The Big Squeeze

Posted on May 27, 2021 by Daniel Farrell

Todays blog post is by Andrew Hargreaves, co-founder of dataHE. dataHE is a specialist firm of market analysts for UK HE founded in 2017 to do one thing: help universities use data better. Their products run in a powerful code-based environment, purpose built for higher education and created in-house by their data scientists.

It’s not always easy to piece together Government policy thinking on Higher Education, candidly there’s not much joined up policy.  What does seem safe to conclude is that Government is concerned about the size of the student loan book, and that it wants to suppress participation in HE.

The most effective tool for suppressing demand is a student number control (SNC).  We’ve had them in the past, and the current Government had a brief dalliance with them in the 2020 recruitment cycle.  Of course anyone with a degree of political sensitivity is all too aware of how it looks to tell people they are not going to university.

There’s no question that Government is right to conclude that demand for domestic HE is set to soar.

It is well documented that the population of 18 year olds in England is about to enter a new era, contrasting starkly with the experience of the previous decade.

This demographic change is not unique, we’ve seen it before. What is unique is the proportion of the 18 year old population entering university as they leave school.  In England, in 2020, we saw 37% of all 18 year old school leavers being accepted onto a university degree.  If you’re wondering how much higher this can go then just look to London, where 48% of school leavers now enter HE.

A simple calculation  shows that the pool of English 18 year olds trying to get into university could grow by around 60% by 2030, and this is the backdrop which seems to be driving anxiety in Government.

So how do you meet a Treasury motivated decision to reduce the overall costs of HE without having a public control policy?

Firstly you can try to suppress demand.  I observe two main themes which seem to be in play:

• Diminish the perceived value of HE. There’s an often shared narrative from the SoS and Minister on the “low value” courses offered by universities.  The aim here being to paint a picture that you would be better doing something else.
• Promote alternative pathways. Whilst diminishing some parts of HE the Government is then working hard to promote apprenticeships, later-life learning, vocational study and FE. 

The problem is that, as yet, neither of these two plays are suppressing demand for universities.  In fact the opposite is happening, the application rate for the 2021 cycle has increased again.  Which leaves the other side of any market; ‘supply’.

On the supply side Government’s approach appears to be attacking the economics of delivery, to reduce the value to universities.

Again we observe two policy plays:

• Overall fees.  Government is clearly considering the Augar review recommendation of a £7,500 per annum undergraduate fee.  It’s not just the reduction from £9,250 which universities will find difficult, but that the current fee is largely unchanged since 2012 and that they have been observing annual inflation for almost a decade. 
• “Low value courses”. The Arts and some Humanities are at the forefront of this narrative, though not exclusively.  Plans to reduce funding for some study areas are aimed at reducing any financial incentives for maintaining delivery. Coupled with the fact that many of these study areas already have dwindling pools of students, then you can force the hand of some universities to remove provision all together. 

This Big Squeeze has both short-term and long-term implications.  In the short-term universities are trying to recover from the Covid-19 crisis, to manage both student and staff fatigue and to be part of any national recovery.  Squeezing the economics at a time like this will be very painful.

My greater concern is the longer-term impact.  Against a backdrop of funding uncertainty universities are hesitant to make the scale of capital investment needed to build capacity for the future.  They need to be preparing for a huge surge in demand, they need to be building, NOW. If universities fail to build capacity, and if young people want to go to university then we risk a decade of disenfranchised young people who want to go to university but simply cannot find a place, and we’re only 3-4 years away from that outcome.

UK universities are one of our national success stories, they are an enormous asset to UK Plc.  The funding of HE is complex and needs a serious solution, but surely the response should be to make the most of this sector, to tap into the asset we have developed over centuries and make it work for us, not suppress its ability to be part of the build back.