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Abtisam Mohamed (Sheffield Central) (Lab)
I beg to move,
That this House has considered higher education funding.
It is a pleasure to serve under your chairship, Ms Vaz. As co-chair of the all-party parliamentary groups on students and for international students and a member of the all-party parliamentary university group, and representing a constituency with one of the largest concentrations of students, I know at first hand the enormous value of higher education and the growing challenges facing the sector. It is worth saying from the outset that I am applying for a separate Backbench Business debate specifically on students that will cover the cost of living, maintenance support and the wider student experience. Those are important issues in their own right, but today’s debate focuses on the foundations and long-term sustainability of higher education itself.
My constituency is home to two outstanding universities: the University of Sheffield and Sheffield Hallam University. I have had the privilege of studying at both institutions and, like many people, I know personally the doors that higher education can open and the horizons it can broaden. We have a world-class higher education system whose institutions are often seen as a great equaliser, especially for working class communities. Walking into universities, we know right away why they are described as centres of innovation and industry. A good university acts as an anchor in our cities and is far more than just lecture halls and graduation ceremonies.
Mr Gregory Campbell (East Londonderry) (DUP)
I thank the hon. Member for giving way and congratulate her on securing the debate. On providing opportunities, particularly for working-class communities, would she agree with me that in my area, the likes of regional colleges, both on the north coast and the north-west, offer excellent opportunities, particularly for people who feel disadvantaged and who possibly left school without any qualifications and are really caught in a bind? The colleges offer them a way out of the position they are in with prospects for the future and for jobs.
Abtisam Mohamed
I agree with the hon. Member. He makes an excellent point. I will come on to talking about disadvantaged students and the role that universities play.
Universities train the nurses and doctors who treat us. They train the teachers who educate our children, the engineers who build our infrastructure, and the researchers whose discoveries save lives. They support businesses, attract investment, create jobs and drive progress. In Sheffield we see that contribution every day. Sheffield Hallam University trains around 3,900 healthcare professionals and 2,800 teachers every year. In a single academic year, those healthcare students contributed more than 365,000 hours through NHS clinical placements.
Meanwhile, the University of Sheffield generates an estimated £4.82 billion for the UK economy and supports 138 start-ups and spin-outs. Its research activity contributes billions more in economic value. Although those figures are impressive, behind them lies a fracture point. There is a growing disconnect between what we ask our universities to deliver and the resources that are available. We want universities to drive growth to boost productivity, tackle regional inequality and undertake world-leading research. We want them to support the NHS, public services and local economies, yet the sector faces a financial crisis that threatens its very survival.
We have to recognise the failed funding experiments of the last 16 years and bring them to an end. I draw colleagues’ attention to the Education Committee’s comprehensive report from earlier this year, “Higher Education and Funding: Threat of Insolvency and International Students”, that identifies the real-terms cut in undergraduate tuition fees as a huge factor, though one of many, in financial instability. It is also widely recognised that the UK’s public education funding levels rank well below the OECD average of around 70%. Funding levels have fallen so far that funding direct to universities now makes up just £2 billion out of a total of £16 billion—the complete inverse of what it used to be. The majority of Government funding is spent on a bloated student loan system that is wildly out of control, while current repayment threshold freezes are punishing lower-earning graduates. Last year, the Office for Students forecast that up to 40% of higher education providers will be in deficit. Put simply, far too many institutions are being forced into a cycle of cuts just to temporarily balance the books.
James Naish (Rushcliffe) (Lab)
My hon. Friend will be aware of there being around 600 job cuts at the University of Nottingham. There have been alternative proposals from staff—120 in total—but the impact will be significant. What has been noticeable in my conversations with the university is the emphasis on commercial elements, whether that is covenants, 30 days’ access to cash or access to a revolving credit facility. Does she agree that that emphasis has gone too far? We have forgotten what the public benefit of universities is, and the Government and universities need to reflect on that.
Abtisam Mohamed
I agree with my hon. Friend; he makes an excellent point. Nottingham is seen as a university that needs support, and I think colleagues across the sector will look to see how Nottingham is supported alongside their own universities.
As I was saying, far too many institutions are being forced into a cycle of cuts just to temporarily balance the books. Over recent months, I have spoken to university leaders, staff, representatives of trade unions including the University and College Union, students and employers. While they all have very different perspectives, they all present a common diagnosis: the current funding model for higher education does not work. That raises a fundamental question: if we recognise universities as national assets, as our rhetoric often does, why have we systematically stripped back public funding and left them to shoulder so much of the financial burden themselves?
Jessica Toale (Bournemouth West) (Lab)
I thank my hon. Friend for setting out the real challenges that our higher education institutions face. Does she agree that the difficult financial position universities are in is causing them to oversubscribe their courses, putting unsustainable pressures on their workforce, reducing the student experience and increasing financial instability as a result of that boom and bust?
Abtisam Mohamed
My hon. Friend makes an excellent point. Universities need to be supported, so that the financial burden is not purely left for them to deal with.
I now want to come on to international students. International students should be welcomed as an enrichment of our campuses and strengtheners of Britain’s international ties. International students’ fee income has become an essential pillar, propping up our universities, cross-subsidising home students’ education and supporting research that would otherwise be cut, but universities did not become dependent on international fee income by choice. They have increasingly relied on it because domestic teaching and research funding has failed to keep pace with the real costs of delivery.
I and many others remain concerned about using an international student levy to pay for maintenance grants. It is seen as little more than an additional tax on one of the UK’s most successful exports. At a time when global competition for talent is increasing, we should be asking how we can strengthen one of Britain’s greatest success stories, not how we can make it less attractive. A restructured maintenance support system for home students, separate from international fee income, would be a vastly more successful policy, and it is one that I will continue to support.
Fundamentally, any solution to the sector’s funding crisis and support for the most disadvantaged home students should not further destabilise university finances. That is especially important in a context where universities are already cutting staff, courses and research programmes. Data from Universities UK shows that nearly eight in 10 universities have pursued voluntary redundancies in the last three years, and the same amount have frozen recruitment. The UCU estimates that 30,000 jobs have been lost over the last three years. That is devastating, and we should be clear about what it means: it means rising workloads and pay erosion for remaining staff, and it means staff who support students every day losing their livelihoods.
In Sheffield Hallam University’s case, more than 1,200 posts have gone in just over two years. Having met staff representatives and UCU members, I know that these numbers are not abstract; they represent people who have mortgages to pay, families to support and bills to meet. I also hear from many talented academics who are moving from one short-term arrangement to another, with little certainty about their future. The consequences are felt by individuals and the community beyond the university gates, but there are also implications for the future of British research. A system increasingly characterised by insecurity will only drive talented people away.
If universities are one of the UK’s greatest assets, why are they not considered to be involved in our economic growth? Although we speak of growth, skills and Britain’s future competitiveness, we see growing financial fragility across the very institutions that help to realise those ambitions. We cannot continue to expect universities to do more with less. Chasing efficiencies erodes capacity, and once capacity is lost, rebuilding it is neither quick nor easy.
I have a number of questions for the Minister. First, what is the Government’s long-term vision for higher education? I want to know not simply how individual institutions will survive the next financial year, but how universities will fit into a national strategy for growth, skills, research and regional development.
Secondly, does the Minister recognise that the current funding model has become overly reliant on international student income, mainly because teaching and research funding no longer meets the real cost that universities face? If the Government continue with the international student levy, what impact will it have, and how will fluctuations in student recruitment affect university finances? Does the Minister recognise that the institutions are likely to pass on those costs through higher fees, potentially making the UK a less attractive destination in the international student market?
