Why are England's universities in trouble?

Under the radar, and away from the benighted question of Brexit, Britain’s public sphere is in a terrible state. Hospital waiting lists that miss targets for years on end. Schools that can’t open five days a week. Councils selling off whatever property they can – and closing libraries, public toilets and youth centres faster than ever before. Hence, of course, the appeal of a more Left-wing politics these days – a perfectly appropriate response to a crisis in our shared space and common ownership.

The situation in England’s universities is no different. Away from the headlines – dominated of course by Britain’s disastrous and chaotic retreat from the European Union – England’s Higher Education Institutions are now struggling for cash. Many of them are now laying off staff, usually in a voluntary manner, but at some institutions in a widespread and sometimes desperate cull designed to save institutions from bankruptcy. At least one institution has had to be bailed out already. Rumours abound about the numbers who will get seriously into trouble if the situation gets any worse. It won’t just be a little handful, that’s for sure.

All of this has got drowned out for lots of reasons, not least the easy answers that are often rolled out when you raise this issue. ‘Well’, people say, ‘Vice-Chancellors shouldn’t pay themselves so much’. ‘Okay’, bystanders shout, ‘don’t build so many new shiny buildings then’. But although there are examples of bad behaviour and bad practice in both those spheres, that isn’t the real reason England’s universities are now struggling. This month, ‘Public Policy and the Past’ is going to take a look at the true causes of the cash crisis – a quiet but poisonous policy disaster in the making. And as ever, the answers are more surprising and revealing than the knee-jerk responses so popular on social media.

Demographics. For all the expansion of postgraduate taught and research student numbers, universities’ core business is still undergraduate teaching. But there’s a problem here. This academic year and next, the number of eighteen-year olds will reach historic lows that are far below long-term trends. There simply are not enough young people to go around – and since this government and the last have done their best to destroy the part-time and second-degree provision that used to play such a positive role across the board, that is acting as a structural drag on HEIs’ income. This situation won’t last. If the share of each cohort going to university stays the same, the rising birth rate from 2001 onwards will mean that the numbers of eighteen-year olds will rise steadily (and by over twenty per cent) in the decade after 2019/20. But universities have somehow got to bridge the gap between here and there. At the moment, shedding staff and ambitions, they’re at risk of destroying teaching provision and knowledge that will be desperately needed in the 2030s – one of the problems of the largely unplanned system we have built ourselves.

The free-for-all. One problem English universities now have is that they can’t plan ahead with any degree of certainty. Back when George Osborne was Chancellor, which yes, does feel like about a thousand years ago, he decided to take the cap-in-detail off student numbers entirely. The idea being that a ‘market’ could emerge, in which students could choose exactly where they wanted to go. Universities can now sign up as many students as they can manage. The predictable outcome: some universities went on an expansion drive to end all expansion drives, delving ‘down’ the traditional hierarchy for students if needs be. So a kind of malign Mexican Wave developed. The Russell Group kicked the middle-ranking institutions. They kicked down. Newer universities kicked new universities. New universities kicked themselves. But as the absolute numbers of young people declined, a huge amount of instability was injected into the system. Some ‘research’ universities which could rely on prestige from the past basically became teaching factories. Some ‘teaching’ universities began to specialise in profitable research, consultancy and spin-offs. No-one knew exactly how many students to expect every September. And some institutions got really nasty shocks when far fewer students actually turned up. University life took on more and more of the characteristics of merry-go-round or tombola, rather than the hallmarks of education.

The rising tide. University income got a welcome jump-start back in 2011. Tuition fees set by the incoming Coalition administration were supposed to usually stop at £6,000 per annum, only rising to £9,000 in certain circumstances. Well, of course universities set themselves immediately to jump all the barriers to charging that higher figure, and almost all of them did immediately apply the top price tag. So far, so good. But there was a problem. The quid pro quo of a one-off funding boost – replacing more than the Government was withdrawing in teaching grants – was first a total freeze on incrases, and then an inflation-based formula that in an age of subdued prices held back universities from raising their prices more than one or two per cent every year. But in a sector like education, where most costs are staff costs (or which are in a few fields related to scientific and technological change), inflation at the sharp end is actually much higher than the background number. So universities’ costs slowly approached the £9,000 per student fee over the last decade, then overall matched it, and have now overtopped it. Put simply, there simply is not enough money in the system.

