Blog

• This HEPI Blog post was kindly authored by Huw Morris, Honorary Professor of Tertiary Education, IoE, UCL’s Faculty of Education and Society and Richard Watermeyer, Professor of Education, University of Bristol.

Introduction

It is a year since the Labour Government was elected with a commitment to produce a post-16 skills and higher education White Paper by Summer 2025. In this article, we look at how changes in the UK’s economy and politics since July 2024 have altered what is likely to be in this policy statement and what might happen despite it.

What has happened over the last twelve months?

Last September, the Minister of State for Skills, Jacqui Smith, drew attention to the enormous economic challenges and tough choices facing the Government, but stressed the administration’s commitment to a mission-led approach to create a new era of opportunity and economic growth within a fairer society for everyone. Two months later the Secretary of State for Education, Bridget Phillipson, wrote to vice chancellors outlining the Government’s expectation that universities will:

• expand access and improve outcomes for disadvantaged students;
• make a stronger contribution to economic growth;
• play a greater civic role in local communities;
• raise teaching standards; and
• deliver sustained efficiency and reform.

There were also subsequent calls for more effective higher education leadership, strong governance and a new business model for the sector. To support these changes, ministers provided an increase in the undergraduate home tuition fee of £285/year and an uplift to the maximum maintenance loan support of £414. For those concerned with institutional finances, this uplift in income was more than matched by higher costs due to increases in employers’ national insurance contributions, reductions in foundation year fees, withdrawal of level 7 apprenticeship funding and reduced capital allocations, among other things. To deal with these changes, most universities have sought to increase their international student recruitment and classroom-based home undergraduate students, as well as higher margin postgraduate provision. For some of the institutions denied these opportunities because of their market position the alternative has been to expand their franchise operations and transnational education and/or to reduce costs. As figure 1 illustrates, these changes in funding and activity have produced some significant changes in forecasts for the money flowing to colleges, independent training providers and universities.

Figure 1: Funding and Orientation Matrix

Looking at the balance between areas of activity which enhance prestige and those that support widening participation, when combined with those that are funded publicly or privately, reveals some big changes. The increase in undergraduate home student tuition fees has not been enough to stem the decline of overall funding from foundation years, postgraduate courses and research grants. The balance in government funding has shifted from these areas of activity towards schools, further education and apprenticeship provision. Meanwhile, although funding from private sources for international students taught in the UK and for transnational education overseas has expanded, UKRI funding for individual institutions has declined due to increases in the number of grant applications from a wider range of institutions and a larger number of researchers leading to a halving of the success rate compounded by changes to the treatment of what was and is now again EU research funding.

Explaining the changes, it’s the economy!

Despite Government Ministers’ declared ambitions for further and higher education last Autumn, the participation of students from lower socio-economic backgrounds has declined over the last three years as measured by the proportion who had previously received free school meals or were enrolled at a state school.

While further and higher education institutions are only one part of the influences on economic growth, the annual rate of change in productivity is negative at minus 0.2 per cent and GDP has declined for two months. The main contributors to this poor performance have been low levels of business investment, persistent skills shortages and low rates of innovation among domestic companies.

Meanwhile, the impact of universities and colleges on local communities has been a tale in two parts. The annual Higher Education / Business Community Interaction survey reveals small increases in business start-ups and spinouts as well as partnerships with small firms, but measures of the impact on local economies is more difficult to demonstrate. These issues are less pronounced with apprenticeship providers and further education colleges where local community engagements are key to engaging adult part-time learners.

The bright spot in recent activity has been the maintenance of high teaching standards in universities as recorded by the National Student Satisfaction Survey (NSS) and the Postgraduate Taught Experience Surveys (PTES), where between three-quarters and four-fifths of respondents are happy with their courses. More students see university education as providing value for money than do not, but there is pressure on students’ costs of living. These pressures stand behind the two-thirds of university students who indicate that they are working 10 to 15 hours per week part-time to generate the money they need to live. One fifth of students report working for more than 20 hours per week in paid employment and over a third indicate their income-generating commitments have a negative impact on their studies. There is also evidence of heightened competition for graduate jobs and a decline in the so-called ‘graduate premium’. This has doubtlessly contributed to the recent finding that 35% of graduates and 52% of postgraduates indicated that, with the benefit of hindsight, they would have made different higher education choices. There is no comparable recent education and outcome data for apprentices and further education students because the Further Education Choices Learner Satisfaction Survey was scrapped in 2020, but recent increases in the number of young people Not in Employment, Education or Training (NEET) suggests all is not well.

Anticipating the future, it’s the politics!

