Future of the university sector: Report from Universities UK

Approximate read time: 15 minutes

On 14 November 2024 the House of Lords will debate the following motion:

Baroness Warwick of Undercliffe (Labour) to move that this House takes note of the findings and recommendations in the Universities UK report, ‘Opportunity, growth and partnership: A blueprint for change’, published on 30 September.

Universities UK represents 141 universities in the UK. Baroness Warwick was formerly a chief executive of the organisation.

1. Universities UK report: Findings and recommendations

Universities UK considered the future of the UK universities sector in its report ‘Opportunity, growth and partnership: A blueprint for change’. It said the report’s recommendations have a single aim: “to create a UK university sector that is better in ten years’ time than it is today”.^[1] To produce the report, the organisation worked with a group of commissioners, largely drawn from outside the higher education (HE) sector and consulted with its members and other stakeholders from the sector. The report’s focus was on universities and institutions which make up the membership of Universities UK, which the organisation states accounts for 94% of all students undertaking HE.^[2]

Universities UK argue the report’s recommendations are a “bold package of reform to stabilise, mobilise and then maximise the contribution of UK universities to economic growth and widening opportunity for all”.^[3] It states that through the actions set out in the report, it aims to “achieve five big shifts”:^[4]

• expand opportunity
• improve collaboration across the tertiary sector^[5]
• generate stronger local growth
• secure universities’ future research strength
• establish a new global strategy for universities

The report says that to enable these shifts:^[6]

• universities need to be put on a secure financial footing
• regulation needs to be streamlined
• the assessment of the wider impact of universities should be improved

The rest of section 1 of this briefing will look at these areas in more detail.

1.1 Expanding opportunity

The report found that inequalities in access to HE varied significantly according to personal characteristics and geography.^[7] It said there was also evidence of inequalities in progression beyond university. Universities UK said these challenges could not be addressed by universities alone and that they should work with schools and colleges to establish a system-wide approach to increase access and to improve student outcomes in the labour market. Its key recommendations in this area included:^[8]

• a target for England of 70% of the population aged 25 having studied at level 4 or above by 2040, with a particular focus on increasing access in low participation areas^[9]
• reinstate maintenance grants for students from the most disadvantaged backgrounds and increase maintenance loans in line with inflation
• a consistent approach by universities to contextual admissions^[10]

1.2 Collaboration across the tertiary sector

The report found that greater collaboration was needed between universities, colleges and other parts of the tertiary system to provide better opportunities for learners.^[11] Key recommendations on how the report proposed a system-wide approach could be achieved included:

• Removing requirements for duplicate reporting to different regulators. The report argued that “overlapping and duplicative demands and regulatory burdens for providers can be off-putting for institutions wanting to enter partnerships as it requires additional resources to meet the increase in regulatory requirements”.^[12]
• Amending the policy design of the lifelong learning entitlement (LLE), including reconsidering the minimum 30-credit requirement and exploring whether it could be used by employers to support the cost of employee study on a modular basis.^[13] The report also urged the government to consider how the LLE could be used to assist greater collaboration between tertiary providers.^[14]

1.3 Stronger local growth

The report argued that universities “underpin growth” given they are often one of the largest local employers and are one of the UK’s largest export sectors.^[15] The report suggested universities could play a greater role in generating local growth through responding to current and future skill needs in the labour market and supporting local stakeholders to adopt new knowledge and technology. The report recommended:^[16]

• Universities should have a key role in ‘local growth plans’.
• Skills England should “capitalise on the central role that universities have in tackling skills shortages at higher levels”.
• Local and national government should create “stable and effective incentives” for universities to collaborate with each other and with business and the public sector to meet skills needs.
• Government should make a long-term commitment to the higher education innovation fund (HEIF) and expand the regional innovation fund. It called for “counterpart funding of a sufficient scale” to devolved administrations.^[17]

1.4 Research and innovation

The report argued that the ‘stop-start’ nature of government funding for research and development was creating breaks in projects. It contended that as a result, this approach was preventing the development of infrastructure and expertise and disincentivising research and collaboration with industry. It suggested the current system relied on a “disproportionate and growing cross-subsidy from universities”.^[18] The report suggested that if the UK was to retain its international competitiveness it needed a “stable and sustainable approach to research and development”. Its recommendations on achieving this included:

