Does Labour come up smelling of roses

May 11, 2001

New Labour's mantra at the last election was that things could only get better. Certainly, higher education has changed significantly since Tony Blair swept to power, but is the sector, and the staff and students who depend on it, any better off? Alan Thomson investigates

Home undergraduates
1997 1,466,419
1999 1,488,046

The expansion of higher education over the past 40 years, and particularly since 1989 when the cap on student numbers was lifted, is a major success story.

Since 1989 the number of students has almost doubled as has the cost to the taxpayer. The question is whether new Labour's intention to continue and even step up expansion, in particular by attracting people from low- income backgrounds, can be as successful.

Continued expansion must be judged against huge improvements in access since the 1960s. There were just 31 universities in 1963, and 114 now. The proportion of mature students, those aged over 21, in the student body has increased from 41 per cent in 1962-63 to nearly two-thirds today, and in some newer universities it is approaching 70 per cent.

The proportion of women has increased from just over a quarter of the student body in 1962-63 to 55 per cent today.

Expansion over the past four decades has also allowed more people from lower socio-economic classes into higher education, including undergraduates from partly skilled and unskilled families. But that success has been limited: people from partly skilled and unskilled backgrounds account for little more than one in ten of the student population today.

The number of students from unskilled backgrounds accepted to university in 1995 was 5,000. In 2000, after three years of widening participation, the figure was 5,500. The number of students from partly skilled families grew more steeply - 19,800 to 24,200. Students from professional and intermediate classes still account for more than half of all entrants.

The government's widening participation drive was given a head start by the Conservatives, who expanded the university system and turned the polytechnics into new universities that have proved better at recruiting students from poorer backgrounds. Between 1979 and 1997 the number of all types of students in higher and further education doubled from 741,000 to 1,702,200, (see cash per student below).

However, expansion has been uneven.Between 1996-97 and 2000-01 the number of undergraduates - home, EU and overseas - studying in higher education institutions for their first degrees decreased by 48,100. Numbers have recovered from a low point of 984,400 in 1997-98 to stand at 1 million this year, but they are still below their peak of 1,048,100 in 1996-97, and recovery is slow - there were just 1,800 more undergraduates this year than last. And the number of home first-degree students continues to fall, from 958,300 in 1996 to 905,200 in 2000, a 5.5 per cent drop.

On the plus side, the total higher education population grew by 45,300 to 1,802,500 between last year and this, a rise of 3 per cent. The figure includes postgraduate students, with 3 per cent growth, and students doing other higher education qualifications such as nursing education, higher national diplomas and foundation degrees.

Tony Blair's target of half of all people under 30 having benefited from some form of higher education by 2010 could amount to an extra 60,000 people a year in the sector, equivalent to six new universities. Currently, 44 per cent of all people under 30 have been in some form of higher education.

Total government spending on HE
1997 £4.7 billion
2001 £5.8 billion
Spending on HE as % of GDP
1997 0.99
2001 0.96

The additional sums invested in higher education from all sources, including privately contributed student fees, since Labour came to power in 1997 are impressive.

Over the life of this government higher education will have gained an extra £1.1 billion. A real terms increase of 11.6 per cent. By 2003-04, the additional investment will total £1.7 billion, a real terms increase of 18 per cent.

The total extra allocated to science will be £1.9 billion. Out of this total, £1.38 billion came from government and most of the rest from the Wellcome Trust.

Between 1989 and 1997, under the Conservatives, total additional funding was £1.6 billion, a real terms cut of 36 per cent in funding per full-time equivalent student.

By 1997 the UK was spending 1 per cent of GDP on higher education, placing the country 19th out of 20 among Organisation for Economic Cooperation and Development countries. The OECD average was 1.3 per cent. Spending on higher education has since declined as a proportion of GDP, because the economy is so much larger.

Despite the extra cash for higher education, Universities UK estimates that by 2004 universities will need at least £900 million more a year. UUK puts the annual shortfall in the real costs of infrastructure for teaching and research (everything from library books to physics laboratories) at 8 per cent.

Cash per student
Unit of funding
1997 £4,820
2001 £4,810

This is key to university funding. Funding per student fell by just over 40 per cent between 1976 and 1996, according to the Dearing report Higher Education in the Learning Society .

The Department for Education and Employment's own figures show that, on an index of public funding of higher education per student, with 1976 as the base year, there was a fall from around 70 in 1990 to just over 60 in 1994.

A recalibration of the index by the DFEE, with 1995-96 as the base year, shows a continued fall to 88 projected for the 2001-02 academic year .

