Three ideas for a future funding model for higher education in England – London Higher CEO Diana Beech at the HEPI General Election briefing


The following piece is an edited version of London Higher CEO Diana Beech’s panel response at the HEPI General Election briefing on Wednesday 28th February 2024. 

London isn’t representative of England as a whole, and neither should it be, but it is a good place to start when it comes to higher education policy, given the size of the sector in London (with well over 50 different universities and higher education institutions) and also the extent to which issues tend to affect the capital – because whatever happens in higher education tends to hit London at the extremes. That’s because of the way the sector is made up in the capital: 

  • It’s got the largest student population of any English region of well over half a million students; 
  • It’s got the highest operating costs for institutions on average, with many institutions likely to be leaseholders themselves rather than landowners; and 
  • It’s got the biggest inequalities of any English region with more and more students from the most disadvantaged groups in society. 

I could go on, but you hopefully get the picture. 

I want to hone in on three issues in particular that I think warrant some consideration when we look to a future funding model for higher education in England. 

1. Implementing place-based teaching grants 

The first has to do with place-based funding allocations. No sooner had I joined London Higher three and a half years ago, London institutions were hit with the abolition of the London Weighting, which was an additional supplement on the English teaching grant for London institutions to account for their higher operating costs. It worked very much the same way as the London Weighting allowances that employees in the capital get today to cover additional living expenses in the UK’s most expensive region. The Education Secretary at the time, Gavin Williamson, argued that such a supplement couldn’t be justified in an era of levelling up, despite all the evidence showing at the time – including our own – that the London Weighting didn’t even cover the additional costs faced by London institutions. This was a political decision that took away £64m from London institutions overnight and, considering the cost-of-living crisis that emerged just afterwards, it couldn’t have been more badly timed. 

While I recognise the days of campaigning for a return of the London Weighting are behind us, surely a fair distribution of the teaching grant should be aligned to the real-terms costs of operating in each specific place? And let me stress, this is not just a London issue. Today, cities like Manchester, Liverpool, Bristol, Oxford, Cambridge and Birmingham, are all becoming more expensive for both institutions to operate in and students to live in. So, instead of issuing a blanket grant to institutions based on the numbers of students they take, why can’t we come up with a three-to-five tier model to apply to the grant, so that those institutions operating in the highest cost areas are given the financial support that is proportionate to their needs? 

2. Recognising sector diversity 

Just as we should recognise there are regional cost differences throughout England, we should also recognise the huge diversity of provider types and student needs that exist in the sector, some of which necessitate extra spending by institutions. 

When the Teaching Grant was transformed into the Strategic Priorities Grant, again under Gavin Williamson, institutions offering STEM (Science, Technology, Engineering and Maths) and healthcare provision received an uplift to their grants, while institutions offering subjects not deemed a priority, usually creative arts and humanities, lost funding – and doubly so if located in London. What that has done, in effect, is created a financial headache for those institutions that are neither large, multi-faculty universities with the ability to cross-subsidise between disciplines, nor world-leading, small-specialists which can apply for additional funding.  

This headache is made even worse when these institutions also have large widening participation cohorts who need more wraparound support to ensure their participation and success. Many of these institutions are the ones doing the heavy lifting when it comes to social mobility, particularly those in London. Yet, as every year passes under the current system, these institutions are exactly the ones faced with doing much more with much less. That’s why we need to stop thinking in terms of a ‘block grant’ and add nuance to the distribution model based on where providers are located, the type of provision they are offering and the backgrounds and circumstances of the students they support to success. 

3. Seeing teaching funding in the round 

Finally, I have long been a vocal supporter of reuniting the teaching and research parts of the universities brief and I am quoted widely about the need to do so. If we’re serious about the ecosystem that universities operate in, we need to be putting some serious systems-thinking into how we fund the sector sustainably for the future. That means that those institutions in receipt of significant research funding need to have added support from government to ensure that the full economic costing of these projects is not having to be met from teaching budgets too. The maths for research grants and teaching grants needs to add up, and that’s where bringing oversight back under a single department will provide the necessary checks and balances to prevent sector funding getting to a crisis point as we’re experiencing now. 

London Economics have put some choices for the next UK Government on the table with their latest research with HEPI and the Nuffield Foundation, but if we are really committed to establishing a level playing field for higher education institutions and for students across the country, then we should be considering all the factors that currently tip the scales for different providers and ensure we are putting in measures to readdress the balance wherever they are needed across the system.