Thirdly, does the Minister believe that the current balance between public and private contributions to higher education funding is sustainable? The Government now contribute about 16p for every £1 spent on teaching. Does the Minister believe that that is a viable basis for the future funding of higher education? Will the Government examine how to move towards a fairer balance between the individual and state contributions in the long term in recognition of the enormous public benefit that universities provide?
Fourthly, how are the Government assessing the economic impact of university job losses? We cannot call universities regional anchors while simultaneously accepting the loss of thousands of highly skilled jobs across the sector.
Finally, where do universities sit within the Government’s growth mission? If they are engines of growth, they should be treated as such, and they need a funding framework that recognises the enormous contributions that they make to our economy, our public services and our communities.
I want young people in Sheffield to have the opportunities that education gave me. I want our universities to continue training the nurses, teachers, engineers and researchers that our country desperately needs, and I want Britain to remain a world leader in higher education and research. If we want our institutions to survive, we have to stop treating them as an afterthought.
Several hon. Members rose—
Valerie Vaz (in the Chair)
Order. Could Members please remain standing so that the Clerk can make a note of how many wish to speak? Given the numbers, I will have to impose a hard time limit of four minutes.
Dr Rupa Huq (Ealing Central and Acton) (Lab)
“Crisis” and “world beating” are overused terms, and both apply to UK higher education, which, after an over-reliance on international fee income during years of underfunding, feels ready to snap. Four in 10 of the best universities on Earth are in Britain. Imperial College London, whose White City campus is in my seat, is one. It attracts the brightest brains for groundbreaking postdoctoral research, and its Scale Space facility incubates start-ups, but Home Office restrictions on dependants, the cutting of the post-study work visa, indefinite leave to remain changes and the new basic compliance assessment, which has inexplicably resulted in record visa refusals, have threatened all that. In a competitive world, international students have other options, which we see them opting for.
I am also the MP for the University of West London. It is not top 10, but it is a local anchor institution. It is a big employer and a vital hub for under-represented communities. Both universities are concerned by the international student levy. The return of maintenance grants, which the proceeds will fund, is welcome, but the £925 fee that universities must pay per international student per year of study at a time of falling student numbers is unviable. Given how course fees vary, why not a percentage—6% was originally mooted? What is the logic behind the the first 250 students being free of the charge? Sadly, the University of Suffolk has for the first time gone below that number—an unwanted situation—thanks to that perverse disincentive. Could we not increase the number?
Why are only the subjects in the Government’s industrial strategy funded by the grants? They include computing, maths and pure science, but no arts or social sciences, which potentially leaves those subjects to elites. Creative sector education—including at UWL, the old Ealing School of Art, which specialised for 100 years in art and the humanities and which was where the Who formed and Freddie Mercury studied—risks being wiped out along with jobs, as the University and College Union fears, because such subjects do not fit financial forecasts.
Our universities are not simply dreaming spires and ivory towers. They are essential invisible exports offering soft power and regional capacity building, with growth in every postcode. The University of Westminster, the first polytechnic, was founded to enrich the working man; its Soho Poly venue was where Pink Floyd played their early gigs, and things still happen there. We must treasure our wide diversity of institutions, not just throw them to the wall.
The Office for Students estimates that 119 universities—43% of the sector—will be in deficit this academic year, with 24 in danger of bankruptcy. After mergers and departmental closures, the next step, as predicted in the Education Committee’s excellent report, is insolvency. The Oxbridges will go from up here to down here, but where will the Suffolks and the UWLs go? Down there? Will it take someone to go bust before the Government finally take notice?
When I taught in the sector, international students, who spend money locally, were seen as the golden goose to compensate for real-terms funding cuts, but our over-reliance is now exposed. The basic compliance assessment’s red, amber and green ratings have become existential. The Government cannot rely on past laurels, then cash-starve a sector, demand gullible international students with limitless pockets, prop it up with staff good will and magically expect growth. The elasticity of demand inevitably snaps.
Jim Shannon (Strangford) (DUP)
As always, Ms Vaz, it is a real pleasure to serve under your chairship. I thank the hon. Member for Sheffield Central (Abtisam Mohamed) for securing the debate, setting the scene so well and enabling us to make a contribution on this incredibly important subject. It is a matter of grave concern for the future of our people, our youth and our economic prosperity in Northern Ireland. The Minister has no responsibility for Northern Ireland, but I always like to bring a Northern Ireland perspective to debates, because what is happening on the mainland is happening to us as well. We are debating the broader systematic challenges facing higher education funding across the United Kingdom, yet, as is so often the case, the view from Northern Ireland reveals a distinct and far more perilous landscape. It is good to see the Minister in her place; I look forward to asking her at least one question, which I hope she will be able to answer.
While universities in England and Wales adjust to tuition fee caps rising to £10,000, our local institutions remain strictly bound by the Department for the Economy. We deliberately keep undergraduate tuition fees lower, at £4,750, to ensure accessibility for our working-class communities. It is important to me as an MP and to our Assembly that we look after them and give opportunity for all. The Labour party wants opportunity for all, I have no doubt, and I wholeheartedly support the motivation of the hon. Member for Sheffield Central.
We need look no further than the devastating crisis that is currently unfolding at Ulster University, where some 735 members of staff—nearly 24% of the entire workforce—have applied for redundancy. The university is forcing through a planned reduction of jobs to plug a catastrophic £25 million deficit. Dedicated lecturers, researchers and support staff across Belfast, Coleraine and Magee are watching their livelihoods vanish. It is gutting our regional skills base, cutting away the fabric of Northern Ireland’s future and threatening the long-promised expansion of the Magee campus in Londonderry.
Mr Gregory Campbell
Does my hon. Friend agree that the issue of the Magee and Coleraine campuses needs to be addressed, particularly the maximum aggregate student number cap, which restricts the numbers that universities in Northern Ireland can take? We have to review that urgently.
Jim Shannon
I thank my hon. Friend and colleague for bringing that issue forward and for backing up practically what he sees on the ground, as I do, from the Northern Ireland perspective. Any decision against the Magee campus in Londonderry means telling the local businesses crying out to fix the skills deficit that the talent will simply not be there. That worries me greatly.
The Provost of Ulster University warned just days ago that those consequences are not abstract, nor are they years away. They are happening at this very minute, as we sit here, and they are affecting student places and long-term investment. Once the intellectual capacity is lost to redundancy, it is incredibly difficult ever to build it back up. Our institutions create value far beyond their campus walls. These are difficult times, and when the Minister responds it is important that we hear of a strategy. Please will she discuss policy changes and strategy with the relevant Northern Ireland Assembly Minister to ensure that we can move forward towards a positive future, even though it looks incredibly black at the moment?
Unlike England, which boasts well over 100 higher education institutions, Northern Ireland has only two for our population: Queen’s University and Ulster University. In a region with only two distinct academic employers, the impending job losses at Ulster University represent not a standard corporate restructuring, but a catastrophic hollowing out of nearly half of Northern Ireland’s university network. Academics and researchers have practically nowhere else to turn locally. These cuts create an inevitable brain drain, forcing elite talent to flee across the water to Great Britain, while triggering course closures that push local students to follow them.
I will conclude, because I am conscious that others want to speak. When one of only two pillars of a higher education framework is forced to cut a quarter of its applicants through redundancy, the structural integrity of the entire region’s skilled economy faces immediate collapse. That is the serious issue we face in Northern Ireland, and that is why I seek the Minister’s help.
Dr Scott Arthur (Edinburgh South West) (Lab)
It is a pleasure to serve under you today, Ms Vaz. I thank my hon. Friend the Member for Sheffield Central (Abtisam Mohamed) for the way in which she introduced the debate. Sheffield University was the first place I visited outside Scotland; I think the Red Deer pub, which is right next to the university, was the first English pub I ever went into.
