British Universities are at breaking point

How have universities managed to accrue too much and too little money at the same time?

Another day at university, another picket line at the main gate. For many of us, this has become a familiar sight – especially those who already went through it last year, and the year before, experiencing marking boycotts and cancelled classes. But why is the conflict still not resolved? Why won’t universities just give employees a pay rise?

One might – based on political perspective – blame either uncompromising administrations, or hard-line unions. But the problem is more fundamental: British universities suffer from a fundamental funding crisis. And after years of stretching the existing model, they have now reached breaking point.

By any standards, British universities are excellent: four universities rank in the top 10 worldwide, with a further 17 British institutions in the world top 100, according to the latest QS university rankings. Sure, the USA has 27 – but it also has a population that is five times larger. More appropriately, the UK can be compared to Italy, France, and Germany, all of which have a broadly similar number of inhabitants. France and Germany manage four each in the Top 100 – Italy exactly zero. 

QS rankings may be abstract, but the difference can be felt in everyday student experience. The University of Glasgow has a brand-new Learning Hub that cost £90 million, many professors rank among the top of their field, and students are taught in tutorial classes of 15 to 30 people. When you compare that to my undergraduate institution in Germany, a respectable institution, but one that lacked money to fix the holes in the library roof, has few professors holding great academic credentials, and where tutorials with more than 50 students were common, the difference is clear. 

What causes these big gaps in quality? The answer comes down to finances. Continental European universities mostly rely on state money. In both Germany and France, over 70 percent of money for universities comes from the public purse. That means education is almost free and easily accessible, but also that money supply is mostly tight. The UK has chosen a different path: 72 percent of university financing comes from private spending, mostly tuition fees. This is the highest share among all western European nations, and it allows UK institutions to splash out a lot of cash: £25,000 per student per year, 50 percent more than in Germany or France. According to the OECD, a club of high-income countries, UK spending is the third-highest among Western countries after Luxembourg and the USA. This spending allows for better infrastructure, more teaching staff and hiring the best professors. Tuition fees are an important reason for British excellence.

But if universities have so much money, why are they not willing to pay their staff more? One reason is the development of funding. Tuition fees were reintroduced in 2004 during the Labour government of Tony Blair, capped at £3,000 per year. A few years later, the new Conservative-Liberal coalition raised the cap to £9,000 from 2012 onwards. Even though state funding was cut at the same time, this was still a huge financial boost, with the best universities profiting the most. Universities got the opportunity to drastically increase their spending and doing so was hardly optional. Keeping fees and expenses low would have meant a worsening quality of education, and falling behind in the all-important league tables. 

Little surprisingly, though, £9,000 tuition fees were not popular with students, with the National Union of Students calling the measure “an outrage”. Likewise, two thirds of the public opposed the increase, according to an Ipsos poll at the time. That might be the main reason why the cap has effectively remained the same ever since, with only one small rise to £9,250 in 2016. In Scotland, the government has gone even further, freeing domestic students from tuition fees but also mostly keeping funding constant in nominal terms.

Because of this, the value of domestic tuition fees has drastically eroded after accounting for inflation. If tuition fees would have risen with prices, they would have to be around £12,000 now. Given this, real purchasing power of domestic fees has decreased by 24 percent. In Scotland, government funding for domestic students has gone down even more, according to Universities Scotland. Universities UK has called the current system “broken”.

So even though British universities still have a lot of money in international comparison, they earn much less from domestic students than 10 years ago. One way out of this financial corner might be cutting staff. But that is hardly an option if the quality of teaching is to be sustained. The logical result is stagnant pay and, by now, strikes from employees who suffer from the cost-of-living crisis. 

There is one trick, though, which allowed universities to mitigate the worst effects until now: international students. As the fees for non-UK students are unrestricted, they have risen ever higher, often totalling over £20,000 a year. At the same time, the number of international students in the UK has increased – by 60 percent from 2012 to 2021. By now, international students make up nearly 25 percent of the total student population. The University of Glasgow has specialised in this model to some extent. The share of international students is around 40 percent. International student numbers have seen supercharged growth: 137 percent from 2014 to 2021. As domestic student numbers expanded as well, even though much more modestly, overall student numbers jumped up from 27,000 in 2014/15 to 43,000 in 2021/22. 

Accepting ever more (international) students has allowed universities to continue spending. But it has been detrimental to student welfare, as every one of us can attest: overcrowded lecture halls and study spaces, stretched support services, and a city-wide housing crunch leading to rising rents.

By now, the model appears to have come to an end. Student numbers and the share of international students cannot be expanded forever. Concerns surrounding immigration numbers have already led the government to restrict visas for the dependents of international students. One way to solve the funding problem might be more money from the Treasury, but with public budgets tight and tax rises not being very popular, this seems unlikely.

In the past ten years, British universities have managed to carry out world-class teaching and research, fuelled by an initial increase in tuition fees and later foreign students’ money. At the same time, political pressure made sure that costs for domestic students were kept steady and, especially in Scotland, very low. It seemed like a magic trick: accessibility and excellence combined.

Now, this magical formula has broken down. Something must give: domestic tuition fees have to go up or academic quality has to go down. Society must choose between broad educational access, or a better education for fewer people.