England’s universities have reached an inflection point. Financial pressures are severe and worsening. With a new government in office, there is an opportunity to undertake a thorough reappraisal, and the education secretary, Bridget Phillipson, has signalled she is ready to do so. She rightly recognises the economic value and social importance of our world-leading university sector. But universities must not be complacent. The new government cannot resolve all of their problems. As universities are autonomous institutions, the onus is on the sector as much as on ministers to offer up solutions, and the new blueprint report from Universities UK, due to be released this week, embraces this responsibility.
I want to see a proper widening of access to Britain’s highest-ranking universities. As well as providing a first-rate teaching deal to their students, they must be powerhouses of social mobility if they are to retain political and public support. A disproportionate number of privileged students from well-off backgrounds are represented at our highest-tariff institutions when we know there are many others with real potential who do not manage to overcome the disadvantages of birth and upbringing to get to university. Those who do succeed from the state school sector often do so because their parents with the means can, and do, game the system by moving closer to the best-performing state schools.
Just 29% of students eligible for free school meals even take A-levels compared to 54% of other students. This is a troubling statistic. A-levels are not the only route to our high-tariff universities, but they are the main one. I want to see universities, including Oxford, where I am running to be the next chancellor, do much more to help disadvantaged students see their future at our most prestigious institutions and assist them in getting there.
That is also why I do not believe we can pile an ever-larger share of the burden of financing universities on to students. Again, it is the most disadvantaged who will be most reluctant to take on student debt. Despite not having risen substantially since 2012, domestic tuition fees in England are already among the highest in the OECD. Yet in real terms they are now worth around a third less to universities. We have to recognise the public value of this investment and not just the return to the individual student.
I believe introducing some form of inflationary link to domestic tuition fees would be a fair approach, recognising the country’s very tight fiscal constraints and the need to steady university finances. It would ensure fees do not become more expensive in real terms for students while securing the value of this income for universities. This would be a stabilising move ahead of further much-needed reforms both to improve university finances and make the loans system fairer for individuals. To guard against any 2012-style tripling of fees, there should be a “double lock” on any increases so that fees rise only by the rate of the consumer price index (CPI) or 2.5%, whichever is lowest. This would mean in the first year that domestic fees would rise, at most, from £9,250 a year to £9,481.
This must be accompanied by making the student loan system more progressive. Currently all new graduates repay the same proportion of their loan – 9% above a salary threshold of £25,000 – irrespective of their income level. This results in repayments over graduates’ lifetimes that can be similar regardless of income.
Modelling by London Economics suggests that a “stepped” repayment system would be cost neutral to taxpayers and universities while being fairer and more progressive. Rather than the current flat rate, repayments would start at 3% and increase as earnings rise. They would begin at a similar salary level to today’s, rising to 4%, 6% and 8% as earnings grow in £10,000 increments. This would be particularly beneficial for women, who are more likely to pursue degrees in subjects that are crucial to public services, such as nursing, but whose salaries can be comparatively low. It would reduce repayments for most low and middle earners, offset by higher repayments for higher earners.
Finally, universities themselves must become more efficient. For the last eight years I have been chancellor of Manchester Metropolitan University, and I know a well-led and well-run university when I see one. Most universities are already pursuing cost-saving measures, but more tough choices need to be made. Currently the student-to-staff ratio in the UK is significantly lower than the OECD average. In 2020, the UK had an average of 13 students per member of teaching staff, compared to 21 in Italy, 19 in Belgium and 17 in France. There must be some scope for this to increase while protecting teaching quality and improving the student experience.
Another area ripe for reform is administrative and back-office functions. As the Universities UK report highlights, just 7% of universities share services with other institutions. We have seen how schools can benefit from the economies of scale in multi-academy trusts (Mats). Universities must learn from these examples, and the government should support institutions in meeting the upfront cost of these changes.
Finally, institutions need to double down on areas of strength and specialisation. For some institutions, this will mean focusing less on research and more on teaching excellence. For others, it will mean narrowing their research activity into fewer fields – ones in which they have a track record or specialist capability. Some will have good reason to take a hybrid approach. There is no one-size-fits-all, and the diversity of the sector, including our specialist research institutes, is a great strength. But choices need to be made, and the government should support universities in transitioning to new business models, including by adapting the financial incentives that drive current behaviour.
Inaction is not an option. We are drifting towards a state of universities being in near-permanent crisis. These ideas should be only the start of overhauling the sector to put it on a more secure footing. Our future economic growth and prosperity depend on it.
Lord Mandelson is chancellor of Manchester Metropolitan University. He was the Labour MP for Hartlepool from 1992 to 2004, and a cabinet minister under Tony Blair and Gordon Brown
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