Tough challenges face next Senedd in Higher Education and other sectors

Martin Shipton

Sloganising in politics is all very well, but getting public policy right across the range of a government’s responsibilities requires considerably more subtlety than a soundbite can provide.

As we move towards next year’s Senedd election, it’s important to be aware that we need politicians of high calibre who are capable and willing to engage with complex issues if Wales is to have any chance of thriving.

With Higher Education in turmoil as a result of alarming job cut proposals put forward by university leaders, it seems the right time to look at the economics of the sector in some detail.

Publicly available information shows that only about half of Welsh universities’ money comes from tuition fees and education contracts. About 10% comes directly from public sources; 14% comes from research grants and contracts that vary significantly between institutions – mostly UK Government research grants, some private charitable funds and before Brexit some EU funding; 15% from other sources of income including accommodation, conferences and even weddings; with the rest coming from investments, donations and endowments.

Tuition fees

Of the tuition fees income, about a third comes from Welsh students, a third from students from the rest of the UK and a third from international students.

Altogether, then, between 30% and 40% of universities’ income comes from private sources.

In terms of income per full-time “home” undergraduate student, universities in England were getting £10,220 in 2023-24; Wales £9,290; Scotland £7,870; and Northern Ireland £7,620.

Since then, an additional £535 per full-time student in Wales has been added, and an extra £285 in England.

In England, tuition fees charged to “home” students were tripled to £9,000 in 2012-13. Wales didn’t immediately treble fees, but the Welsh Government plugged the income gap for Welsh universities at the time. The impact of the big increase in revenue has declined in real terms since then, with inflationary pressures taking their toll. In Scotland and Northern Ireland there has been a bigger state subsidy. Nevertheless, the cost per student is higher to the public purse in Wales than in England because of the payment of maintenance grants – £3,800 on average.

Expensive

Looking at international comparisons, the UK is a very expensive HE system, spending the third highest amount per tertiary education student, only behind Luxembourg and the United States.The UK spends between one third and one fifth more in terms of the money made available by the state to teach students than in comparable countries like France, Germany and Spain. However, fees charged to students have been higher in England and Wales than in public universities in the US, being topped only by private US institutions. As a percentage of GDP, the UK spends 2%, which is higher than nearly all other comparable countries, with the exception of the US, Canada and Chile, and quite a bit more than Germany and other EU countries.

In Wales, there are two sources of Welsh Government money for the HE sector. Currently it gets about £480m in the Treasury block grant in line with the Barnett formula. About £282m of that goes in maintenance grants via the Student Loans Company, predominantly for students from poorer socio-economic backgrounds. Around £198m goes via the recently rebranded funding body Medr to the institutions. In addition, the Treasury provides about £1bn per year for student loans – around £520m for student maintenance and the rest for student fees paid to universities in Wales and England. The Welsh Government has to demonstrate that its way of distributing the money is no more expensive than the way it’s distributed in England.

Fees

There are two ways of increasing the amount of money going to Welsh universities: putting up the fees, which could have the negative effect of encouraging students to study elsewhere, or stop paying fees for Welsh students to study in England, which could theoretically result in retaliation to deter students from England studying in Wales. In 2022-23, there were 33,675 Welsh-domiciled students studying in England, but 50,630 English-domiciled students were studying in Wales.

On maintenance grants, if a student’s parents are both working on median wages, they would only be entitled to the universal minimum grant of £1,000. If both parents are on the national living wage, the student would be eligible for a grant of around £3,000. Household income thresholds have remained frozen in cash terms since 2018, when maintenance grants in their current form were introduced. They haven’t increased with inflation, and the funding gap has been filled with loans – to the extent that the sector has come up close to the extent of its loan budget, one of the reasons why the overall maintenance package wasn’t increased in line with the national living wage this year. This is presenting questions for policy going forward.

One consideration in the context of HE funding is that the current Welsh Government favours prioritising spending on lower income groups. While this aligns with the system of giving financial help to students from poorer backgrounds, it is at odds with spending more on HE institutions themselves, where students come disproportionately from better-off families.

Overall, the amount of Welsh Government money available in real terms to fund HE has gone down since the pandemic because of poorer block grant settlements from the Treasury.

Another factor is Brexit, with EU programmes that began when the UK was still a member state eventually tailing off in 2023-24. Universities in Wales benefitted more from EU membership because of grants from EU structural fund programmes. Universities Wales estimates that £350m came to our universities from the EU from the 2014-20 funding round. The UK Shared Prosperity Fund – introduced by the previous Tory Westminster government – has not replaced lost EU funding, either in terms of quantity or how it’s distributed.

Overseas students

The political landscape has also changed because of Brexit, with an impact on overseas student fees created by a more hostile environment towards migrants. From a financial point of view, it has been foolish – as well as inaccurate – to include overseas students in migrant statistics. Doing so has helped the far right in its demonisation of migrants, leading to a situation where visa restrictions have acted as a disincentive to foreign students deciding whether to come to the UK or not.

Overall there were 17,500 international students doing postgraduate courses at Welsh universities in 2022-23, representing 13% overall. But the numbers are dropping.

It’s a complex picture then, in just one of the Welsh Government’s many areas of responsibility. Clearly devolution is at a critical juncture, with funding problems exacerbated by a Labour government at Westminster that, for the moment, is sticking to fiscal rules that keep the austerity policies of the Conservatives very much in play.

Wales needs Members of the Senedd who have the critical insight that enables them to understand the challenges facing all sectors and make strategic choices.

Just as importantly, they need the passion to stand up for Wales.