Universities under pressure to hike tuition fees amid soaring inflation

By Rosie Neville, Third Year Economics and Politics

As inflation soars, several vice-chancellors are calling for increases in domestic tuition fees in order to keep running universities.

Among these include Sir David Bell, vice-chancellor at the University of Sunderland and a former permanent secretary at the Department for Education, who told The Times: ‘If you want to keep running universities even at the level we have now, you have to increase the tuition fee at some point.’

When speaking to Epigram, Professor Evelyn Welch—Vice-Chancellor at the University of Bristol—underlined the financial pressures facing the University. She pointed out that, due to inflation, ‘what bought £9,250 two years ago now only buys around £6,600.’

When Epigram contacted the University of Bristol’s senior team to ask whether they supported the calls to increase domestic tuition fees, Professor Evelyn Welch said:

'Tuition fees of £9,000 were introduced 10 years ago, rising to £9,250 in 2017. The cost of running a university, as with most things, has vastly increased in that time. This often leaves universities with difficult decisions to make around finances and how to ensure we can provide the very best education, experience and facilities for our students.

'I would be very reluctant to see students taking on more debt given the understandable anxiety this would cause. Instead, I would urge the Government to develop a new funding formula that is fair to students and taxpayers while ensuring universities can continue to deliver a world-class education to not only benefit students but the wider society and productivity of the country'.

How are Universities financed?

In the UK, Universities are funded by a combination of direct government grants and tuition fees charged to students, which can be paid back incrementally. The systems vary across the four nations of the UK as higher education is a devolved policy area.

In England, tuition fees have been capped at £9,250 since 2017 and are set to remain at this level until 2025. Tuition fees were initially introduced in 1998, under New Labour, at £1,000. They were subsequently raised to £3,000 in 2006 and £9,000 in 2012.

It is important to note tuition fees are not upfront costs to UK students, who are eligible for a loan allowing them to make tuition fee payments - hence why the system is often compared to a ‘graduate tax’. Graduates start to pay back these loans once their average income reaches a specific threshold.

Even with new student finance reforms announced this year, which reduced the repayment threshold from £27,295 to £25,000 and extends the repayment period, the Institute for Fiscal Studies predicts that only a third of students will fully repay their student loan.

Inflation and its impact on University finances

UK inflation now stands at around five times the two percent target set by the government for the Bank of England (BoE). In the most recent Monetary Policy Report, the BoE forecasted that inflation will peak at around 13% by the end of this year and will continue at “elevated levels” through 2023.

For UK Universities, this means that the freeze in tuition fees is experienced as a real funding cut as the income received from tuition fees no longer goes as far as it once did. As inflation is forecasted to remain at high levels, further real terms funding cuts seem inevitable.

The Russell Group—an association of research-driven universities of which the University of Bristol is a part of—have warned that the system of unsustainable funding ‘will inevitably start to undermine the quality and international competitiveness of the teaching and research that they deliver.’

A hike in tuition fees does not appear to be a flawless solution to the financial pressures faced by universities.

They have estimated that, by 2024/25, the average deficit universities would incur for teaching each undergraduate student would be £4,000. If this, as predicted by Russell Group, results in an unavoidable fall in quality, it will have a knock-on effect not only to student experience but also the graduate pipeline for the economy, potentially hindering universities’ ability to respond to skills gaps.

Universities’ solutions to squeezed finances

When speaking to The Times about how to fill the funding shortfall, Sir David Bell—Vice-Chancellor of the University of Sunderland—noted that recruiting more international students, who pay on average £24,000 a year, has become 'a financial imperative' for universities, and no longer simply a matter of choice.

The share of Overseas Undergraduate students at the University of Bristol has been steadily rising in recent years. This may indicate that the University of Bristol is facing financial incentives to recruit more overseas students at the detriment to domestic students due to the higher fees they pay.

However, the increased number of international students may contribute to funding resources for domestic students, as the income generated by their tuition fee costs allows the University to cross-subsidize.

Some argue that the high fees international students are willing to pay demonstrates the leeway the government and universities have to increase domestic tuition fees, conscious of the perceived value attached to UK degrees.

Opposition to tuition fee hike

However, these calls to increase domestic tuition fees have not come without criticism.

Geoff Barton, ASCL General Secretary, said to inews: ‘We would be extremely concerned about any big rise in university tuition fees, particularly in terms of disadvantaged young people and the potential to deter them from applying for university courses’.

Although tuition fees are not upfront costs to UK students, higher debt and potentially higher lifetime repayments will likely put off young people from lower income families from going to university, as aversion to debt is stronger among those with lower family incomes. Increasing tuition fees potentially has the danger of further impairing social mobility in the UK and could perpetuate and entrench the class divide that is apparent amongst many top UK Universities.

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Furthermore, an increase in tuition fees would likely see an increase in central government finance by proxy. This is because the majority of graduates are not set to fully pay off their student loans, so the increase in student loan debt will not lead to them repaying anymore.

Substantial financial support is required to support universities across the UK, many of which are buckling under financial pressure amidst the daunting economic circumstances and the impacts of the coronavirus pandemic.

Given both the negative impact this may have on widening-participation, as well as central government largely remaining liable for the funds, a hike in tuition fees does not appear to be a flawless solution to the financial pressures faced by universities.

The University has urged students who are struggling financially to reach out to the Student Finance Team for support.

Featured Image: Flickr / Graeme Churchard

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