Before I was elected to this place, I worked in the university sector for 20 years in Scotland. Our universities are among Scotland’s biggest assets. Across the sector, there is incredible innovation. Each year, our universities attract the very best staff and students from across the world. I always say that any country serious about its economy should be serious about its universities. It is great to see our Prime Minister putting universities at the heart of the triple helix model that he talks about so often. In a debate in Westminster Hall 18 months ago, I quoted the then president of NUS Scotland, who warned that Scotland’s education system was “crumbling”. At that time, I hoped our words would prompt the Scottish Government into action. Sadly, they did not, and Scotland’s sector has lurched from crisis to crisis.
Undergraduate university education in Scotland is free, but the sector is grossly underfunded. Broadly speaking, funding per undergraduate student in Scotland is well over £2,000 less per student compared with universities in England. That means less money for facilities and staff wages. I draw hon. Members’ attention to my entry in the Register of Members’ Financial Interests: I am a member of UCU and have an ongoing connection with Heriot-Watt University. Because of the huge stresses on the sector, there is industrial action at, I think, six universities in Scotland right now. Industrial action at one university might suggest a local issue, but when it is happening across the country it suggests that the Government need to step up and do something about it.
In my constituency, both Edinburgh Napier University and Heriot-Watt are internationally recognised institutions. They are home to dedicated staff, ambitious students and world-leading research, but both face serious challenges. In the past year, there has been talk of compulsory redundancies and course reductions. There are similar issues at Edinburgh University, which is outside my constituency, but quite a lot of staff and students are based in Edinburgh South West. This situation cannot continue. We need the Scottish Government to bring together universities, staff, students and trade unions to agree a way forward.
I want to talk briefly about immigration. During my time at Heriot-Watt, I worked alongside fantastic academics from around the world. Next door to my office, on one side I had Professor Adebayo Adeloye from Nigeria, and on the other I had Benny Suryanto, who came from Indonesia. Our students are lucky that these people choose to come to the UK. I felt lucky that students came from around the world to spend time in Edinburgh and enjoy its education and the opportunities that provides.
I am concerned that the Government are making it harder for both staff and students to come here. If we are serious about growing our economy, we have to recognise the benefits that universities provide, both nationally and locally in our towns and cities. It would be great to hear what is happening inside the Government to support universities and ensure that they can thrive. In Scotland, their funding is largely a matter for the Scottish Government, but I think the UK Government could do more to support the immigration status of students and staff.
Hannah Spencer (Gorton and Denton) (Green)
I thank the hon. Member for Sheffield Central (Abtisam Mohamed) for securing this debate. Britain has a proud tradition of higher education. Our historic universities, our culture of learning and discovery and the world-class research carried out in this country have earned us a reputation that is recognised around the world. It is an asset that we must celebrate and that we must protect, because that tradition belongs to all of us.
Higher education is so much broader than a three-year degree. Higher technical qualifications, foundation degrees, degree apprenticeships and lifelong learning all have a vital role to play alongside academic study. I left school at 16 and built a career as a plumber and gas engineer through vocational training at Bolton college and, later, apprenticeships, including the Prince’s Trust’s brilliant enterprise programme. I raise this because too often the voices of working people, tradespeople and people who maybe did not get on with school or who just prefer steel-toe cap boots to suits are missing from the debates and decisions that shape higher education.
In the areas I represent, there is no shortage of ambition or of people willing to graft to make something of themselves, but far too many people struggle, through no fault of their own, to see a clear route into secure, well-paid work and a decent life. A strong and accessible higher education system should be part of that route. That system is clearly now at breaking point. Across the country, higher education institutions are facing a deepening financial crisis, driven by years of under-investment and a funding model that is no longer fit for purpose. Universities, specialist colleges and other higher education providers are grappling with a multibillion-pound funding gap, as tuition fee income and public funding have failed to keep pace with their rising costs.
Yesterday, more than 400 students graduated from UCEN Manchester. Many of them were the first in their family to enter higher education, while others were mature learners who had returned to education. Yet providers such as UCEN that specialise in widening participation are increasingly being asked to do more with less, with their funding being steadily eroded.
The consequences of that underfunding are already painfully clear: courses closing, experienced staff being forced out and departments having to make severe cuts just to make ends meet. At the same time, working conditions have worsened for all staff members, with growing workloads, stagnant pay and increasing job insecurity. In vocational education, things have got so bad that institutions cannot persuade people to leave industries like plastering to take up teaching the next generation, because the wages are far below what they are already earning. Students are facing exorbitant fees and the prospect of being burdened by decades of debt.
If we are serious about equal opportunity, we must recognise that higher education is a long-term investment in our people, in our communities and in our country. The inventions and discoveries made by higher education researchers, like the covid-19 vaccines or the development of famine-resistant crops, have the potential to benefit all of us. The Government face a choice in today’s Budget; they can continue papering over the cracks or they can finally make a long-term investment in Britain’s future.
The Green party’s position is clear. Higher education should be free, and students should be provided with adequate maintenance support funded through public investment, not private debt. A 1% tax on wealth above £10 million would raise around £15 billion a year—money that would more than cover the cost of scrapping tuition fees and would give our higher education institutions a vital injection of cash.
Higher education policy must focus on spreading opportunity and investment more fairly across the country in areas like Gorton, Denton, Abbey Hey, Burnage, Longsight and Levenshulme. People from those places have never, ever lacked talent or drive. We must stop wasting it, by properly funding higher education and finally recognising learning for the national asset it is.
Darren Paffey (Southampton Itchen) (Lab)
It is a pleasure to serve under your chairship, Ms Vaz. I congratulate my hon. Friend the Member for Sheffield Central (Abtisam Mohamed) on securing this important debate.
Southampton is home to two excellent universities and yet in my constituency, only 7% of kids on free school meals will hold a degree by the time they are 22. Of those who do not receive free school meals in Itchen, just 19% will get there. If we go a few miles up the road to Winchester, however, that become 39%. We must make sure that higher education is not shut down as an option for young people. In my speech, I will focus on three points that are becoming worryingly clear about the funding system as it stands: it is not working for students, it is not working for universities, and—I fear—it is working only for the Treasury. I do not believe that is what this Labour Government are about.
First, on students, I was the first in my family lucky enough to go to university. I started in 2000 when fees were—wait for it—£1,025. My annual loan was about £3,500. We looked enviously on the generation before us, who did not pay fees and who received a grant to go to university. This generation is looking enviously on my generation, which is worrying. I went on to spend 20 years as university lecturer, so I saw every subsequent wave of student finance agreements. The Treasury Committee has concluded that we were essentially mis-selling some of the previous loan agreements on terms that no commercial lender would ever be allowed to offer.
Darren Paffey
My hon. Friend makes an absolutely salient point. Many of us never imagined that we would get to an even worse place, but here we are.
Only the top three earnings deciles of recent intakes will ever pay off their student loans in full. The nurse, the teacher or the engineer on £35,000 will pay 9% for decades and still never clear the balance. Dare I say it, but if it walks like a tax and quacks like a tax, let us call it a tax and treat it as one. If we properly sort it, it could well be a better deal than the current loan system.
John Slinger (Rugby) (Lab)
My hon. Friend is making a very compelling speech. I wonder if he noticed the coverage in The Telegraph, which reported that graduates on the minimum wage will be making repayments on three out of the five student loan plans from next year onwards. Does he agree that this, in many ways, breaks our social contract with the student population, who were essentially told that they would earn a huge amount more and should therefore contribute to their higher education?
