HEPI Report, 'Funding Higher Fees: Some Implications of a Rise in the Fee Cap'

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03 April 2008

Director General of the Russell Group, Dr Wendy Piatt, said:

“We welcome the fact that the report acknowledges that the main barriers to the participation of students from lower socio-economic groups in HE are prior academic attainment and lack of access to appropriate information, not financial considerations.

“We also welcome the fact that the report acknowledges that the UK student finance system provides a relatively high level of support to students. HE is now free at the point of use, payments are only made on annual income above £15,000 p.a., remaining debts are written off after 25 years and the loans are interest-free.

“The report raises some important issues about the current funding regime for universities. However, the scenarios it presents are narrowly-focused and are underpinned by some questionable assumptions. It is also surprising that the report does not mention the impact of overseas students on university funding.*

“The HEPI report also fails to set out why major research-intensive universities need access to more funds. Funding for HE in the UK is significantly lower than most other OECD countries, and particularly our primary competitors - in terms of GDP, expenditure per student and as a proportion of total educational funding.

“We think it is important to have an evidence-based policy on the vital issue of how research-intensive universities can continue to excel in conducting world-class research and teaching in an increasingly competitive global marketplace.

"The Russell Group is therefore undertaking comprehensive research into the impact of different funding regimes across the world on a range of factors, particularly access. We are aiming to draw up options for a package of proposals which is both fair with regard to contributions made by the student, the government and other key stakeholders, and which will give universities access to increased funds."

Notes to Editors

There is no real rate of interest on the loans offered to undergraduate students.
These include assumptions on the proportion of institutions who would charge a certain fee, the numbers of students who would take up loans in the hypothetical scenarios and the timescale of when the total fee income will accrue.
Based on the most recent OECD data, the UK’s annual expenditure on HE is lower than most other OECD countries, in terms of GDP, expenditure per student and as a proportion of total educational funding.

Annual expenditure on higher education (for all services including research activity) per student shows that the UK is spending less than all of its main competitors – US, Australia, Germany and most Nordic countries.
The UK spends approximately $11,484 (USD), while the US spends double at $22,476 (Australia spends $13,959).
On core educational services alone the US spends more than double per student.
Relative to GDP per capita, Australia spends roughly 25% more per student and the US still spends 50% more per student.
The UK spends below the OECD average on higher education as a percentage of GDP. The US spend 2.9% ($320 billion), Korea 2.3% ($20 billion), Australia 1.6% ($9 billion), while the UK spends 1.1% ($18 billion).
This is below the percentage spending by Belgium and Mexico on HE.
On public spending alone on HE as a proportion of GDP, the UK spends 0.8% ($13 billion), less in percentage terms than Iceland, Hungary and the Slovak Republic.
When all public expenditure (for example public subsidies for living costs) are factored in, however: UK spends 1.0 percent ($16 billion), close to the US at 1.3%, OECD average ($143 billion) and Australia at 1.1% ($6 billion).
Average funding spent on HE as a proportion of all educational spending is 24%. The US spends 36.4% on higher education, the UK spends 19%.
The only country to give a lower proportion of educational funding to HEIs is Iceland.

* This lower level of funding has real implications for the ability of Russell Group universities to continue to punch above their weight in highly ompetitive global market. For example:

Russell Group universities are competing with international universities who are able to offer extremely attractive remuneration packages or stipends to attract the leading academics and postgraduate students. It is vital that UK universities attract and retain world class academics particularly in subject areas that are of national importance such as medical sciences, and where the UK is lagging behind comparable countries.
Russell Group Universities are investing heavily in teaching and learning resources, but are still tackling a backlog particularly in infrastructure and the HEFCE T-grant simply does not cover the full costs of teaching in world-class universities. Universities are therefore incentivised to take on high quality overseas students, rather than home students.