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What the budget didn’t say

Chris Husbands argues that the latest indications of government funding intentions suggest trouble ahead

When he heard of the death of the famously devious French statesman Talleyrand, the 19th-century Austrian diplomat Metternich is reputed to have asked: “What did he mean by that?” Versions of this question were probably circulating in university senior teams on budget day.

The long-awaited, repeatedly delayed government response to Philip Augar’s May 2019 review of higher and further education funding did not appear alongside the government’s three-year Comprehensive Spending Review. The government said that its response would appear “in the coming weeks”, which Michelle Donelan, minister for higher and further education, parsed as “very shortly” in comments to the House of Commons education committee.

Now there is talk of a white paper by the end of the month, which ironically feels like record speed in terms of production times. It’s not difficult to see what the scope of such a white paper might be: policy discussion has roamed to areas including the future funding of higher education, regulation of entry and post-qualification admissions, and the impact of universities in areas without higher education provision. But I won’t cancel my early Christmas shopping schedule just yet, because these are all complex questions that demand detailed thinking about likely consequences and an overarching narrative about a long-term vision.

In the absence of such a narrative, speculation is tempting—and there’s a good deal of it. Some say that there is a continuing disagreement between (variously) the Treasury, Number 10 and the Department for Education about the future role and shape of higher education. Others argue that government is genuinely unsure about what to do, while yet others insist that education secretary Nadhim Zahawi is using his first months in office to call in papers and review the possibilities, which may in turn trigger more wide-ranging interventions. Who knows? Ultimately, of course, Talleyrand died because he ran out of life—and he didn’t mean anything more by his death than that.

Responses to Augar

In fact, the government is responding to Augar. Cast back to 2019 and the panel made 53 recommendations about the future shape and structure of post-18 education. A good number—on skills, further education and apprenticeships—are clearly shaping government thinking and legislative intention. The world is moving on at speed. Funding is going into further education—although the announcements so far do little more than make up for the cuts since 2010. The ‘skills revolution’ still feels rather underpowered and, not for the first time, underfunded.

The difficulty for government and for higher education is that there are a small number of recommendations where government has not indicated its intention, and these matter very much indeed. Two and a half years on from his report, Augar himself has said that he no longer considers his flagship fee reduction recommendation (3.2) to be relevant, but this has not stopped the Treasury apparently continuing to be tempted by it, nor nervous university leaders from worrying about it.

Meanwhile, other important funding decisions are stacking up. Augar recommended (3.3) that “government should replace in full the lost fee income [as a result of the fee cut] by increasing the teaching grant, leaving the average unit of funding unchanged at sector level”. His panel also argued (3.1) that average per-student resource should be frozen until 2022-23, and then increased along with inflation from 2023-24, and (7.1) that government should restore maintenance grants for disadvantaged students.

Funding intentions

Despite the lack of any formal announcements, there are some indications of the government’s funding intentions, and they suggest difficulties for higher education. Dig through the budget and spending review publications and there is little evidence of any intention to reshape the funding of higher education or to increase the unit of resource. If there is no statement on the review’s recommendation 3.2 (on a cut in fees), neither is there on Augar’s arguably as important 3.1 (on an inflation-linked increase in fees and the teaching grant from 2023-24).

It’s the lack of clear government intention in these areas that causes the difficulty for universities: as inflation in the wider economy increases, higher education is locked into its 2012 funding settlement with no teaching income uplift save for a small increase in 2018. The vice is tightening on university costs, salaries and student teaching and support provision. While everyone is preoccupied with talk of fee cuts, maintaining the status quo for the foreseeable future also presents real challenges.

This makes the agenda for higher education leadership over the next few years clear: it will be to deliver a post-pandemic student experience on the basis of (at best) fixed fees against rising costs and rapid expansion in the number of 18-year-olds likely to want to go to university. Assumptions about the student loan regime in the Treasury analysis essentially track future demographics, which means that the unit of resource looks set to continue to decline, with a consequentially growing efficiency agenda for universities.

Wrong-headed analysis

Back in 2012, an argument was advanced that the fee settlement introduced by former universities minister David Willetts had removed universities from dependence on government spending decisions that, over time, had produced long-term reductions in the unit of resource for teaching. By transferring the costs of higher education wholly to a loan basis, higher education had essentially, so the argument went, been financially privatised. George Osborne’s decision in 2015 to finally abolish student number controls would allow higher education’s fate to be decided by market forces and the capacity of individual institutions to respond to demand.

It’s clear that this analysis was wrong-headed. Higher education in 2021 remains dependent on government spending decisions, whether in teaching or research. The devices that were intended to preserve the unit of resource have not delivered. Resources are being squeezed. The demographics of the next decade will deliver sharp increases in demand for higher education. At some point in all this, whoever is in government is going to need to ask some tough questions about the way teaching is funded.

Questions to answer

If, as appears to continue to be the case, it remains politically impossible for the government to increase fees—which requires an affirmative vote in the Commons—and thus the unit of resource, then significant new subsidy in the form of a revived teaching grant will be required, or universities will need to deliver against a substantially lower specification, or the funding model will need to be revamped. With or without a white paper, there’s no evidence as yet that the government is grappling with these questions.

A good deal of what universities currently offer is easily taken for granted, but it in fact depends on interrelationships between the different things that they do: teaching quality and learning development, institutional stability and market responsiveness, research impact and economic innovation, and place-making and outreach through cultural and educational engagement.

The evidence of the Comprehensive Spending Review—in terms of what it did not say as much as what it did—is that the government continues to believe in the underlying financial resilience of higher education and to be confident that it can secure what it wants at a lower unit cost than universities believe they need in order to deliver on teaching, research and civic and regional impact. What can the government mean by that?

Chris Husbands is vice-chancellor of Sheffield Hallam University.