Higher education is an investment, not cost

UK success is built on a highly skilled workforce. Our higher education system is a fundamental foundation of our economy and society, allowing employers to access the talent that they need.

But as talented people are needed more than ever to steer our recovering economy, sweeping university reforms announced this week threaten to reduce opportunities to access high quality university education in England. The reforms, which include proposals to limit university access, reduce university funding and increase costs on graduates, are described as “fair” for students and for tax payers.

Surely an important question is whether the reforms will deliver on the needs of employers.

The UK faces its greatest skills shortage crisis in decades. The number of job vacancies has hit a 20-year high, and was 65% higher in January than it was before the Covid-19 pandemic hit. Employers are calling for more graduates, not less, to help them tackle the consequences and seize the benefits of a rapidly changing world.

The combined impact of the higher education reforms on employers is complex to assess, but will undoubtedly be significant. The reforms will almost certainly block some young, capable people from accessing higher education and thereby reduce the pool of highly skilled and diverse talent. One proposal is to require all university entrants to have achieved at least a grade C in GCSE maths and English. This would affect the equivalent of 8% of the current student body.

Not everyone will be affected equally

Young people from outside of London, from less advantaged backgrounds or with protected characteristics will be impacted most as their school grades often do not reflect their potential. The UK will not succeed in levelling up, if individuals’ opportunities are levelled down.

The Government has considered how lifelong learning opportunities might be expanded, launching a much needed consultation on a Lifelong Loan Entitlement to enhance opportunities later in life. This is an important step in a world with rapidly changing labour market needs. However, it seems nonsensical to couple such an important recognition of the importance of learning with policies that limit opportunities at younger ages.

The reforms call on universities to do more with far less. Funding per student will fall, as tuition fees are frozen for at least another three years. This comes at a time when inflation is high, and costs for universities to operate are soaring. The £9,250 tuition fee has already eroded to less than £7,500 in 2012 prices, when the new higher education funding system was first introduced.

So why the proposed change?

The main motivation for the reforms appears to be balancing the books, with the assumption that the public costs of higher education are too high. This assumption does not, however, stand up to scrutiny.

While graduates benefit from higher earnings over their lifetime, the government also benefits in tax revenues, social contributions, and reduced expenditure on social welfare. On these measures alone, over 80% of graduates return a net benefit to the exchequer.

But of course the contribution that higher education makes is much greater than higher tax receipts alone. Graduates fuel our businesses and public services. Our highly skilled workforce attracts investment from around the world. Our university system has made huge progress in improving opportunity and driving social mobility.

The foundation to this is our system of tuition fees, a progressive student loan system and a healthy cost-sharing between government and individuals.

This system has a proven track record of reconciling crucial policy objectives, from making sure higher education is equally accessible to those from disadvantaged backgrounds, to expanding the number of graduates to meet the needs of our knowledge economy, and to funding our universities at a level that allows them to deliver world class teaching and research.

The reforms start to chip into these foundations of success. Whilst any sector with the longevity and scale of the higher education system should be challenged to evolve and adapt, the combined impacts of the reforms could be very damaging.

Almost a year ago precisely, the Government published its Plan for Growth, which plotted a path for long-term economic growth as we recover from the far reaching consequences of Covid-19. The Plan for Growth recognised that innovation, and the ability of businesses to discover and adapt, is a crucial feature of the future economy.

As a first step this requires more highly skilled people, trained in independent research and innovative thinking, equipped to take creative and collaborative approaches.

This is why higher education is not a cost, but a critical investment into the UK’s future.

Rosalind Lowe, Head of Policy and Engagement, The National Centre for Universities and Business (NCUB)