Darren Paffey
I agree that this is not the deal that I think our country wants to offer its young people, particularly if the Government are about breaking down barriers to opportunity.
Secondly, on universities, the Office for Students reported in May that more than a third of English higher education institutes were already in deficit last year, and that if recruitment simply flatlines, nearly six in 10 could be in deficit within five years. International student numbers, as hon. Members have stated, fell by around 45,000 last year, and student visa applications in the first months of this year were down by a third.
In May, the Education Committee, which I sit on, warned of the real threat of insolvency. Universities such as those in my constituency—the University of Southampton and Southampton Solent University—are anchors of our local economy, and that is reflected around the country. We cannot afford to let them fail. They are not immune to the job losses that are affecting other HEIs.
Thirdly, I turn to the taxpayer. The Government estimate that the state meets 35% to 40% of the cost of higher education. Others take a different view: the Institute for Fiscal Studies put the figure for the 2022 cohort at around 3%, with 97% of the cost met by students. Sir Philip Augar recommended a 50:50 split. Whichever number we look at or choose to believe, we are a long way from the balance that Parliament intended, and the bill is quietly being passed to young people.
That brings me to the international student levy. Don’t get me wrong, I absolutely welcome the return of maintenance grants—for families on low incomes, they really matter—but a grant of up to £1,000 a year amounts to about £20 a week, and it is to be funded by a levy of £920 per international student from 2028. Last November, that was forecast to raise £445 million in its first year, but that forecast was made before visa applications fell by a third. I fear that a grant that depends on a shrinking tax base is a good intention built on sand. Before the levy legislation completes its passage, will the Minister commit to publishing an updated forecast of what it will raise based on today’s recruitment figures? Will she confirm that maintenance grants will be protected if they fall short?
Finally, the Government have said that the whole student finance system is under review, and I welcome that news enthusiastically. Will the Minister set out how and by when that review will report, and whether it will move us back towards a fair balance between the state and the individual? As hon. Members have very eloquently said, this is all about intergenerational justice. It is about whether 22-year-old me would look at university and say, “Yeah, I can risk that,” or whether I would now be more likely to say, “Nah, my family has never done that and I simply cannot afford it.” It is about growth and the 7% of kids in Itchen, and more across this country, who deserve better opportunities and better odds.
Perran Moon (Camborne and Redruth) (Ind)
It is an honour to serve under your chairship, Ms Vaz. I thank the hon. Member for Sheffield Central (Abtisam Mohamed) for securing this debate.
As remarkable as it is to imagine, I also began university under Margaret Thatcher.
Perran Moon
Thanks, Jim.
The higher education funding settlement is currently failing both universities and young people in Cornwall. Institutions such as Falmouth University, based largely in my Camborne, Redruth and Hayle constituency, are central to our local economy and our skills base, yet they are increasingly being asked to educate students at a loss. Delivering a full-time degree costs more than £12,000 a year, so even when the maximum tuition fee rises past £10,000 next year, it will still fall well short.
No sector can remain sustainable if growth depends on losses, and the funding gap is particularly acute for regional and specialist institutions. Universities, therefore, are forced to compete for short-term grants and rely on international student income to balance the books. But when that income falls, courses and jobs are at risk. We have seen that play out over the summer at the University of Exeter’s Tremough campus, also in my constituency, with voluntary redundancies and the closure of its geography course.
The system is not working for students either, especially those from lower-income backgrounds. In my constituency, less than 23% of 18-year-olds went to university in 2025, compared with 51% in London. That is not because young people in Cornwall lack talent or ambition; it is because in one of the poorest regions of northern Europe, the costs of pursuing a degree with the associated debt are too great to even consider. The barriers to higher education are simply too high. Even students who remain in Cornwall but rightly want to live on campus find that the rent for a single room consumes almost their entire maintenance loan before they have spent a penny on food, travel or other essentials.
The loan system does not make things any better. Those from wealthier families may avoid taking out a loan altogether, while low-income students have no such option. A low-income student on a three-year course could be left with a £67,000 debt the moment they graduate. The interest on the debt often accumulates faster than repayments, leaving poorer graduates paying a higher effective rate for their entire careers.
Higher education should expand opportunity and drive growth in places such as Cornwall. Instead, we have a system that asks universities to do more with less while operating a student loan system that, for all intents and purposes, functions as a regressive graduate tax. We cannot build a fairer, more productive country on that foundation. I ask the Minister: what steps are the Government taking to make higher education funding fairer for students and more sustainable for universities?
Pam Cox (Colchester) (Lab)
I thank my hon. Friend the Member for Sheffield Central (Abtisam Mohamed) for securing this debate. I declare an interest as a member of the University and College Union and the all-party parliamentary university group.
Everybody in this debate wants to see young people and lifelong learners succeed in their chosen path in life. Most would agree that the Government have done a great deal to invest in education and skills since 2024, and I want to pay tribute to that. We have seen that uplift in schools, special educational needs and disabilities provision, youth hubs, colleges and apprenticeships.
This debate, however, is focused on the situation in higher education. My discussions with those who work in and represent that sector give me cause for concern, as I know is the case for other hon. Members present. Other south Essex MPs and I have spoken in this Chamber and elsewhere about the very significant challenges that my former colleagues at the University of Essex have faced over the past year. The university closed its Southend campus and made large numbers of staff redundant there and at its main Colchester campus.
The University of Essex is not alone, as we have heard, in facing these painful challenges: many universities are closing departments and issuing redundancies. At least two other universities are considering campus withdrawals or closures. The University of Buckingham has withdrawn from its Crewe campus, to be replaced as the main operator by Apollo Education. The University of Brighton is closing its Eastbourne campus and is considering closing its Falmer campus.
Other institutions are merging: the University of Kent with the University of Greenwich; City, University of London with St George’s; and King’s College London with Cranfield University. These new arrangements are the start of a new era in higher education. They raise the very thorny issue of how universities that were brought into being by the Privy Council via royal charters merge with those that were brought into being as companies limited by a guarantee. I suspect that this is a policy rug nobody really wants to lift. Other universities are being bought out or privatised. Lincoln Bishop University, for example, is now operated by Global University Systems, a global body with millions of students around the world.
This new era of campus closures, redundancies, mergers and buy-outs comes at a time when many in the sector face huge financial challenges. The Education Committee has already been referenced. It recently reported:
“The higher education sector in England is facing a financial crisis that now poses a real risk of institutional insolvency.”
This situation requires our close attention. We need our universities to thrive in our rich research and teaching ecosystem—they are part of an ecosystem. Our industrial strategy depends on that, as does our ability to create sovereign innovations in every sector.
Universities are very ready to adapt, and have adapted over the years, but they need us in this place to have more open conversations about how they can best do that. I ask the Minister to continue to champion our universities, but to support them by enabling more open conversations like this one about the scale of the challenges that they face.
Neil Duncan-Jordan (Poole) (Lab)
It is a pleasure to serve with you in the Chair, Ms Vaz. I congratulate my hon. Friend the Member for Sheffield Central (Abtisam Mohamed) on securing this timely debate. My constituency does not have a university, but many of my constituents study and work at the two nearby universities in Bournemouth. However, my interest in this subject comes from the fact that when I was a regional official for Unison, I was head of the HE section in the south-east. That experience taught me a lot about the way in which the sector is financed.
Today, a growing number of institutions are forecasting deficits, and many have introduced or will soon be introducing the cost-cutting measures that hon. Members have mentioned, including redundancies among academic and support staff. For years, there has been a financial over-reliance on international students. We saw that decline greatly during covid, when I was working as a trade union official, and it has not yet been able to come back. Coupled with changes to visa restrictions, international students are being put off from coming to the UK.