• funders should review the requirements of their research grants and mechanisms so that universities would not be expected to contribute more than 20% of the costs of research
• government should set an “ambitious [gross domestic product]-based research and development intensity target”, covering both public and private investment^[19]
• government should create a missions innovation fund to help “stimulate research and innovation” that is designed to address the priorities set out in the government’s missions and its industrial strategy^[20]

1.5 Global reputation and impact

The report contended that international collaboration is a “cornerstone of a UK universities’ success”.^[21] It argued that globalisation in universities involved a broad range of activities and benefits, including collaboration in research; hosting international students; and delivering transnational education. The report called for a “holistic approach” which would include:

• Government developing a ‘global strategy for universities’. The report says the strategy’s objective should be to “harness the global reach, reputation and impact of our universities to create opportunity, foster prosperity and develop knowledge”, both for the UK and its international partners.^[22]
• Universities and government creating a ‘compact’ where each seeks to have sustainable levels of international students.
• Government reviewing immigration costs for academics, entrepreneurs and technical staff.

1.6 Financial sustainability

The report argued that the current funding system for universities across the UK was “unsustainable”.^[23] It proposed a two-phase approach to reforming funding in England:

• Phase 1: The government should work with the sector to establish a more reliable financial foundation for teaching, student maintenance and research. This would include linking tuition fees to inflation; restoring the teaching grant; policy stability on international student admissions; and developing with the sector a “clear plan” on how to assist universities that find themselves in financial distress.^[24]
• Phase 2: Universities should lead on a programme of transformation. The report proposed an agenda that would bring Universities UK members together to share learning and good practice and to explore options for increasing regional or national shared services. The report also called for the government to support the sector by growing a culture of giving to universities, including by considering the benefit of repeating previously successful matched funding schemes and introducing tax efficient mechanisms for legacy giving. The report suggested the government could further support universities by removing VAT on shared services and introducing a transformation fund.

1.7 Regulation

The report argued that to “retain its earned autonomy” the HE sector needed to demonstrate the quality of what it was offering while also being open to the “scrutiny of regulation and acting on concerns”.^[25] Recommendations on how to improve regulation of the sector included:

• The priorities of the Office for Students (OfS) should be streamlined to focus on quality, access, international competitiveness and financial sustainability.^[26] The OfS is the independent regulator of HE in England and a non-departmental body of the Department for Education.
• OfS should establish a transparent risk-monitoring and assessment process.
• HE providers, regulators and funders should develop a strategy on financial sustainability.

1.8 Impact assessment of universities

The report argued that the public benefits delivered by universities is “poorly understood and often overlooked” by policy makers.^[27] The report called for a more consistent and systematic way of measuring the benefits that come from HE, research and innovations. It recommended:^[28]

• Universities UK commits to developing a methodology that universities can use to capture their impact, in consultation with national and local government
• government “redouble[s] efforts to more rigorously and consistently” measure the private and public benefits of universities

2. Report on the Office for Students: Future of higher education regulation

In July 2024, an independent review of the OfS published its report ‘Fit for the future: Higher education regulation towards 2035’. The review was conducted as part of the ‘Public bodies review’ programme initiated under the previous Conservative government. The review into the OfS was led by Sir David Behan, a former chair of the board of Health Education England and former chief executive officer of the Care Quality Commission.

In his foreword to the report, Sir David argued that the HE landscape was shifting and the sector had faced a series of challenges over the past few years. These included the pandemic; leaving the European Union; the cost of living; reduction in number of international students; and fee limits for domestic students.^[29] Sir David argued these challenges were “too important to be left to the vagaries of arguably imperfect market mechanisms”.^[30] He called for the government to be “an active player, working with the sector to shape higher education teaching and research for the future”. The report made 32 recommendations for the OfS, government and the HE sector to consider. Its key recommendations included:

• OfS reduces its number of strategic objectives, and focuses on the priorities of monitoring financial sustainability, ensuring quality, protecting public money, and regulating in the interests of students.^[31]
• OfS is given consumer protection powers to be able to defend students’ interests.^[32]
• OfS, government, the HE sector, regulators and other bodies work collaboratively on data collection to consider improvements to reduce the overall data burden.^[33]
• OfS establishes an “integrated assessment of quality, creating a regulatory model that incentivises ongoing improvement for all students”.^[34] The report argued that “baseline regulation to assure quality should use more predictive and lead indicators and qualitative intelligence”.
• “Urgent and decisive action” from the OfS and government to manage financial risks faced by the sector. The report argued “financial sustainability is the most significant, growing challenge for the sector”.^[35] It recommended government and the OfS worked together to manage this, including sharing intelligence and data proactively at an early stage to ensure students were protected.
• The government revisits and clarifies its position on the market exit of providers, and whether the “non-interventionist positioning is still the most appropriate”.^[36]
• The OfS and government continue to build an infrastructure to offer advice, guidance and support for providers experiencing financial sustainability challenges.^[37]

