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