The funding of Higher Education comprises two main elements: direct funding through the Office for Students (although this is less a funding council in terms of the nature and quantum than its predecessor, the Higher Education Funding Council for England, or HEFCE) and UKRI (Research England and the research councils), and student loans for maintenance and tuition fees. The decline in public funding for teaching has been incremental since the government raised the cap on tuition fees, and the 2019-20 total for teaching is 74% below 2011-12 in real terms.
However, the large increase in tuition fee income from home and EU students since 2012 has meant that the total funding for institutions through this fee income and funding has increased in real terms from 2011-12 to 2019-20. From 2020-21, the government is reducing the OfS’s teaching grant. It is perhaps not surprising that value for money for students and the taxpayer is of interest to HM Treasury and the OfS, as well as being a recurrent topic of education and other media. In turn, the Public Accounts Committee is showing increased interest in higher education, whether it be the market (June 2018), alternative providers, or the sale of student loans (22 November 2018). It is often heads of institutions, NSS, OfS and other bodies who are brought before the PAC.
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The financial cross-subsidy of programmes or activities, such as research through teaching, is an area of much debate in the HE sector, and one that finance committees and governing bodies should understand more fully when getting beneath the skin of budgeting and long-term forecasts. For example, it is recognised that UK government does not fund the full economic cost of university research, and the shortfall is made up often from (international) tuition fees. Universities as a responsible community may see the value of cross-subsidy between departments and activities, but increasingly, students are asking questions about cross-subsidy in from the context perspective of paying fees for a specific programme, rather than to support the wider student experience from which they benefit.