In response to the report, the government stated the OfS would be “refocussed to prioritise the financial stability of the higher education sector and deliver better quality and outcomes for students”.^[38]

The government said it:

[…] accepts [Sir David’s] core recommendations, recognising that strong regulation is crucial to ensuring a stable future for the UK’s world-leading higher education sector, which is a key engine at the heart of growth plans.^[39]

The government also announced that Sir David had been appointed as the new interim chair of the OfS.^[40]

In its reaction to the report, Universities UK welcomed many of its recommendations.^[41] The organisation argued the report’s findings “underline the importance of an independent regulator for higher education in England and the need for a focus on the financial sustainability of the sector”.

3. Government policy: Plans to reform higher education

In its 2024 general election manifesto, Labour said it “recognis[ed] that UK higher education creates opportunity, is a world-leading sector in our economy, and supports local communities”.^[42] However, it also argued that HE was in “crisis”,^[43] and that its current funding settlement “does not work for the taxpayer, universities, staff, or students”.^[44] The Labour Party said that if in government it would:^[45]

• Create a post-16 skills strategy that would better integrate further and higher education and ensure high-quality teaching. The strategy would set out the role for different providers, and how students could move between institutions.
• Strengthen regulation.
• Improve access to universities and raise teaching standards.

On 4 November 2024, Education Secretary Bridget Phillipson made a statement to the House of Commons setting out further details on the government’s policy on reforming the HE sector and measures it would be introducing relating to students in the 2025–26 academic year.^[46]

The first set of announcements detailed by Bridget Phillipson were on tuition fees and student maintenance loans. The education secretary stated that from April 2025 the maximum cap for tuition fees would increase “in line with inflation to £9,535—an increase of £285 per academic year”.^[47] She also confirmed that from the start of the 2025–26 academic year, a lower fee limit of £5,760 would be introduced for foundation years in classroom-based subjects such as business, social science and humanities. She announced that to “boost support for students” the government was increasing maximum student maintenance loans in line with inflation, which she said would give students an “additional £414 a year in 2025–26”.^[48]

Bridget Phillipson said increasing the fee cap “had not been an easy decision” but that the government needed to “fix the foundations” and “secure the future of higher education”.^[49]

The minister said her “second set of announcements signals the start of deeper change for our students, our universities and our country”.^[50] She argued that investment could only come with the promise of major reform, and that the contribution of HE to the economy and society needed to “grow and strengthen”. Areas identified by the minister included:^[51]

• universities “doing more to spread opportunity to disadvantaged students”
• improving teaching standards to “drive out poor practice”
• universities working with Skills England, employers and partners in further education to “deliver the skills that people and businesses need, and shaping world-class research to create jobs”
• ensuring value for money and a “renewed drive for efficiency”

Bridget Phillipson said that her statement was setting out the “scale of our ambition” and that proposals would be published in “the months ahead”.^[52]

In her statement, the education secretary also confirmed that the government would be accepting “in full” the recommendations of the independent review of the OfS.^[53]

On the issue of international students, in a speech at the Embassy Education conference in July 2024, the education secretary said the government valued their contribution to “our universities, our communities [and] to our country”.^[54] She stated international students were “welcome in the UK”. This approach was reiterated by Minister for Skills Baroness Smith of Malvern at the Universities UK conference in September 2024. The minister stated:

The UK is outward looking. It welcomes international students from all over the world. They make a hugely positive impact on this sector, on our economy and on society as a whole.^[55]

4. Read more

• House of Commons Library, ‘Higher education in the UK: Systems, policy approaches, and challenges’, 15 July 2024
• House of Lords Library, ‘Higher education funding’, 23 August 2024
• House of Commons Library, ‘Higher education finances and funding in England’, 23 August 2024
• House of Lords Library, ‘Office for Students: Lords Industry and Regulators Committee report’, 15 May 2024
• House of Commons Library, ‘Equality of access and outcomes in higher education in England’, 25 July 2024
• House of Commons Library, ‘Higher education student numbers’, 10 October 2024
• House of Commons Library, ‘International students in UK higher education’, 20 September 2024
• House of Commons Library, ‘The lifelong learning entitlement’, 12 March 2024

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