There are also rising operational costs—energy costs, pensions and national insurance rises; those have all had an impact on large campuses—and a tuition fee funding model that has failed to keep pace with those rising costs, but the real reason for the state of HE funding is the marketisation of the sector. Pitching one university against another to compete for students has driven an arms race to build the shiniest buildings they can, often at the expense of the teaching and student experience. At any time, many of our campuses look more like a building site than a university.
The financial risks, however, are not evenly spread across the sector. Institutions with smaller reserves, limited international recruitment and weaker balance sheets are particularly exposed. The most invidious result of these financial pressures is the move to make staff pay for the failure of the system. At a number of universities, including those with whom I used to negotiate, we are seeing the creation of subsidiary companies to transfer staff out of direct university employment. That removes them from either the local government pension scheme or the teachers’ pension scheme. Staff who refuse to transfer often face the threat of redundancy. Despite the Government’s best efforts, this looks remarkably to me like fire and rehire.
The Government cannot secure the future of the HE sector simply through further fee increases for students. I believe we need an immediate cap on student numbers for each institution, rather than allowing the larger institutions to hoover up all the available students in an area. We need financial support for those universities facing immediate financial pressure, and we need to put a halt to the redundancies and wholesale course closures that are taking place across many of those institutions.
The Prime Minister has made it clear that his growth agenda is based on a triple helix model of business, Government and universities working together. For that to succeed, we need a healthy HE sector, and to achieve that, we need greater Government intervention and support.
Jayne Kirkham (Truro and Falmouth) (Lab/Co-op)
It is a pleasure to serve under your chairship, Ms Vaz, and I thank my hon. Friend the Member for Sheffield Central (Abtisam Mohamed) for securing this debate.
Access to higher education can be life changing for young people. However, this opportunity is already harder to grasp for young people in Cornwall. Students face the high costs of travelling from remote, disconnected areas or, if they stay local, the high costs of private renting in a tourism-heavy region. Students across the south-west face the second highest monthly living costs in the UK, at £1,212 per month, which is only £114 less than London. These financial barriers directly impact whether young people pursue higher education. While the 2025 UK-wide entry rate for 18-year-olds was 36.3%, the rate in the south-west was joint lowest at 30%, and in Truro and Falmouth it was 27.2%, which is the lowest rate on record since 2016.
Having universities close by with a variety of courses and offerings is key for young people in Cornwall to be able to access the higher education opportunities. HE is an investment in place, and nowhere more so than in Cornwall. It leads to economic growth, productivity and innovation, including higher wages, skills and regional development.
There are ongoing funding concerns in relation to higher education institutions in Cornwall, and it is integral that support for these vital institutions is considered. Losing higher education opportunities there, especially with the campus that is across the border in the constituency of the hon. Member for Camborne and Redruth (Perran Moon), means that Cornish students risk losing out on these opportunities.
Falmouth University, which began in my constituency, offers traditional creative arts alongside technical and entrepreneurial courses and produces nearly 7,000 highly-skilled graduates each year. Tuition fee income does not meet the costs of delivering these degrees, particularly in creative and technical universities like Falmouth. That leaves universities with a difficult choice: sacrifice their core academic delivery for research investment or engage with more corporates. Government funding is cost-intensive to obtain and competitive, and frequent changes to Government funding models make it very hard to plan effectively. Specialist institutions like Falmouth are unevenly affected by those higher costs to secure fewer grants.
Funding for these integral institutions cannot fall by the wayside. They offer local employment opportunities, produce wider economic benefits and give young people in Cornwall a tangible place to pin their aspirations. I welcome the Government’s reintroduction of funding for higher education through targeted, means-tested maintenance grants, which will support low-income students from deprived areas to access and excel in higher education. We need to ensure that funding for a diverse range of courses that allow young people to gain skills and access to new experiences is accessible, realistic and enables the higher education sector to continue to foster ambition in Truro and Falmouth, Cornwall, the south-west and across the UK.
Dr Peter Prinsley (Bury St Edmunds and Stowmarket) (Lab)
It is a pleasure to serve with you in the Chair, Ms Vaz. I thank my hon. Friend the Member for Sheffield Central (Abtisam Mohamed) for securing this important debate.
Sheffield is my university. I attended the 45th reunion last weekend and, apart from the fact that many of my former student colleagues had decided to dye their hair grey, everybody was looking remarkably well. I would also like to say that I actually went to university before Mrs Thatcher was the Prime Minister.
I am a former NHS surgeon and a father of three children who have all been through our university system. Our universities are among our greatest assets, as we have heard during the many thoughtful contributions this morning. They drive research and support our local economies, but we cannot take them for granted. They are facing considerable financial pressure. Rising operating costs and an increasing reliance on international student income have left many of them in a precarious position.
We all know that the importance of universities goes far beyond the lecture theatres. Just this Monday, I spoke in the House about genetic research at the University of East Anglia to help us distinguish between dangerous and less dangerous prostate cancers—a subject that we absolutely need to sort out. That sort of groundbreaking research depends on well-funded universities with the confidence to invest in the long term, particularly in subjects such as my own, medicine, but also in the sciences and many others, where the costs of providing higher education and training are considerable.
The Government’s decision to increase tuition fee caps in line with inflation rather than allowing their value to erode makes sense. I also welcome the return of maintenance grants. Those are important steps towards supporting universities and students, but we must recognise that there is a difficult balance at the heart of this debate. Universities need more money, yet increasing tuition fees means that we are asking students to take more debt. I can see that generational difference in my own family. My two eldest children studied under plan 1, my youngest is on plan 2 and the students I met at Thurston community college in my constituency face the prospect of something called plan 5, with repayments potentially stretching over 40 years.
I graduated from medical school without tuition fee debt. I began my career, I entered the housing market and I gradually became more secure, but that looks very different for today’s graduates. A maths graduate who recently attended one of my constituency surgeries brought home just how complicated our student finance system has become. He brought a very well worked-out spreadsheet that explained it to me—at least at the time; I could not possibly explain it to Members today. We must avoid a situation in which the financial sustainability of our great universities is secured simply by transferring the ever-greater burden on to the next generation, for generational unfairness is the great challenge of this Parliament.
I ask the Minister to consider just two things. First, how can we provide universities with greater long-term funding certainty rather than leaving them so dependent on tuition fees and unpredictable international student recruitment? Secondly, how can we ensure that efforts to stabilise university finances are accompanied by a fair and transparent student finance system so that young people really understand the financial commitments they make? Our universities need financial stability, but our students need financial security. That is a hard thing, but our Government know how to do hard things.
Lewis Atkinson (Sunderland Central) (Lab)
I congratulate my hon. Friend the Member for Sheffield Central (Abtisam Mohamed) on securing this debate and I congratulate Members from across the Chamber on their contributions.
It should not be said that issues facing our universities are the preserve of MPs from big cities or the leafy suburbs. As Sunderland Central’s MP, I want to highlight the importance of the University of Sunderland to my city. This is as much a red wall issue as it is anywhere else in the country.
I want to mention the university’s educational and economic impact, and what the higher education funding environment means for our city. The university comes from the proudest of polytechnic traditions. It is rooted in the city, with a mission to be open to anyone who can benefit from higher education. It is shaped by what local employers and professions need. Nowhere is that clearer than in health. Sunderland trains the nurses, pharmacists, paramedics and doctors whom our NHS rely on. Its medical school was explicitly set up to bring more working class and local students into medicine. It is now moving into dental education, in a region where too many people struggle to see NHS dentists. When it was named university of the year for social inclusion, more than six in 10 of its students were the first in their family to go to university. If I may, I will associate myself with the remarks of my hon. Friend the Member for Southampton Itchen (Darren Paffey) on the intergenerational and social mobility missions of our universities. That is crucial in Sunderland, as it is elsewhere.