The ageing professoriat. One of the reasons those costs move up higher than any increase in fees is the structure of the academic profession. Once you’re on a scale as Lecturer, Senior Lecturer, Associate Professor and the like, you get to move up one increment on the pay scale every year until you reach the top salary point for that role. And of course you then usually apply for promotion, and if you’ve been teaching, researching and publishing as you should, likely you’ll eventually get that promotion. What that means, and what that means especially in a world where there are fewer and fewer permanent entry level posts, is that the professoriat is expensive. Add to that the effects of vastly increased management surveillance and government pressure on performance indicators – meaning that staff increasingly meet the criteria for progression – and it’s an increasingly costly picture. You will probably have heard about last year’s university strike, caused by a complex mix of the pension scheme attempting to de-risk its investments and deeply questionable assumptions about yield and risk – but for now the upshot is that pensions, too, have become pricey. Add it all together, and universities basically now cost more to run than students are being asked to pay. The Government could easily make up that gap – for now – but the political drive is, shall we say, conspicuous by its absence.

The building boom. It won’t have escaped your notice that campuses look great these days – if you like a lot of glass and steel. Now this has mostly been a boon to Britain’s very competitive and very successful Higher Education sector. Vice Chancellors were usually right to rebuild. Campuses from the 1960s and 1970s were often, well, knackered: teaching needs and modes have changed; environmental standards have moved on, making energy-hungry teaching blocks seem like a throwback to the days of coal and lead; very low interest rates have meant that governing bodies can lock in cheap borrowing for capital. So far, so good. But the rush to build has also been rooted in the same helter-skelter hyper-competitive race for student numbers that is making finances so hard to plan. Prospective students and their parents are not the gullible consumers that many critics imagine: they are of course impressed, not so much by the buildings themselves, but by the care and investment in the future that they represent. Still, there’s little doubt that the sector has overshot. Very low interest rates won’t last forever; some institutions have borrowed too much, and not always on the most advantageous terms; some prestigious universities have imagined that their huge and rapid expansion can be maintained forever, in terms of the level if not of the increase. Basing their capital plans (and therefore their debt maintenance) on that model may turn out to be a huge error.

Bad policymaking. It will not have escaped your notice, on the top of all this, that the UK’s policymaking community has been making rather a hash of things of late. From Universal Credit to Chris Grayling’s train timetables, the capacity to react to Brexit and the need to update services, is just very low. It can’t be done at the same time as satisficing with a much smaller and less experienced state apparatus. Consider the situation from Vice Chancellors’ perspective. Will they be able to bid to the European Research Fund? Will they still have access to the Erasmus student programme that allows EU students to study across the continent? Will they still be able to attract the best and the brightest EU staff? Will the Government allow them to uncouple student visa numbers from their absurd overall immigration targets? The answer being: right now, who knows? So they will draw in their horns until the storm has passed – except, the way things are going, the storm may never pass. The Conservatives in government look ready to slash tuition fees and make universities absorb some of the cost – while preventing potential students from lower grades accessing the student loan system at all. Labour, for their part, want to abolish fees altogether. And if you think the Treasury will pay up for that, we’ve got a really nice bridge here we can sell you. On top of Britain’s longstanding research and development deficit, its ailing infrastructure, the anti-intellectualism that passes for much of our collective life, the path ahead looks more than steep and winding. It looks impassable.

Here, then, are the six real reasons why England’s universities are struggling. It’s not Vice-Chancellor’s pay and too many new buildings. It’s a matter of student numbers, impossible planning, rising costs and poor policymaking. All the signs are that things will continue to deteriorate – perhaps quite rapidly – before they get better. If they get better. The fantasymongers that pass for the two main parties are about to make it worse, just like they poison everything else they touch. The current rash of redundancies will assuredly snowball, and a small number of perhaps very high-profile universities which have expanded furthest and fastest will threaten to go completely belly-up. What will governments do then? In the case of redundancies, nothing, because those job losses will make the sector cheaper. In terms of actual threatened bankruptcies, though, things are trickier. Should central government bail the stragglers out, or let the unlucky victims fail before reconstructing them later? That will be the test for Whitehall and Westminster, who will yet again have set themselves a challenge that should never have arisen in the first place.