However, a further version of the index, in this year's annual DFEE report, with 1995-96 as the base year again, shows a fall to 90 this year, rising to 91 next year and every year to 2003-04. The index for 1996-97 was 93.

This rise in 2001-02 is due to an additional £100 million allocated by the DFEE, which justifies education secretary David Blunkett's claim to have increased the unit of funding in real terms for the first time in 15 years.

Between 1989 and 1997, under the Conservatives, funding per student fell by 36 per cent. The funding cuts caused massive upheavals in the university system after the then education secretary Kenneth Baker's lifting of the numbers cap in 1989.

The Conservative government put the brakes on expansion in 1993 by imposing financial penalties for universities recruiting over target figures. It forced universities to abandon vital building projects and to rework their medium to longer term plans.

Student finances: grants
Spending on maintenance grants
1997 £932 million
2001 £140 million

To understand higher education funding under this government it is necessary to look closely at the changes to student finances.

The abolition of maintenance grants and the introduction of means-tested undergraduate tuition fees for home and European Union students have had a big impact on individuals and the dynamics of higher education funding.

Grants to cover living costs were cut in half in 1998 and abolished a year later. Student loans, introduced by the Conservatives in 1990, were increased to compensate for the loss, switching the cost of maintenance on to graduates. The total cost to the state of providing grants in 1987 was £503 million. This rose to £1.2 billion in 1993 as a result of the post-89 expansion.

The Conservatives cut the value of the grant, and so the cost to the state, until 1997 when expenditure stood at just under £932 million.

This was the last year there was universal access to means-tested maintenance grants and so the £932 million can be taken as a rough estimate of the cost to the state of reinstating grants. An indication of the sort of amount saved by the government on grants outlay between 1997-98 up to next year is, therefore, the sum of £932 million minus the declining amounts (see Student grants in the table below) in each of the four subsequent years. A total of £2.1 billion saved.

At the same time, the cost to the state of providing loans increased from £59.4 million in 1990-91, to £104.8 million in 1998-99, £1.54 billion in 1999-2000 and nearly £1.9 billion in 2000-01.

But last year the Treasury adopted a new way of accounting, called resource accounting and budgeting (RAB). RAB, a commonplace method of accounting in the private sector, allows the Treasury to account differently for certain expenditure in a particular financial year, such as the outlay for student loans. Loans will be repaid, unlike, for instance, money spent on pensions.

This year, it meant that the £1.88 billion total cash cost of loans could be counted on the Treasury balance sheet as £938 million. The balance, around £920 million, was "freed up" for allocation elsewhere. In 2001-02 the £2.1 billion cash cost of loans can be lodged as £1.1 billion on the balance sheet, "freeing" £1 billion.

The total freed from student loans by the Treasury between 2000 and up to 2002 will, therefore, be nearly £2 billion, in other words £920 million this year plus next year's billion pounds. The NUS is campaigning to have these sums redirected towards targeted maintenance grants for students.

Add to this the £2.1 billion saved by scrapping grants and it becomes clear that the government has saved and otherwise freed up resources of more than £4 billion.

Student finances: fees
Income from undergraduate fees
1997 £0
2000 £342.7 million

If the government had implemented the flat rate £1,000 tuition fee for all students repaid after graduation recommended by the Dearing report, instead of its own means-tested fees, universities would next year receive around £753 million in fee income from students, compared with the £350 million they will receive (answer to parliamentary question January 23 2001).

But the government has offset the income from fees against the amount it contributes, roughly three-quarters of the average cost of tuition, through the Higher Education Funding Council for England.

If the privately contributed fee income had been treated as additional income on top of state funding for teaching, then universities could have expected, all other things being equal, to be nearly £695 million better off between 1998 and the current academic year.

Add this "lost" additional income to the grants and loans "savings" made by government and universities might be justified in thinking they have been short changed to the tune of almost £4.7 billion over the lifetime of this government, subtracting the additional £1.1 billion invested in teaching between 1997 and 2001.

Student finances
Grant plus loan
1997 £3,440
2000 £3,725

Two-fifths of full-time undergraduates have term-time jobs for an average of 13 hours a week. Of them, over half said that their paid work had a detrimental effect on their studies, according to the National Union of Students.

Furthermore, says the NUS, there is a huge shortfall between the amount available for student support and the actual cost of living. In particular, the cost of student accommodation both private rented and halls of residence has soared.

