This blog has been written by Alistair Jarvis CBE, Chair of the London Higher Policy Network and Pro Vice-Chancellor (Partnerships and Governance) at the University of London.
In the weeks leading up to the Budget there was much speculation that the Labour government were considering interventions to tackle the growing financial challenges facing universities and students. Rumours included a plan to uplift and then link the headline tuition fee to a measure of inflation; a new transformation fund to support universities to refocus and evolve to better meet societal and economic needs; improvements to graduate repayment terms; a new financial ‘rescue regime’; the return of some form of maintenance grants; and the announcement of (another) major review of university; even a wider review of tertiary education leading to revolutionary regulatory and funding reforms. Amongst sector commentators, there was even a list of names circulated of the people that have been earmarked for the review panel.
In reality, the Budget lacked any headline grabbing announcements about university funding or student finance. Many in the sector will be disappointed – indeed increasingly worried – to have to continue to wait to see whether any new policy interventions are forthcoming to relieve the acute financial pressures on both students and universities.
Despite the need for funding interventions, the politics remain difficult. Polls have consistently shown little political or public support for a significant tuition fee rise or for significantly more direct public funding for universities. The Chancellor’s political team will also know that any announcement about tuition fees has the potential to fill the front pages. They will not have wanted the big spending decisions and messages at their first major fiscal event to be overshadowed by headlines about university funding.
There is also an argument that has been made, that any changes to university funding need to be sustainable for the longer-term, whereas this was a budget focussed on short-term (mostly 1 year) spending decisions. Might the 2025 Spending Review be a more likely (and appropriate) opportunity for major funding reforms?
Despite the lack of new funding interventions, the Budget did include a number of other policy measures that will have an impact on universities.
The Chancellor’s statements on research funding are positive. Rachel Reeves announced that “to unlock growth industries, we will protect research and development with more than £20 billion worth of funding. This includes £6.1 billion to protect core research funding for areas like engineering, biotechnology and medical science, for Research England, other research councils and the national academies.” With cuts to so many departmental budgets and pre-budget commentators speculating that research funding could be a victim of the tight fiscal position, there is much relief that research funding for 2025-26 has been protected. This includes the positive news that full funding has been made available for the UK’s association to Horizon Europe. Good news, given the speculation ahead of the budget that these costs may need to be funded from the current R&D funding pot. It was also positive to hear the Chancellor highlighting research and innovation as a key pillar of the growth mission.
As major employers, the 1.2% increase in employer National Insurance (NI) from April 2025, together with lowering the threshold at which employers start to pay NI, will add further strain to university budgets as this change makes it more expensive to employ staff. UCEA have estimated that this will add around £372m to the sector’s pay bill next year – equivalent to 2.1%. This will be a painful hit to budgets, with so many universities already making staffing cuts as they struggling to balance the books.
The Budget included mention of the Lifelong Learning Entitlement (LLE), but the timescale has been further delayed. From September 2026, learners will be able to apply for LLE funding for courses and modules starting from January 2027 onwards for the following qualifications: higher technical qualifications (HTQs); technical level 4 and level 5 advanced learner loan transfer qualifications; and level 4 and level 5 qualifications approved through the new LLE qualifications gateway, when launched. This further delay will understandably worry some given the extremely long gestation period of this policy. However, the delay is coupled with the publication of updated Department for Education policy paper which at least suggests that the government remains committed to implementing the LLE and continues to work on the detail ahead of the rollout.
In the small print, it was also confirmed that the planned reduction (from 2025-26) to the maximum tuition fees for foundation year provision will go ahead as previously announced. I fear the impact that this change will have on access to university, given the success of this popular route to higher education study.
There was budgetary silence on other university issues. Indeed the education portion of yesterday’s Budget speech had no mention of universities at all. However, I suggest that this should not be read as a government with no appetite for higher education policy change. We should not forget that the first mention of higher education in the (July 2024) Labour manifesto was a short but stark statement: ‘higher education is in crisis’. This is not a statement that an incoming government makes unless it is planning to drive change. It is clear that Labour Ministers see a major problem that needs fixing. The manifesto also stated that: ‘the current higher education funding settlement does not work for the taxpayer, universities, staff, or students. Labour will act to create a secure future for higher education and the opportunities it creates across the UK.’ Labour could not be clearer that it plans to act to change the higher education funding system. I believe that there will be significant policy interventions for higher education in the period ahead… we’ll just have to continue the agonising wait a little longer.
