Higher Education Funding

Rebecca Smith Excerpts

Wednesday 28th October 2026 Westminster Hall

[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.

[Jayne Kirkham]

Will the hon. Lady give way?

[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.

--- Later in debate ---

[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.

[Rebecca Smith]

Will the Minister give way?

[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)).