This is what widening participation looks like in practice: young people from Pallion, Hendon or Southwick in my constituency having the chance to get a degree and, by living at home, de-risking some of the financial issues facing students that we have talked about. The university, as we have heard, also brings people to the north-east from across the country and, as successive Governments’ international strategies have encouraged, from around the world.
On its economic impact, independent analysis found that the University of Sunderland adds around £250 million a year to our city’s economy and supports more than 4,000 jobs in the city. It is one of our biggest employers. The university, however, is under real financial pressure, which has serious consequences for the city as a whole. Home tuition income has fallen behind costs, and the visa landscape for international students has changed rapidly and unpredictably. As a result, the university has had to set out plans to save £40 million over the next two years, and staff are understandably worried about their jobs.
That pressure did not come from nowhere. For years, the previous Government froze tuition fees while costs kept rising, with no long-term plan. As others have said, the Government now expect to fund just 16p in every pound of home student funding. Universities that do the most to open doors, like Sunderland, are left the most exposed. I know the Government are working with significant fiscal constraints. I know they have taken steps to set stable expectations for future fee income so that proper financial planning can happen. I, of course, welcome the return of targeted maintenance grants. But in previous responses the Government have been keen to highlight that universities have always been autonomous institutions. I understand that. In my experience, they take the responsibility to be financially sustainable seriously, even when that means making deeply painful and locally unpopular decisions such as the withdrawal of funding from our National Glass Centre in Sunderland. But we cannot treat them as autonomous institutions and assume that they will always be there as anchors in communities like Sunderland and across the country. I hope we will hear more about the Government’s long-term strategy.
Ian Sollom (St Neots and Mid Cambridgeshire) (LD)
It is a pleasure to serve under your chairship, Ms Vaz. I congratulate the hon. Member for Sheffield Central (Abtisam Mohamed) on securing this debate. Sheffield is an excellent place to ground this debate because it has two great examples of the origin stories of many of our universities. The University of Sheffield is a civic university in the truest sense. When it sought its charter in 1904, steelworkers, factory workers and other local people raised over £50,000 in penny donations to support it. Sheffield Hallam traces its roots to the School of Design, which was founded in 1843 to train designers for the city’s industry, and became a university in 1992. One red brick, one post ’92: both serve the city and both embody the idea of universities as anchors of their community. That idea is now at risk.
Later today the Chancellor delivers his first Budget; every signal is that universities should expect very little from it. We cannot continue to ignore the stark choice before us when it comes to university policy. Either we carry on with a managed decline—courses cut, talent lost, places left behind—or we can choose transformation with universities as engines of learning throughout life, as innovation hubs driving economic growth and as civic institutions embedded in the places they serve. The Liberal Democrats would choose transformation, and I hope the Government will do the same.
At the moment, too many universities are fighting for survival. More than a third of English providers were in deficit last year. The Department’s own costing study found that universities lose about £3,000 on every home undergraduate they teach. Research is worse: universities now recover only two thirds of research costs. According to the Russell Group, universities put in £6.3 billion of their own money into research last year.
For many years now, the funding gap has been filled by international students, but that income is now also falling away. Visa applications in August—the peak month—were down by 17% on a year ago. Of course, education as a great British export is about much more than money, but the business model that has saved the Government from spending more on home students and research is being undermined. The Government have said that they intend, in the Finance Bill that will follow today’s Budget, to legislate for a £925 levy on every international student. Only a tiny sliver of that money will go to the maintenance grants put forward as a justification for it.
This crisis does not simply affect an ivory tower elite who sit apart from our communities: in many towns and cities, the university is one of the largest employers and the source of the next generation of teachers, nurses, engineers and members of many other professions. Such universities produce graduates who are likely to stay and work locally and serve the students who are often least able to move away to study. When a nursing course or engineering department closes in such a place, it does not relocate; it disappears from the region. With it goes a route into a profession for everyone who cannot simply up sticks and leave.
Post-’92 universities carry a burden that their older neighbours do not. For no other reason than institutional history, they are tied into the teachers’ pension scheme, for which employer contributions reached 28.7% last year—roughly double what many older universities pay, and about £8,000 extra a year for a typical member of staff. In July the Government ruled out any help, but part of solving this crisis in the sector must include working towards a single, fairer pensions framework.
There is also the question of what happens when one of these institutions does not survive. The Office for Students told the Education Committee that 24 institutions could exit the market within a year. The Committee recommended a special administration regime so that a failing university could keep teaching while its future was resolved, but the Government have said that they are “not currently persuaded” because legislating would be too complex. I would say that that is an argument for starting now, not for doing nothing.
Further education colleges have had a special regime since 2019, and having no regime has its own risks. With no orderly way to fail, many simply assume that the Government will step in. Sir Philip Augar has said that a handful of universities are already getting secret bail-outs. When I asked Ministers about that, I was told that emergency support is not provided, but also that officials meet universities and their banks regularly in confidence. Discussing potential rescues behind closed doors gives us all the moral hazard and none of the transparency.
Liberal Democrats see universities as essential national infrastructure, not cost centres to be squeezed. That means a new settlement: in the short term, reform the levy before it reaches the statute book; reprofile student loan fee payments to ease the cash flow; offer low-interest loans for restructuring; and remove the VAT penalty that stops universities from sharing back-office services, so that they merge finance and HR rather than cut teaching. We need to fund the breadth of subjects in every region and make sure that public research grants actually cover the 80% of costs that they are supposed to. But this needs to come alongside obligations on universities. The money alone will not fix the problem.
After 2030, the number of 18-year-olds will fall by 17%, yet 82% of the growth in priority occupations in the industrial strategy sectors will require a higher education qualification. Put those two facts together, and a model built around school leavers simply will not work in the long term. Many of those who will fill the jobs in that growth are already in work and will need to retrain as technology reshapes what they do. Universities need to open up to adults through modular lifelong learning, which we suggest needs to be through lifelong skills grants, not simply loans. Universities also need to work hand in hand with further education colleges, with credits that transfer between them, and they need to turn British research into businesses that stay in Britain.
Dr Arthur
The hon. Member is diagnosing the problem excellently and detailing all the issues. I do not want to go back too far, but we have to think about the role the Lib Dems played in the coalition Government and the decision to go back on their pledge not to raise fees but instead raise them to £9,000. The Budget this afternoon is not just about spending money; it is also about raising money to pay for policies. A range of policies—
Valerie Vaz (in the Chair)
Order. May I remind the hon. Gentleman that the hon. Member for St Neots and Mid Cambridgeshire (Ian Sollom) only has a minute left?
Ian Sollom
A lot of the interventions that I have suggested on the university side are cost-neutral and would involve restructuring.
I have three questions for the Minister. First, will the Government update their impact analysis to reflect this year’s fall in international recruitment and publish the effect by region and type of institution of the international student levy before the Finance Bill is debated? Secondly, will they think again about special administration before rather than after a university fails? Thirdly, will the Government commit to working with the sector to end the pensions penalty on post-’92 universities? Universities did not get to this position overnight and they will not recover overnight, but today’s Budget is a chance to stop the managed decline and start the transformation. I hope the Chancellor takes it.
Rebecca Smith (South West Devon) (Con)
It is a pleasure to serve under your chairmanship, Ms Vaz, and to respond on behalf of His Majesty’s official Opposition.
