Precipitous times ahead for higher education
University purchasers must feel like they are teetering on the brink of a precipice. On Friday, Universities UK head Professor Steve Smith emailed all higher education institutions saying he had seen what was in the plans for universities in the Comprehensive Spending Review, to be made public this Wednesday.
The plans, he says, are to slash government funding by £4.2 billion, including £1 billion on research and £3.2 billion (or a whopping 79 per cent) off the teaching budget. State finance for just about all arts and humanities courses will fall away, in favour of the sciences, mathematics and some modern languages courses.
Last Tuesday, the long-awaited report by Lord Browne into university funding recommended lifting the cap off tuition fees altogether, allowing universities to charge what they like for courses and in effect creating a market for university places. Many say that while those institutions in the Russell Group of elite universities, such as Oxford and Cambridge, will fill courses whatever they charge, other institutions may face having to restrict fees or face falling revenues as poorer students are put off higher education by the prospect of such a large debt. It heightens the prospect that some institutions will face bankruptcy or a private takeover.
The coalition is known to favour raising tuition fees over a graduate tax as a means of funding higher education. But at the weekend, the Institute for Fiscal Studies said Lord Browne’s recommendations would create a graduate tax in all but name for most students. IFS claims that, with student fees at £7,000 a year, more than half of graduates would not be able to pay off the loan before the end of their working lives. At £9,000 a year, the figure rises to almost two-thirds.
But the real danger ahead for universities is highlighted by Professor Smith in his email. If the cuts turn out as deep as feared on Wednesday, then to stand any chance of recovering the status quo, the new fees regime would have to be up and running quickly and without pressure for a watering-down from nervous Lib Dem MPs looking to save face.
And the biggest question for university purchasers is one of timing. While the CSR comes into force in April, the necessary legislation to remove the cap on fees (assuming the coalition follows Lord Browne’s advice) will follow some time later, bringing the flow of income on stream perhaps as late as 2013. What will the profile of the cuts look like across the three years? Will universities face a precipice-like drop in funding, forcing massive cuts in courses and jobs before the new fees can come on stream? Only time will tell.
Andy Davies is director of London Universities Purchasing Consortium
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Meanwhile multi millionaires keep their winter fuel allowances…. (let’s hope that changes on Wednesday.)
And you just need to find another 30-40% savings on purchased goods and services for your members – shouldn’t be a problem surely Andy?
Anway, this will be the final straw for Unis such as Cambridge I suspect – private within 3 years.
There will not be any bearing on the purchasing and supply. There has not been any undergraduate programme for our profession, Rather, all are masters.
The probable “ceiling” removal supports “survival for the fittest”.
If people can buy homes for, say, £200k and pay that off before they retire, why can’t they pay off say (3years X £7k) before they retire, especially at the extremely low interest rates currently available on student loans? Explain please.
Before Prof Smith had even sent his email, we were preparing for the expected funding gap between the CSR and the rise in tuition fees, we are already reconsidering spend from University funds and at present only large value purchases from external grant funding or endowment funds are proceeding without further consideration by our executive. There are difficult times ahead, but also some real opportunities for Procurement professionals, lets hope we all grab them and capitalise on this going forward.
Well those 200k homes are mostly bought by couples (so probably double that student debt then) or people who’ve already got equity thorugh house price inflation. Plus the affordability if property is really about the gap betwwwn buying and rental csots.
And £21K is only the tuition fees: add 50 to 100% to that for living costs.
I think the claim that graduates will not be able to pay off the student loans during their working lives is based on what has happened in the United States.
The student loan system in the US is run such that any extra payment made does not get credited against the principal of the loan, but credited towards future installment payments. The loan T&Cs may say that if you send them a written notice, they will apply extra payments to the principal, but in practice, the companies ignore these letters. So unless you can save up the entire amount to pay off the loan in one payment, you are stuck on a 25-30yr payment schedule. Also, while you do not have to pay back the student loans while in school, interest does accrue so while you may have only borrowed 7k the first year, by the time you graduate 4yrs later, you actually owe 9k. This gets worse if you go on to graduate degrees.
In those 25-30yrs after graduation, they have found that graduates are less able to purchase a home and are stuck in the rental market, then they have to come up with funds to 1) save for their retirement, 2) support ageing parents and 3) additional savings/loans for their childrens’ university costs- which in the US have been inflating tremendously since the baby bust of the 1990s.
I have seen some articles saying that the US system of univeristy tuition is a huge success. Well, it isn’t really(for a number of reasons not all of which are comparable to the UK). However, the end result is that only the very well off or the very poor can financially afford university. The vast majority of working and middle class people can only afford to go if they take out a lot of student loan debt, are star athletes, or their parents sell the family home and liquidate their retirement savings.