The Government has fared poorly in opinion polls over the last twelve months due to concern about the cost of living, immigration and the state of public services. This has prompted challenges from the political right and left. This is not confined to questions about tax, immigration and public spending, it has also extended to concerns about the role of universities and support for other forms of post-16 education. Across the voting population, recent private opinion polling has revealed that just over half of the electorate are questioning, sceptical or openly hostile to the role of universities in their communities. University research as an area of activity is poorly understood and where there is an appreciation of this activity, it is not automatically seen as meeting real-world needs. Meanwhile, among the leadership of many major civic and corporate organisations, universities are seen as profit-driven and not working in the public interest. In short, there is a lack of an emotional and relational connection between universities, local communities and national leaders.

It has been argued that university leaders need to respond to these adverse public perceptions by stating the virtues of higher education and research more clearly and advocating for universities more often. Pursuing this approach, it is argued, will open the door to greater trust, less regulation and improved funding. More recently, it has been argued that public opinion has changed to such an extent since the Covid pandemic that this approach will not work and there is now a need, quoting Robbie Burns, for university staff “to see ourselves as others see us”, before considering how best to respond. The priorities of these others are likely to become more visible over the summer months as they question the evidence of university contribution and those who champion the current arrangements in the wake of this year’s home and international student recruitment rounds.

The Autumn party conference season begins with the Liberal Democrats in Bournemouth (20 to 23 September), Labour in Liverpool (27 to 1 October), the Green Party in Bournemouth (3 to 5 October) and the Conservatives in Manchester (5 to 8 October). In today’s world of multi-party politics and jostling to define the public policy agenda, it is also important to note that the Reform Party conference will take place in Birmingham (5 to 6 September). Meanwhile, “Your Party”, the new left-wing party led by Jeremy Corbyn and Zarah Sultana, has not given a formal indication of its plans for an inaugural conference, but it seems likely that there will be events in early Autumn..

The conference season is normally a time when parties outline what is planned or hoped for in the future. Governments are not supposed to announce new initiatives outside of the House of Commons, and although they occasionally do, they are rebuked by the Speaker of the House of Commons, as the Secretary of State for Education and Chancellor of the Exchequer have found out in recent months. This year is likely to be more difficult than usual as pressures on the public purse raise questions about tax changes in the Autumn budget and raise the spectre of changes to expenditure plans to meet the Government’s spending rules and to provide for defence, health and welfare commitments.

Any post-16 education announcements are likely to be especially difficult because of the competition with other parties. The Reform party has promised to eliminate interest on student loans and to extend loan repayment periods (a graduate tax in all but name), as well as removing student loans for medical and STEM students and writing off the loans of long-serving NHS workers. There are also proposals to invest more in apprenticeships and technical education with an increase in publicly funded training courses.

Similar proposals were made by the Green Party in their 2024 General election manifesto with commitments echoing the 2019 Labour Party manifesto to scrap tuition fees, restore maintenance grants and increase investment in skills and lifelong learning. Meanwhile, for completeness, the Liberal Democrats pledged to improve financial support for disadvantaged students by reintroducing maintenance grants, in part modelled on the arrangements introduced by the Liberal Democrat minister, Kirsty Williams, while she oversaw higher education for the Welsh Government (2016-2021). These promises of increased spending on student maintenance are likely to be attractive to many young voters and particularly newly enfranchised 16–18-year-olds. These promises can also be made by parties that believe they are unlikely to find themselves in government in 2026. The problem for university leaders and staff with these proposals is that while they will help students, they won’t help institutions to pay their bills, except perhaps for students’ halls of residence.

What could possibly go wrong?

Increased strain on university finances and growing pressure on the public purse, combined with demands for improved student maintenance funding, create a difficult context if anything unexpected goes wrong with the income and expenditure of individual institutions. These challenges have been added to by the publication of nine major Government strategy and policy papers with implications for post-16 education and training.

The five missions that the Government was elected to pursue have been added to by a plan for the NHS, an Immigration White Paper, five critical technologies, six milestones, seven chapters in the Get Britain Working white paper, the eight priority sectors in the industrial strategy white paper, the nine regions identified in the national infrastructure plan and 10 priority skills sectors identified by Skills England. All of these plans have local dimensions that are being developed with the 12 established Mayoral Strategic Authorities and 12 new regional bodies outlined in plans for devolution to 44 English regions which will combine with 38 Local Skills and Improvement Plans (LSIPs). The complexity associated with these arrangements means that there will, in practice, have to be some simplification.

