No British public university has ever been forced to close. The sector is in “no man’s land”, said Josh Freeman from the Higher Education Policy Unit.
“In law, [universities] are not supposed to get a bailout, we have a market system of higher education, so in theory they would be allowed to go bust,” he said.
“In practice, there’s no precedent. It would be a total, horrible, mess.”
Frozen fees and fewer international students
In 2012, David Cameron’s coalition government overhauled higher education funding. They trebled student fees in England to £9,000 per student, per year, while slashing most ongoing direct public funding.
The individual student, not the state, became the sector’s main income source. In 2011/12, tuition fee income made up 64% of the sector’s total teaching income sources. By 2022/23, this had increased to 93%.
The reforms marked a “wholesale change” to the system, says Paul Kett, former director general for skills at the Department for Education. Kett currently works for PwC as global director for education and skills.
“At the time, [the change] meant a bit of an injection of money to universities,” he said. “There was a shift to funding primarily coming through tuition fees paid by students. There’s now pressure because the tuition fee hasn’t kept pace with inflation.”
In England, government support through the funding council for teaching plummeted, falling from £4.6 billion in 2011-12 to £1.3 billion in 2021-2 – a 78% cut in real terms.
According to Clayton, the crisis is a direct result of the reduction in the teaching grants. “The coalition government cut teaching grants to fund a tax cut. Tuition fees were put in to offset that,” he said. “That’s fundamentally the problem – a lack of direct funding. We still get research funding, and there’s a whole mechanism for that, but the largest amount of funding for most institutions was the teaching grant. That’s been slashed.”
Home students now pay £9,250 per year, a ceiling that was set in 2017 – before several years of eye-watering inflation. Meanwhile, international students pay double or triple their British counterparts.
“Universities are earning, in real terms, a third less per home student than they were in 2012 [when fees were hiked to £9,000],” Freeman said.
“There have been insinuations that international students take the places of home students. This is just not true. International students subsidize home students.”
Earlier this year, Universities UK found that a 5% fall in international admissions would put more than half (51%) of universities in the red in 2024-25. A 20% fall would leave four-fifths in deficit.
But the last government pushed lucrative international students away, increasing visa fees and banning most from bringing dependents to the UK.
Esther McVey, former prime minister Rishi Sunak’s so-called “minister for common sense”, said she had “no sympathy” for struggling institutions. “For too long, these universities have been selling immigration to international students rather than education,” she claimed.
The last government’s policies and rhetoric had an impact. According to the independent Migration Advisory Committee, the number of international postgraduate students paying deposits to study at British universities this September has dropped by 63% compared to last year.
Sunak’s crackdown on so-called ‘mickey mouse degrees’ didn’t help.
“When the Conservatives talked about ‘low-quality degrees’, that filtered through to the media in other countries, places like India in particular, who send a lot of international students to the UK,” Freeman said. “They think, ‘Well, I’m not going to be welcome in the UK. But also, it’s not worth it if the degree is low quality.’”
Under intense pressure to attract more students, many universities have engaged in an intense building drive. Across the country, cash-strapped institutions are stuck in an infrastructural arms race, a drive UCU’s Clayton describes as a “group think problem”.
“They’re trying to do the right thing, but they’re all seeing themselves as competing with other universities and pushing themselves further into financial difficulty,” he said.
In 2022, the UCU slammed vice-chancellors for planning a £4.6bn splurge on ‘vanity projects’ as staff pay fell by a quarter.
Staff bearing the brunt
As shiny new buildings go up, staff are bearing the brunt of cost-cutting measures. UCU estimates that 66 institutions are currently affected by redundancies and restructurings. The alphabetically organised list makes for grim reading: Aberdeen is folding modern languages; Aberystwyth is looking to cut 200 jobs; Aston has launched a voluntary severance scheme. And we’re not even up to B.
The University of Lincoln has not been exempt. In April, the university refused to rule out compulsory redundancies, only backing down after staff threatened strike action. Clayton fears that they are in “year one” of a “multi-year redundancy process”.
“It’s been a very, very difficult place to work the past few months,” he said. “People have been terrified, extremely stressed. They’re worried about their futures, worried about whether they’re going to be able to be able to pay their mortgages and rent and so on if they lose their jobs.”
Clayton says the impact will affect students, who will see larger class sizes, as well as an increased workload for the staff that remain.
The University of Lincoln told Big Issue that “cost-cutting measures” were required to take it back to a “strong financial footing”. However, it called on the government to rethink its funding model.
“Our work is important, it must be recognized and supported, we are too important for our region,” a spokesperson said.“Universities need a sustainable funding system that recognises the real cost of delivering the high-quality teaching and research our economy and communities need.”
What will the new government do about the crisis in education?
So how can the financial pressures on the sector be tackled? The new government has several choices, says PwC’s Paul Kett.
“Assuming that you believe there needs to be an injection of additional money into the system, your choices are: put up the tuition fee, [inject] more Government funding into the system through the Strategic Priorities Grant [a direct government investment fund], enable more International students to attend, [or] to increase government funding for research,” he told the Big Issue.
“Those are the obvious mechanisms you can choose if you want to put more money into the system – but these are political choices.”
The new Labour government has said it has “no plans” to raise tuition fees or increase direct funding, however. Asked by Channel 4 if she was willing to see a university go bust, the new higher education minister Baroness Jacqui Smith replied: “Yes. If it were necessary.”
“I don’t want that to be necessary,” she added. “I want us to find a way for there to be financial stability for universities, and most importantly, for the students that they are serving into the future. And that is what we are working on.”
The new education secretary Bridget Phillipson has said that supporting international student recruitment would put universities on “sustainable footing”.
Clayton doesn’t think this is enough, describing the current market model as “really fragile.”
“It really doesn’t need very much of a reduction in student numbers below forecast for the problem to recur all over again,” he said.
The answer is not to increase tuition fees, UCU urges – poorer students are already being priced out. Instead, the union is calling for an ‘employer education levy’, whereby employers pay a national insurance-style contribution for each graduate they hire. Alternatively, UCU claims that a 3% increase to corporation tax could be used to fund higher education.
If a British university did close, it’s unclear what would happen. According to the Institution Overboard report published by the University of Warwick and Public First in July, existing student protection plans have “no force in insolvency law”. Students have no legal protections beyond their interests as creditors.
Without urgent change, the impact of a sudden closure – termed a “disorderly exit” by the Office for Students – could be catastrophic. There are many unknowns about how it would play out. But one thing is certain, Freeman says: students, staff, and cities would suffer.
“There are so many unanswered questions,” he said. “Do you relocate students to another city? What if there’s no nearby university? What if there’s nowhere else that runs the same degree? What about alumni that have a degree from the university that no longer exists? How valuable is that degree? What do you do with all of the staff there?
“It would be a disaster.”
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