Britain’s higher education system, long heralded as a world leader in research and teaching, and a major export earner, is in big trouble. Yet our main political parties do not seem to be aware, or are turning a blind eye.
The trouble is economic, academic and cultural, as we explain in a new book from the IEA.
The economic problems affect students, institutions and the taxpayer. Students are accumulating enormous nominal debts – averaging around £50,000 by the time they start repaying. These debts constrain aspirations and life choices, making it harder to secure decent housing and start families. Student ‘loans’ are misnamed: they are a peculiar form of redistributive tax which would fail to pass the rules of conventional financial regulation.
Our university set-up is failing students, business and the taxpayer. It is over-regulated, limiting competition and innovation, yet at the same time fails to focus on the key question of what a university should be in the 21st century
Universities are themselves in chronic financial difficulties: Office for Students figures show that over 40% of institutions were expected to have an operating deficit in the last financial year. Financial problems, a flawed funding system and excessive EDI concern have led universities to maximise recruitment with insufficient concern about ability to cope with degree-level study and contribute to an academic community. This open-door policy includes an excessive dependence on 700,000 overseas students each year. These foreign students are sometimes inadequately screened and pay very high fees for often poor service. Critics argue that in some institutions the concentration of particular nationalities in classes makes effective teaching difficult and dilutes the student experience for both foreign and domestic students.
Despite the public’s perception that students in England and Wales now pay for their own education, this is far from the case. The taxpayer still subsidises the sector to the tune of at least £12 billion a year. Apart from direct subsidies to teaching and research, student loans are also subsidised. A large share of student ‘debt’ will never be fully repaid, and the cost of those write-offs falls on the taxpayer.
What of academic standards? Recruitment of weaker students – UCAS entry scores in seven major subjects fell nine points in the four years to 2023 – has led to plunging academic standards. This has helped drive grade inflation, with the proportion of first-class degree awards rising from 7% in 1993/94 to 30% in 2024/25 despite a far wider range of ability entering university.
This has undermined the value of degrees as labour market signals of ability and achievement, leading to many employers ignoring degree results in favour of using A-level scores or their own assessment programmes.
As institutions do not bear significant consequences for producing poor-quality graduates, higher education has expanded faster than demand for graduates. This has reduced the average ‘graduate premium’ from around 35% 20 years ago to little over 20% today and left 30% of graduates in jobs that do not require a degree – or unable to find jobs at all in a declining labour market. Many then resort to taking expensive postgraduate qualifications in a bid to improve job prospects, despite evidence that many such qualifications add little to earning power.
Degree study has also moved away from the ideal of a liberal education and a frank exchange of ideas; the rise of political correctness threatens free speech. Critical theory has come to dominate many areas of the social sciences and the humanities, where surveys have suggested leftist academics outnumber conservatives by at least six to one. This underpins the spread of woke ideas within universities, and leads even teachers of mathematics or sciences to be expected to ‘decolonise’ their teaching and make obeisance to identity politics. Graduates spread this sensibility beyond universities through EDI advocacy as they enter professions.
Research is an important part of university life, but often obsesses academics. It consumes much of their time and energy, sometimes to the detriment of teaching. Unknown to most students, who think their fees go to fund teaching, around 20% goes to subsidise research. Much of what is classed under this heading adds little to useful knowledge. Most researchers are not trying to find a cure for cancer or new forms of energy. In the last round of the Research Excellence Framework (REF) – the peer-reviewed assessment of university research, held every few years – around half of all 76,000 academics whose work was submitted were in Social Sciences or the Arts and Humanities.
The REF itself seems to suffer from the same grade inflation we see with students. In 2008 this ‘peer-reviewed’ exercise classified 14% of all submissions as ‘world-leading’, the top (4*) category. In 2014 this proportion rose to 30%. In the last exercise in 2021, with the largest-ever number of submissions, a preposterous 41% were placed in the top category. This points to the essentially subjective nature of these assessments, and arguably to the academic profession’s collective vanity and self-interest in bigging up its contribution to potential funders.
Our university set-up is failing students, business and the taxpayer. It is over-regulated, limiting competition and innovation, yet at the same time fails to focus on the key question of what a university should be in the 21st century. There should be room for new types of institutions to develop, with the widespread adoption of artificial intelligence likely to boost this process. AI is already undermining many traditional features of universities – such as classroom teaching and absorbing a static body of knowledge in order to regurgitate it in essay-based assessment – and this trend will only accelerate. We may not need the current 166 institutions with a university title, teaching expensive three-year programmes to students who neither fully commit intellectually to them nor gain significant leverage in the jobs market as a consequence.
The higher education sector urgently needs to be dragged out of its current malaise. Its reform should be much further up the political agenda.
The Higher Education Delusion: What’s gone wrong with the UK’s universities? is published by the Institute of Economic Affairs.
With the introduction of student fees in 1998, one might have expected that universities would gain independence from the state and its agencies. They would live off the fees paid by those who wanted them, free to act in accordance with whatever academic values they chose to embody. But the opposite happened: all the movement […]
The reforms of Michael Gove represented a profound shift in England’s educational landscape, based upon the belief that outcomes improve when there is freedom with accountability. During his tenure as Education Secretary (2010-14), it became possible for all publicly funded schools to become academies, free schools could be created, and there were substantial reforms to […]
Schools do not exist in isolation from the economy. The number of young people who are not in employment, education or training (NEET) is, in large part, a function of the economic conditions in which they leave education. When growth is weak, entry-level opportunities are scarce, employers are cautious and the public finances that pay […]
