New Labour, new maths, old results

September 22, 2000

Ministers like to talk about how much extra money the government has provided for higher education. But this disguises a fall in funding per student in real terms. Stephen Court checks the figures for the true picture

It never rains but it pours. In the twilight years of Conservative government, higher education funding cuts were dressed up as "efficiency gains". Now, in the new Labour years of plenty, ministers frequently speak of double-digit funding increases for universities since 1998.

But it is necessary to be wary of the government's spending claims for education. In July 1998, education secretary David Blunkett issued a press release about additional government funding in Labour's first comprehensive spending review. He said there was Pounds 19 billion in additional funding for the entire education sector, including universities, in the United Kingdom for 1999-2002. Of this increase, Pounds 16 billion was for England.

What a bonanza! Even a relatively small share of this money for higher education could do much to repair the damage of consistent Tory underfunding. A main area of that damage was in the amount - or unit - of public spending per student (the Dearing report in 1997 showed a 40 per cent fall in the unit of funding between 1976-77 and 1995-96 in real terms).

However, Mr Blunkett's announcement was not what it seemed. Two weeks after the press release, the House of Commons Treasury select committee reported that there was only Pounds 8 billion in extra money for England over the three years. The rest of the "additional" money had been produced by cumulative addition of earlier rises.

The committee commented that assessing the extent of the increase in real resources going in to key departments had been complicated by "presentational" issues. It said: "The press releases issued at the time of the publication of the CSR, and faithfully reproduced by the media, highlighted the total, cumulative, additional resources being made available over the three-year period rather than the increase in annual expenditure over the three-year period." The committee recommended that, for the sake of transparency, the government should in future refer to annual increases over the previous year rather than a cumulative total.

Despite this, the Department for Education and Employment has continued to refer to the additional Pounds 19 billion. So when Mr Blunkett and his ministerial colleagues say that there has been a real-terms funding increase of 11 per cent for higher education in the four years to 2002, are they to be believed? The difficulty is that they rarely spell out what the increase is for.

In that period, the DFEE's grant to higher education institutions in England via the Higher Education Funding Council for England and the Teacher Training Agency - not including the extra for 2001-02 announced in July - rose by 14 per cent in real terms (excluding access funds). But institutions' income from tuition fees fell by 30 per cent in real terms. Put grant and fees together, and the real increase was 8 per cent. All of which leaves us little wiser.

What about the unit of public funding per student? This calculates - or it should do - the amount of recurrent government grant and tuition-fee income for each full-time equivalent student. Unit funding is a more effective measure of the value of funding going into universities than grants and fees, because it divides funding by student numbers. Taken by themselves, increases in funding sound impressive. But if student numbers have been rising at a much faster rate, the funding is being spread more thinly. This means more students per teacher, per library book, per lecture, than before.

The trouble for Labour is that funding per student in England has fallen in real terms by 2.5 per cent, from Pounds 4,820 in 1998-99 to Pounds 4,700 in 2001-02. The government has given the go-ahead for resumed growth in student numbers - now running at an additional 20,000 full-time equivalent students a year. Little wonder ministers prefer to tell us simply about the extra money they have put into the system. Traditionally, the unit was calculated using recurrent government grants and tuition fees. Non-recurrent items - such as capital spending and funding for special initiatives - were not included. But in recent years, the goalposts have been moved quite a long way.

After a change in the way grants were allocated, grants since 1996 have also included non-earmarked capital funding - adding to the amount the government puts into the unit. The extra Pounds 300 million for 1999-2002 in capital funding for research from the government, included in the grant to institutions via the funding council, while very welcome, will increase the unit. More significant, the unit of public funding since 1998 has included funding that has come from undergraduate students, rather than from the government. By 2002, institutions' annual income from student fee contributions had risen from Pounds 130 million to Pounds 405 million - nearly equivalent to the Pounds 447 million provided by public fees. If you strip out income from tuition fees paid by students and consolidated capital grants, the unit of public funding fell by more than 7 per cent in real terms between 1998 and 2002. The rate of reduction in spending per student now begins to look rather more like the rate under the Conservatives in the glory days of the hated efficiency gain.

Finally, what about student numbers? The chancellor wants 50 per cent of young people to go into higher education by 2010. If this is to be realised (it would mean about 100,000 more FTE undergraduates), it is highly likely there will be a rise in student numbers during the period covered by the second CSR (2001-02 to 2003-04). The cost of an additional 10,000 FTE undergraduates in 2001-02 would be about Pounds 50 million. This would further drive down the unit of resource.

Yes, there have been genuine increases in real terms in the amount the government is putting into higher education. Given the lean Tory years, these increases, particularly in funding for research, have given universities a lifeline. But the government, by appearing to put in more funding than is the case, undermines public confidence and undervalues the contribution by fee-paying students.

Stephen Court is senior research officer at the Association of University Teachers.

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