MPs say rising deficits spell trouble for universities while Blair backs expansion

Higher education providers are under severe financial pressures. Their financial viability and sustainability is at stake. In fact, the percentage of providers with in-year deficits has increased from 5% in 2015/16, to 32% in 2019/20.

Against this backdrop of deteriorating financial health across an increasing number of providers, in a report today PAC says the Department for Education is “not effectively holding the Office for Students to account”.

The committee is concerned about student satisfaction, especially in relation to value for money. In 2021, 33% of students considered their course good value for money. 54% said it wasn’t. 

Some providers are heavily reliant on income from overseas students’ fees to cross-subsidise research and other activities and dependent on their ability to continue growing overseas student numbers – leaving them potentially exposed to significant financial risks.


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The resilience of individual providers, financial support provided by government, the fearful interruption to income from overseas students, and the fact that large-scale tuition fees refunds were not necessary, helped the higher education sector survive the COVID-19 pandemic.

But the committee says DfE “failed to adequately assess the current and future financial impacts” of the “substantial grade inflation” that resulted from local assessment in place of A-level exams during the COVID-19 pandemic, which meant more students were able to take up places at high-tariff providers, and many medium- and low-tariff and specialist providers were undersubscribed.

Ongoing financial pressures – including pension fund deficits and predicted rises in employer contributions, inflation and rising costs, the cap on student fees, the impact of changes to student loans and potential policy reforms on entry requirements – do, nonetheless, increase the risk of providers failing; closing campuses or courses; reducing the quality of teaching; or limiting access: any of which could adversely affect students. In this context, the committee believes that protections for students are not strong enough if providers are in financial difficulty.

Chair of the committee, Dame Meg Hillier MP, said: “The A level fiasco of 2020 and grade inflation have a long term impact on higher education, adding to deep systemic problems in the financial sustainability of higher education. In the four years prior to the outbreak of the pandemic, the number of providers in deficit grew dramatically.

“Too many providers are too heavily dependent on overseas student fees to maintain their finances, research base and provision – that is not a satisfactory situation in a sector that government is leaning on to boost the nation’s notoriously, persistently low productivity.”

The report, which was published this morning, is in conjunction with the release of Times Education Commission Report.

The Commission, backed by former prime ministers Tony Blair and John Major, argues that new university campuses should be created in 50 higher education “cold spots”, including “satellite wings” in further education colleges. The Commission also suggests that pay conditions and productivity must be improved in further education.

Blair, the prime minister, announced his goal of getting 50% of school leavers to university. This was achieved in 2019.