The NUS has calculated that this year it cost an undergraduate £7,686 to live in London on average. The maximum they could borrow in student loan was £4,590.

Between 1992 and 2000, the cost of living in the capital rose by 67.8 per cent. In the same time the amount students could borrow fell by 2.8 per cent.

A DFEE report, by Claire Callender and Martin Kemp of South Bank University, showed that between 1995-96 and 1998-99 younger students' average outstanding debts rose from £777 to £2,473, a real-terms rise of 195 per cent. Mature students saw their debts rise from £1,209 to £3,131, a rise of 140 per cent.

The report found evidence of the deterrent effect of the government's decision to scrap grants and introduce fees. It found that 61 per cent of full-time students said that friends had been deterred from university because of the changes to student funding.

Yet the government knew that its changes to student finance was likely to have a deterrent effect.

Ministers commissioned a survey in late 1997 which, when presented to government in February 1998, predicted that a third of mature university applicants would be deterred. It pressed ahead with its reforms nonetheless and full-time student numbers fell by nearly 30,000 between 1996-97 and 1999-00.

Science funding
OST-funded expenditure
1997 £1.3 billion
2001 £1.7 billion
spending as % of GDP
1997 0.16
2001 0.18

Research has fared relatively well under this government. In total research, including cash for equipment and laboratories, will be £1.9 billion better off in 2003 than it was in 1996.

However, around a quarter of this additional money has come from the Wellcome Trust. Universities have also been expected to provide matching funding as part of their bids for some of this cash.

Despite these substantial increases pressure group Save British Science is calling for a doubling of the total science base from a 1998 figure of £2.5 billion to £5 billion by 2008.

Teaching quality
Student:staff ratios
1996 1:15.9
1999 1:16.9

Teaching assessment began in 1992 as a ten-year project to judge every one of the country's 1,500 or so university departments.

The exercise, to be completed by the end of the year, has shown a remarkable improvement in the quality of teaching over the years. Particularly noticeable is the jump from 25 per cent of departments awarded an excellent 22 out of 24 points for teaching in 1996 to 60 per cent in 2000.

Critics claim the exercise merely proves that university departments have become adept at passing the assessments, while lecturers are spending more time on administrative tasks associated with the TQA and the research assessment exercise. They are also teaching more students.

Lecturing unions say that the dedication and expertise of their members are all that has stopped the post-1992 expansion from being derailed.

Academic pay
Lecturers' pay (grade B)
1997 £,985
2000 £30,967
As a % of GP's salary
1997 61.1%
2000 57.1%

Despite increasing demands upon lecturers, academic pay has been in relative decline for many years. The beginning of the rot can be pinpointed to the start of the 1980s when average salaries for all UK employees began to rise steeply.

Between 1981 and last year, academic pay rose by 5 per cent in real terms, compared with an average rise of 44 per cent for all full-time employees in the UK. Average vice-chancellors' pay has increased by over 28 per cent since 1993-94 alone.

Since 1997, pay rises have averaged 3.3 per cent. Between 1992 and 1997 annual pay awards averaged 3 per cent. Over the 18 years of Conservative rule, between 1979 and 1997, annual pay rises averaged 6.8 per cent.

The 1999 Bett report on pay said that higher education funding for teaching, the majority of which goes on pay, would have to rise by 9 per cent in real terms by 2002. This amounts to an estimated £365 million more on the higher education budget in 2001-02.

But the government distanced itself from the report and its recommendations on pay, even though the Bett inquiry was recommended by the Dearing report of 1997, which received all-party backing before the last election. The government is holding its line that pay is a matter for universities.

Government has, however, provided an extra £330 million over the next three years for university pay structures and mechanisms. It is unclear whether universities can use this money to increase pay for all or some academics and other staff, or whether it will be swallowed in reforming pay structures. Structural reform might mean some lecturers getting more money, but it would leave the vast majority with nothing additional to speak of.

Little has been done to improve pay for female university staff who fare worse than many women employees in other sectors.

Bett estimated that it would cost 2.5 per cent of institutions' total costs to meet obligations on equal pay. The Association of University Teachers estimates that next year this would amount to an extra £300 million. There is no indication that the government intends to provide this extra funding.

The education select committee report on student retention, published in March this year, urged the government to address the growing disparity in salaries between academics and comparable professionals. It had taken evidence that poor academic pay would deter students from considering lecturing as a career that in turn could lead to shortages over the next few years.

This poses potentially serious problems for the next government in trying to maintain higher education quality while continuing to widen participation.

  Election 2001 index page

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