Further Education Funding System


Over the past 20 years, the systems for providing and funding higher education in Britain have been subject to multiple reforms. Provision has expanded significantly as polytechnics and new institutions were granted degree awarding powers, oversight has been devolved to the nations, grants have been replaced by loans, and most visibly, fees were introduced and raised to £9,000 in England from last September.

In a very short time England has moved from being a country which offered free university education to those who wanted it, to one which is squeezing funding and saddles its graduates with vast debts that will often never be cleared. What impact does the marketisation of further education (FE) have, and will the taxpayer actually benefit?

First, let us examine the financing of FE as it stands today. Most students pay fees at the statutory limit of £9,000, financed by loans from the state-owned Student Loans Company (except in the few cases where students pay upfront). These fees are paid to and retained by the universities, with the government claiming that universities would be able to benefit in part from the increases, as state grants would be only modestly reduced. Unfortunately, the Higher Education Funding Council for England (HEFCE) was in fact forced to implement cuts of 12.6% in 2011 alone. Not even the top universities have emerged unscathed, as the table below indicates:

University Total recurrent funding 2012/3 No. of students Funding per head
University of Oxford £177.8 million 25,000 £7,112
University of Cambridge £169.2 million 21,000 £8,057
LSE £24.4 million 10,000 £2,440
Imperial College London £148.2 million 15,000 £9,880
Durham University £55.6 million 16,000 £3,475
University College London £174.2 million 25,000 £6,968
University of Warwick £67.2 million 28,000 £2,400
University of Bath £45.3 million 15,000 £3,020
University of Exeter £54.8 million 18,000 £3,044
University of Bristol £103.2 million 20,000 £5,106


The wild variation can be partly accounted for by the fact that universities which specialise in more expensive science teaching attract higher subsidies, which is why Imperial College London is the most costly university to the state in the country (per student), rather than, as might be expected, Oxford or Cambridge.

The cuts in funding have forced a number of universities to close courses, a problem compounded by cost-conscious students abandoning subjects which- unfairly or otherwise- have attracted a reputation for being “soft”, in favour of “harder” subjects such as science- increasing the subsidies that government must provide. In even worse news for the government, the increase in inflation caused by the tripling of fees is costing them approximately a billion pounds per year in uprated budgets, disability benefits, and pensions. Studies have concluded that imposing an effective tax of 9% on graduates (Student Loan repayments) is actually costing the government money. Universities are also losing income as young people have been put off applying by the prospect of vast debts

Whilst in theory, students are covering the majority of the costs of their degrees; in reality the government is paying out more than enough to cover the entire burden. Before top-up fees were introduced, the total cost to the state of FE was £6 billion a year in direct grants to universities. There were lower administration costs, as fees did not exist. Grants were based on quality of teaching, the number of students, the need for equipment and requirements for widening access. In short, good, innovative universities which worked hard for their students received financial benefit to do so. Today, as with any market based system, merit and reward are not so closely intertwined, and this will have major consequences.

If we are to create the best deal for the nation, we must be seen to be investing in our educators. The development of skills is the key to the long term health of any society or economy, and our FE institutions are key to our national success. Antibiotics were a result of a University of Oxford study. IVF was pioneered by students at University College London. The dangers of smoking were uncovered by our universities.

It is time we once more freed our educators from the corroding influence of market forces, and made access to FE free at the point of use. It is crucial that this is accompanied by the restoration of grants to above their pre-Coalition level, as every pound invested in them is a pound well spent.

BY: Jack Darrant