Why are universities in financial trouble? | IFS Zooms In

Over the coming weeks, we’re bringing you a series of briefings looking at key areas of government and analysing their performance over recent years, the challenges they face and the solutions the new government may look to help them.

This week, we’ll be looking at higher and further education.

Over recent months, we’ve heard lots of stories about the pressures on university finances, and concern that some universities may go bust. We’ll discuss why this is, what happens if a university goes bust and whether government can do anything to fix the problem. We’ll also discuss longer-term challenges facing the higher and further education sectors.

We're joined by Jack Britton and Christine Farquharson, IFS education experts.

00:00 Introduction: University Failures?
00:26 Education policy
01:30 Key challenges facing the government
02:00 Financial Trouble in UK Universities
02:55 Deficit and Insolvency Risks
04:00 Impact of Deficits on Universities
05:14 Why Are Universities Struggling?
06:20 International Students and University Funding
07:10 Squeeze on Further Education Colleges
09:10 What If a University Goes Bust?
13:00 Government's Dilemma: Bailout or Not?
15:00 Tuition Fees vs. Teaching Grants
19:00 Reliance on International Students
22:00 Post-16 and Further Education Challenges
27:10 NEETs and Long-Term Unemployment
29:30 Education and opportunity
39:00 Realigning Funding for Growth
40:30 Skills Policy and Inequality

[InstituteforFiscalStudies]

Timecodes:
00:00 Introduction: University Failures?
00:26 Education policy
01:30 Key challenges facing the government
02:00 Financial Trouble in UK Universities
02:55 Deficit and Insolvency Risks
04:00 Impact of Deficits on Universities
05:14 Why Are Universities Struggling?
06:20 International Students and University Funding
07:10 Squeeze on Further Education Colleges
09:10 What If a University Goes Bust?
13:00 Government's Dilemma: Bailout or Not?
15:00 Tuition Fees vs. Teaching Grants
19:00 Reliance on International Students
22:00 Post-16 and Further Education Challenges
27:10 NEETs and Long-Term Unemployment
29:30 Education and opportunity
39:00 Realigning Funding for Growth
40:30 Skills Policy and Inequality

[CrossfitWarrior]

This makes me extremely happy knowing the heinous price tags that's been placed on education. Those institutions were making great money, it sounds like financial mismanagement

[scolexuk]

As a former lecturer at an ostensibly high-quality UK university, I can confirm that the majority of my students had no real reason to be in higher education. They had no intellectual curiosity and no passion for their chosen subject. I saw the shift in the quality of education when students became consumers of education paying 9000-pound fees.
In the meantime, one year, we had our departmental research budget diverted away from research to pay for a "research impact consultant". My colleagues and I were largely on zero-hour contracts, leaving us relying on benefits to pay rent even as we took on full-time teaching loads.
The money goes to a bloated bureaucracy, not to equipment or supplies.

[roc]

when I was in the UK, I noticed that the board and the president had insane pay, sometimes even secret, with a third administrative roles. this, while everything was not digitlized but paper!!!!

[hughiemg]

Interesting conversation. Interested to hear the extent to which administrative cost bloat has contributed to this as is alleged in the NHS

[johnedwards]

£9000 a year with students having very little contact time in most unis. I don't know where the money is actually going.

My view would be to let a few go bust if they can't run with that sort of income. We've got a few too many institutions, too many worthless degrees, losing a few won't be a big deal.

[shaneintheuk]

My question with this situation is, “are we serving our children best by sending almost all of them to universities so they carry on learning into their 20’s and leave with huge debt?”

My generation sent a tiny minority of students to uni and most left school between 15 and 18. Is the current generation happier, more productive, or more knowledgeable than we were?

Is there a case for drastically reducing the number of students and banishing degrees that are aimed at the less able?

[soulrebelno]

I suppose that the people at the top creaming off the profits doesn't help! The annual salary of the UK prime minister was £166, 786 in 2024. In 2012-2022, the vice-chancellor of Imperial College London received a huge salary of £714, 000—why, what did they do to earn that much? During 2023, average vice-chancellor pay was £325, 000 despite a crisis in the sector, and their remuneration typically increased by 5 per cent.

[rhysjohnson]

Many British universities are able to deliver degrees with overseas partners for a fraction of the 9k they charge UK students. They are in financial difficulty not because the student fee is too low but because of massive borrowing for unnecessary infrastructure projects and bloated payrolls.

[cybergornstartrooper]

I got to where I am today through adult education in the 80s. I wasn’t very academic so decided to do the infamous “Youth training Scheme” at a local college. While there I enrolled in a computer programming class, learned to code and then went on to get a job as a coder. My workmates were stunned that I’d got a job as a computer programmer. Ive worked all over the world including the US. I no longer code instead i manage development projects. But it all started with adult education.

[aficio]

Why should the tax payer bail out wat r essentially private businesses? Maybe the salaries paid to top heavy boards should be looked at first.

[Marenqo]

I am surprised by the complete lack of understanding by some of the comments. There seems to be a complete ack of acknowledgement that UK universities are one of the only industries left worthy of anything in the UK today. They not only provide income for cities that have lost all industry providing retail, housing and other Industries of income, they provide the whole of Britain a global image. Just look at the number of Peer-Reviewed papers, Publications and public profiles of many academics. I'm not only talking about Cambridge and Oxford or even the Russell group institutions, but the entire UK higher education ecosystem is of tremendous importance of keeping Britain alive.

[melindagallegan]

I went to university from 2013 to 2016. The teaching I received was only worth the 3000 and certainly not the 9000!

[qswaefrdthzg]

Having been taught in Germany and having taught in the UK, I just have to say the UK universities are a complete scam when it comes to teaching (my comments do not concern the research though there are major issues there as well). Simply put, having a UK degrees means nothing. You could be amazing or horrendous and still end up with good grades at the end. In Germany this is impossible, most students fail and don't finish their degrees, and even amongst those who finish you know that a first actually means something. Exams are actually hard unlike in the UK, because the money the university has at its disposal, has almost no correlation with the amount of the students it has. In the UK you can't fail a student because on one hand it's kinda unethical given the ungodly amounts of money he has spent and on the other you'll get into trouble with the administration because they want that student to keep on spending his money. Beyond that the terms are much shorter here leading to less material being covered, and the completely useless one-year masters programmes.

[utubeify]

In Scotland UWS became an amalgam of Paisley, Ayr, Dumfries, Bell College. There is a vast distance between some of the colleges. Universities are also making placements abroad, so having u iversities merge within the UK is an option.

[JS-jhcy]

Self learning and books 📚 are cheaper than running to and from classes and dorms at an university

[AGirlNamedVan]

How about promoting technical colleges too....

[mercurialpoirot]

Unis should have skin in the game. If student getting govt loan, then uni should be responsible for 5% of monthly repayment if the student hasn't achieved a salary premium within 2 years of graduation.

[AbAb-thqe]

The question to ask with all this is what do we want the purpose(s) of academia to be? To develop technologies? To consider the world in new, somehow better ways? To develop a cohort able to make good decisions? To provide the best value to society as a whole?

And does academia as it is today do those things effectively?

Remember: Whoever pays the piper names the tune. Will that tune be one you like?

[sidgb]

Student accommodation construction, extensive hospitality services, offering the wrong types of courses, maintenance overheads, utilities for these massive corporate facilities is staggering and all the leisure facilities is where the money goes only a small fraction actually goes on education. There’s numerous universities with golf courses.