I thank the hon. Member for Sheffield Central (Abtisam Mohamed) for tabling this important debate and all Members for their contributions this morning. I have to say that I did not expect to hear quite so much agreement for Margaret Thatcher’s education policies this morning. I am particularly grateful to the hon. Members for Edinburgh South West (Dr Arthur) and for Camborne and Redruth (Perran Moon) for their positivity about that.
Let me pick up on the points made by the hon. Member for Southampton Itchen (Darren Paffey). Although I think we are the same age, he started at Southampton University a year after me, but we have many mutual friends from our time at university. It is worth noting that the changes we experienced as the first cohort that had to pay fees and take on a loan were due entirely to the Teaching and Higher Education Act 1998, which was snuck through by the new Labour Government and then conveniently forgotten about, in a time where social media did not exist. I dread to think of the furore if today’s students realised that that was going to happen to them, but I for one, aged 16, thought I was going to university for free, but by the age of 18 that was not the case.
Rebecca Smith
I am going to make some progress.
I do not want to burst the bubble of the hon. Member for Sunderland Central (Lewis Atkinson), but Plymouth has also had dentistry offered as a subject. Unfortunately, only about 5% of the students are from Plymouth and nearly all of them leave the area, so although we absolutely need more dentistry students, so far that has not quite been the mechanism to solve the crisis that we hope it will be—although that is a debate for another time.
To respond to the topic of the debate, let me put it on record that the Opposition recognise the enormous value and significance of the UK’s university sector in terms of its economic and societal contribution. The National Centre for Universities and Businesses argues that the UK’s universities are
“one of our greatest strategic assets. They educate the future workforce, conduct world leading research, and act as anchor institutions in their regions—supporting businesses, driving innovation, and powering local growth.”
Economically, universities contribute around £265 billion to the UK economy and support more than 800,000 jobs. The return on investment is also staggering. For every £1 of public money invested in the higher education sector across the country, £14 is put back into the economy.
In addition, there is no doubt that universities are some of the most critical engines of growth and prosperity at the regional level. As the proud Member of Parliament for South West Devon, I know the huge role that the sector plays across the south-west. We have 10 universities with more than 200,000 students between them, employing more than 31,000 people and contributing £7.8 billion of gross output. Plymouth Marjon University, Arts University Plymouth and the University of Plymouth are certainly playing their part. I am meeting the vice-chancellor of Plymouth University tomorrow to discuss this very topic. Although I unfortunately cannot add any more today, I know that he wants to talk to me about the struggles that the university is facing.
Notwithstanding this vital economic contribution, it would be wrong to look at universities purely in terms of their economic output. Universities help to shape the society we all live in. They equip young people with the skills needed to navigate an increasingly fractured society. They teach young people to think critically and outside the box, skills that I believe will be essential in a Britain where communities are more divided than ever and the spectre of the AI revolution looms over us all. It is beyond clear that universities will play a central role in Britain for decades to come. That is our view, but we are not blind to the big challenges facing the sector.
It is no secret that real and imminent challenges face the UK’s university sector. A May 2026 report from the Education Committee went so far as to claim that the sector faces a financial crisis that poses a real risk of institutional insolvency. The report laid bare the terrible state of some universities’ finances, with the Office for Students fearing that 24 providers could face insolvency within the next 12 months. Against this uncertain backdrop, universities are being forced to close courses and sell buildings to cut costs and make efficiencies.
The difficulties facing universities are explained well in the Policy Exchange report, “Tarnished Towers”. It argues that high inflation, pension pressures and a reduction in international student numbers have created a perfect storm for our universities. It all seems to be compounded by a lack of action from the Government thus far. A Universities UK report from February 2026 found that Government policy decisions will
“lead to an estimated £3.7 billion reduction in funding to higher education providers in England from 2024-25 to 2029-30.”
Its analysis shows the impact of Government immigration policy, but also the damaging shock that the sector received through increased pension and employment costs.
In 2020, Keir Starmer made scrapping university tuition fees the centrepiece of his leadership campaign. Indeed, in June 2023, the previous Education Secretary even had the audacity to claim that graduates would pay less under a Labour Government. Students right across the country felt betrayed and let down by the Government’s broken promises when the previous Education Secretary announced in November 2024 that Labour would push up tuition fees for students. In that debate, the shadow Education Secretary, my right hon. Friend the Member for Sevenoaks (Laura Trott), said that she would be willing to work with the Government to support universities and students. His Majesty’s Opposition are yet to be invited to work constructively with the Government on that—indeed, we have heard very little at all from the Government about what they want to do. I hope the Minister can shed some light on the Government’s plans to support our university sector.
The new Education Secretary has been keen to talk about her plans to reform technical education, but aside from providing a statement on that issue in the House, we have heard little else. She has not come to the House to clarify when the Government will bring forward the legislation they promised at the King’s Speech to support children with SEND and their families, or to talk about the challenges facing the university sector.
I am grateful to the hon. Member for Sheffield Central for securing this debate, as it gives His Majesty’s Opposition some time to ask the Minister, whom I respect very much, some important questions about higher education funding. First, can the Minister shed any light on how the Government intend to support the 24 institutions that the Office for Students claimed are at risk of insolvency in the 12 months from May 2026? Secondly, can she confirm whether the Government intend to make any changes to plan 2 student loans? Thirdly, can the Minister tell the Chamber whether she has had any meetings with institutions that might be facing significant financial uncertainty during the remainder of this academic year? Lastly, will the Government rule out pushing up student tuition fees again before the end of this Parliament? His Majesty’s Opposition, the higher education sector and, most importantly, students right across the country need answers to those important questions. Universities need them to begin to develop long-term financial plans, and students need to have certainty about their finances and about the stability of the institution they are studying at and the course they are taking.
Regrettably, I hold little hope that the Government have answers to those questions, given the lack of focus that the new Education Secretary seems to have shown to higher education since coming into office. That is in stark contrast to the official Opposition: we have outlined detailed and fully costed plans to lower interest on plan 2 student loans and set out reforms to the university sector to ensure that the Government stop funding dead-end university courses. That is all part of our new deal for young people.
I reiterate His Majesty’s Opposition’s firm belief in the strength and value of the UK’s higher education sector; it is indeed a huge strategic asset. However, we must be honest and recognise that it will face huge challenges over the next decade. The digital revolution means that universities need to rethink how they prepare students for the world of work, and they must be open to accepting that they must adapt to stay solvent in the new economic reality.
The Government should be there to guide the sector through these turbulent headwinds, but we have seen little indication that they are. The new Education Secretary urgently needs to shed some light on what steps they will take to address some deeply concerning reports about the financial health of our institutions. The Budget is a little over an hour away; I hope that the Chancellor will set out steps to solve these problems, but I hold out little hope.
The Minister for School Standards (Georgia Gould)
It is an honour to serve under your chairship, Ms Vaz. I congratulate my hon. Friend the Member for Sheffield Central (Abtisam Mohamed) on securing this really important debate. She is a passionate advocate for these issues: she has chaired the APPG on students and has regularly raised issues related to universities and students, and from her speech we heard how thoughtful and knowledgeable she is on these issues.
I also thank my hon. Friend the Member for Colchester (Pam Cox) for her characteristically thoughtful speech. She called for a wider debate, discussion and focus on these issues, and we have had a very important debate today. We have heard the range of expertise in the Chamber, from lecturers to others who have real experience of working in universities, and about the range of decades when everyone went to university—I cannot believe that anyone here looks old enough to have gone to university under Margaret Thatcher.
