University tuition fees in England set to climb above £10,000

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University fees in England are set to surpass £10,000 this parliament, as education secretary Bridget Phillipson draws up plans to continue with inflation-linked fee increases over the next three years.

The funding settlement will come in the Labour government’s three-year public spending review next year, with universities expected to enact reforms in return for the increased fees, according to government officials.

One person briefed on Phillipson’s thinking said that while no final decision had yet been taken, the “direction of travel” was clear.

In November, Phillipson announced the first increase in university tuition fees since 2017, raising the £9,250 payment for domestic students to £9,535 for the 2025-26 academic year — an increase of £285.

Linking fees to inflation over the next three years could push tuition costs to above £10,000. The Office for Budget Responsibility forecasts annual inflation of just above 2 per cent until 2028.

Vivienne Stern, chief executive of Universities UK, the sector lobby group, said institutions would welcome dependable annual fee increases after a decade when payments were in effect frozen, storing up financial problems for universities as the real-terms value of fees eroded.

“Creating the expectation that undergraduate fees rise with inflation every year, and not just once in a blue moon, is essential to creating that stability and will lead to better financial management of universities,” she said.

One government official said any fee increases would be linked to “significant reform that drives value for money”, including improved access for students from poorer backgrounds and closer ties between universities and further education colleges.

Phillipson also wants to raise teaching quality and require universities to support more innovation, as part of Labour’s ambition to raise growth rates.

“We will also be looking at whether the regulator has the right role and powers in overseeing value for money,” said a person briefed on Phillipson’s thinking.

The Department for Education said the government had taken “tough decisions” to put universities on a firm footing and that the Office for Students, the independent regulator, was “rightly focusing its efforts on monitoring financial sustainability”.

It added: “Whilst institutions are autonomous, we are committed to restoring universities as engines of opportunity, growth and aspiration.”

The UUK analysis found that raising fees would deliver £1.4bn in additional funding to the sector in 2029-30, while creating an additional long-term cost to the government of £400mn to fund additional loan provision.

University leaders said an inflation-linked rise in fees would help to stabilise the sector, after a recent boom in recruitment of lucrative international students came to a shuddering halt last year.

The last Conservative government’s decision to ban postgraduate masters students from bringing family members, coupled with a currency-crisis in Nigeria, led international numbers to fall by more than 30 per cent in some institutions.

In November, the Office for Students warned that a £3.4bn decline in net income across the sector would mean that almost three-quarters of universities would be in deficit in the academic year starting September 2025.

Calculations by the Russell Group of research-intensive universities estimated that, before this year’s fee increase, universities were making an annual “loss” of £2,500 on each domestic student.

However, analysts have warned that the recent fee increase has already been largely gobbled up by the rise in employers’ national insurance contributions announced in the Budget, which will come into effect in April. 

The Institute for Fiscal Studies think-tank calculated that the most recent tuition fee increase would raise an additional £390mn a year for universities, set against increased NIC costs of £372mn a year, leaving a net gain of just £18mn.

“It’s nothing like enough,” said Nick Hillman, director of the Higher Education Policy Institute think-tank. The sector needed above-inflation investment similar to the “inflation plus 1 per cent” formula agreed in October for social housing rents, he added.

Data visualisation by Amy Borrett