It is reassuring to see this energy and commitment to change, but it is also a cause of concern that it is not clear how the various plans and governance arrangements will join up within Whitehall and across the regions. This may not be a problem in the largest city regions of Greater Manchester, Liverpool, London, North East, West Midlands and West Yorkshire. However, it is likely to be more of an issue in the less developed Mayoral regions of Cambridgeshire and Peterborough, the East Midlands, Sheffield, South Yorkshire, Tees Valle and West of England, not to mention the other 22 yet to be reorganised regions of the UK covering 50% of the population.

The challenges of developing joined-up plans are likely to become problems if the reputational and financial risks being experienced by cash-strapped colleges, independent training providers and universities materialise. Among universities 43% are currently forecasting a deficit and the most recent published figures for further education colleges in 2022/3 revealed a figure of 37%. As recent experience with the University of Dundee has illustrated, the short-term direct costs can exceed £100m, and the longer-term indirect costs are even greater. These additional costs are likely to be substantial as national regulators, regional officials and local providers wrestle with the challenge of developing the capacity, capability and courage needed to align provision with employer demand as well as student interest.

With low economic growth, high inflation and challenges to reductions in government expenditure and without additional funding for student maintenance and living expenses, it is difficult to see how universities will widen participation for students from lower socio-economic backgrounds. Without more funding for courses in the areas of skill shortage that underpin the eight industrial sectors and the requirements of the NHS and National Infrastructure Plan, it is difficult to see how local skills needs will be met and the improvements in productivity and economic growth achieved. Teaching quality might be maintained by a lower-paid and increasingly casualised workforce, but will the efficiency and effectiveness of institutions improve without support for the local coordination and rationalisation of activity?

What might be in the Post-16 and Higher Education White Paper?

Now that the anticipated publication of the Post-16 and Higher Education White Paper has been delayed until the Autumn it seems likely that it will be timed to coincide with the Budget in November. This Indian Summer schedule is needed to gain some certainty about the future funding position and associated changes to tax and spending decisions. So, what might be in the White paper? At present the following five strands of activity seem most likely.

Widening participation and progression

Proposals for the development of regional education and skills pathways to support the introduction of the credit and modular funding arrangements that will be needed with the Lifelong Learning Entitlement in January 2027. Proposals for consultation on how institutions could be required to introduce bursary and scholarship arrangements if they fail to meet regionally agreed targets for widening participation and progression.

International students

Proposals for consultation on how the 6% international student levy will be used to pay for the upskilling of domestic learners, rebalancing of funding towards institutions that have not recruited international students and underwriting of the costs of structural adjustments.

Local Skills and Productivity

Outline of how Local Skills Improvement Plans will be developed by Skills England to ensure that Mayoral Strategic Authorities and other regional bodies have tools to influence education provision to respond to the 10 skills priorities and 5 critical technologies while meeting the needs of local employers and communities. This might include local independent careers, advice and guidance arrangements of the sort developed in Greater Manchester.

Quality and Standards

Announcement of the provisional findings from an internal review of the standards and regulations applied by the Office for Students including tightened controls over franchise and transnational education arrangements.

Efficiency, effectiveness and exit

Changes to Competition and Market Authority guidance on regional institutional cooperation. The introduction of an insolvency and regime for higher education institutions to parallel arrangements for further education colleges and independent apprenticeship providers. This to include formal mechanisms for restructuring loans or similar transitional finance arrangements.

What is currently missing from these arrangements is a multi-year agreement on fees and funding or a plan for supporting English regions that are not part of the current plans for devolution. All major post-16 White papers in the past have included an explicit or tacit exchange of support for the UK economy locally and nationally with an agreement on longer-term funding and finance. To achieve this realistically in the future will require guidance on how regional and institutional leadership and governance will be aligned with national plans. The UK’s devolved governments and a few established Mayoral Strategic Authorities have mechanisms to bring colleges and universities together to discuss their plans and the opportunities for alignment. In many instances these arrangements span more than one MSA or its equivalent. Most of the other regions lack these arrangements and will need support to develop local officials, senior managers and governing bodies. Most importantly what should these groupings do if one or more institutions in their patch fail?

There is little appetite among the UK’s political parties and government departments for an independent review of higher education because of concern about the time this would take and the loss of control it would entail. However, the risks associated with current economic constraints and political polarisation pose substantial risks for local communities and regional economies in general and for the students and staff in individual institutions in particular. The summer months provide a useful time to reflect on these challenges and to consider how genuinely transformational change can be led and managed within city regions and rural combined authorities. For universities, further education providers and independent training providers and their representatives, this should involve more than improving their public affairs and relations and should consider how local and regional forms of organisation can be developed.