We should rightly be proud of our world-class higher education sector, which remains, by any objective metric, one of our nation’s greatest exports and a global beacon of intellectual excellence. We heard from my hon. Friend the Member for Ealing Central and Acton (Dr Huq) that the UK’s university sector includes four of the world’s top 10 universities, of which we can be very proud. It contributes more than £265 billion to the UK and supports more than 750,000 jobs. In my work as Schools Minister, I get to see directly the contribution that universities make to places and how integrated they are in local innovation, support and access.
I have spent quite a bit of time in Sheffield and have seen the contribution that the University of Sheffield and Sheffield Hallam University make to the local area, whether through their pioneering work on opening up participation to university or some of their wider research: Sheffield Innovation Spine, the work that Sheffield Hallam University is doing on early years and Sheffield Children’s University, and the work that the University of Sheffield is doing on adult social care.
As my hon. Friend the Member for Sunderland Central (Lewis Atkinson) was talking, I was reflecting on being in Sunderland two weeks ago, where we are working on Mission North East, and the role that Sunderland University is playing in partnership to support better outcomes for children in the area.
The Government are committed to maintaining a world-class higher education sector that delivers for students, our society and the economy. We of course recognise that the sector’s financial environment is challenging. The sector is rightly independent from Government, with providers managing their finances and ensuring that their business models provide long-term sustainability. However, I recognise the long-term challenges that many Members have raised and the strain that we saw over the last decade, including the legacy of seven years of frozen tuition fees. Universities have had to deal with the issues caused by that.
Dr Huq
I know the Minister is really passionate about this subject, and her Department has done excellent work with the Department for Work and Pensions on the phenomenon of those not in education, employment or training. A statistic shared by my hon. Friend the Member for Sheffield Central (Abtisam Mohamed) was that the UK has the lowest proportion of public tertiary education expenditure among OECD countries. Could the Minister have a word with Treasury colleagues about nudging that upwards, because that is a statistic we are not so proud of?
Georgia Gould
Of course, I always support greater funding for education and young people, but I was just about to talk about some of the changes the Government are making to support sustainability.
After they were frozen for eight years, we increased tuition fee caps in line with inflation for 2025-26. We will increase them once again in line with forecast inflation in 2026-27 and in 2027-28. We will then legislate when parliamentary time allows to increase tuition fee caps automatically for future academic years. Over the coming year, that is £6 billion-worth of safeguarded indexed increase in income underpinned by the Government, which will make a real difference.
My hon. Friend the Member for Sheffield Central asked about the Government’s vision for universities. We have set out an ambitious programme of reform through the post-16 education and skills White Paper, with a clear vision for a more sustainable and collaborative higher education sector. We want providers to be clear about their distinctive roles but to be working in collaboration.
My hon. Friend also mentioned the importance of research. My hon. Friend the Member for Bury St Edmunds and Stowmarket (Dr Prinsley) talked about the pioneering research on prostate cancer at East Anglia. Research is a critical role that universities play. The Government are investing a record £86 billion in R&D from 2026-27 to 2029-30; as part of that, UK Research and Innovation will deliver an expected £38.6 billion of research investment, rising to nearly £10 billion per year by the end of that period. In the Department for Education, we are working closely with the Department for Science, Innovation and Technology to deliver the White Paper’s commitments, which include research funding reform and improvements to research grant cost recovery.
We heard from almost all the Members who spoke in the debate about the importance of opening up access and ensuring that young people who want to go to university can always pursue that route. That is why we do not support the Conservatives’ proposals, which would pull up the drawbridge because they are about reducing the number of young people going to university. We know that young people from disadvantaged backgrounds will be the ones who do not get that opportunity.
Jayne Kirkham
It is important to note that in the 1980s, only about 10% of people went to university. The Blair Government opened that up to 50% of the population, and that is worth putting on the record.
Georgia Gould
We want two thirds of young people to participate in higher-level learning, whether that is going to university, pursuing an apprenticeship or a technical route. We see all of those as deeply connected.
Jim Shannon
I thank the Minister for her helpful response. She has outlined a very clear strategy to try to address the issues that we have all raised. I ask her a specific question: would she consider sharing the strategy with the relevant Minister back home?
Georgia Gould
I regularly talk to colleagues across the four nations, and my right hon. Friend the Minister for Universities, Baroness Smith, does the same. It is very important that we have that spirit of learning.
Those different routes are deeply connected. We think that the relationship between higher education and the Department is important, particularly on supporting outcomes for young people and as we think about how we respond to the changing nature of education, the introduction of the lifelong learning entitlement and long-term flexible learning. We want people to have access to education throughout their lives.
Georgia Gould
No, I must make progress. The lifelong learning entitlement will transform the student finance system, giving people flexible access to high-quality education throughout their working lives. From January 2027, for the first time learners will be able to use their entitlement to fund individual modules as well as full courses at levels 4 to 6 at colleges, universities and independent providers.
A number of Members, including my hon. Friends the Members for Sheffield Central and for Edinburgh South West (Dr Arthur), raised the issue of international students and support for them. I want to be clear: international students are welcome in the UK. They enrich our campuses and communities, and are ambassadors for this country long after they graduate. They made a vital contribution of £12.7 billion in fee income in 2023-24—almost a quarter of the sector’s income, as other Members said. The new international education strategy confirms our commitment to welcoming students who meet the requirements to study here.
A range of questions were asked about the international student levy. That is part of a wider package that also includes inflation-linked fee rises, and it is important to stress that every penny it raises will be reinvested in higher education and skills—including new maintenance grants for disadvantaged students, which many hon. Members raised, to remove some of the barriers around the cost of studying. We know how important those are. The levy is simple and proportionate: a flat £925 fee per international student per year from 2028-29, paid for by providers with an allowance of 220 students each. We listened to the sector; the flat fee is equivalent to around 4% of international fee income, down from the 6% first provided. To answer the questions asked by my hon. Friend the Member for Southampton Itchen (Darren Paffey) and others, we will publish an updated impact assessment ahead of the Finance Bill.
I was asked a number of questions about the pressure that many students are facing, including from my friends from Cornwall, the hon. Member for Camborne and Redruth (Perran Moon) and my hon. Friend the Member for Truro and Falmouth (Jayne Kirkham). We know that cost of living pressures have hit students hard. The previous Government removed maintenance grants and the real-term value of loan support for students fell by almost 20% between 2020 and 2024. We are taking action to put that right.
We are introducing a targeted maintenance grant from 2028-29 of up to £1,000 a year for disadvantaged students on top of their loan, putting cash in their pockets without adding to their debt. The new grants will support students from low-income households studying full-time courses, which is in line with the Government’s mission and industrial strategy. We are future-proofing maintenance loans by increasing them in line with forecast inflation every year, with the biggest cash increase going to students from the lowest-income families.
My hon. Friend the Member for Southampton Itchen raised the issue of student loans, and I want to address that in the time that remains to me. As we have heard from across the Chamber today, giving those who want it and have the ability the chance to study in higher education changes lives. We are determined to support students who want to go to university to fulfil their aspirations. We cannot lose sight of the value that student loans provide in enabling that and levelling the playing field at the point of access. They remove that upfront financial barrier to studying and enable students to repay when they are earning. We inherited a student loan system that is not working as fairly as it should, and we recognise that some students and graduates feel the impact of that.
We are making the tough but necessary decisions to deliver a fairer and more sustainable system. We increased the plan 2 thresholds in 2025—its first increase since 2021—and we again raised the plan 2 repayment threshold in April, to £29,385. We have also capped interest rates for plan 2 and plan 3 loans at 6% for the academic year 2026-27. There are a whole range of very important discussions that came up today. I know that myself—
Motion lapsed (Standing Order No. 10(6)).