The House Article | University funding is unfinished business for Labour

(Alamy)

4 min read13 min

It is an ambitious agenda.

Yet, one policy challenge continues to go unaddressed by Westminster: higher education and how it is funded.

Successive governments have relied on universities to deliver their defining ambitions, while also avoiding the question of how to sustain them.

Boris Johnson wanted universities to help “level up” the country. Rishi Sunak wanted Britain to become a science superpower. Sir Keir Starmer promised to break down barriers to opportunity. Burnham now wants to strengthen technical education, which many universities – including my own – are already delivering at scale.

But while the slogans have changed, the underlying dependence on universities has not, and nor has the underlying funding problem.

Before Labour entered government in 2024, university finances were reportedly included on Sue Gray’s risk register of problems a new administration could inherit. Over two years later, we are still waiting for the government to work with us to find a long-term solution.

Without one, the consequences will be hard to ignore.

More than a third of universities in England reported a deficit in 2024-25, according to the Office for Students. Universities UK also found that 44 per cent of institutions had closed courses over the previous three years, and almost a third had cut their academic research.

This doesn’t mean that every university is struggling financially – we’re not, and we all have a responsibility to manage our finances carefully and demonstrate continued value. But when pressure is widespread enough to alter what we can deliver, it becomes a national policy problem.

Higher education is fundamental to the UK’s economic infrastructure. It supplies the workforce on which our public services and industries depend, provides the research and innovation on which our international competitiveness depends, and supports growth for regions across the UK. London Economics reported the total economic impact of UK higher education is £265bn, which shouldn’t be taken for granted.

Without urgent action, the danger is systemic collapse by attrition. This doesn’t mean universities suddenly disappearing, but instead dispersing the research teams who are close to ground-breaking discoveries; closing courses in sectors with immediate staffing gaps, such as medicine and nursing; and losing our competitive advantage on the global stage.

What can the government do to avoid losing the sector on which it relies so heavily?

The Treasury Committee’s recent report offers a strong and credible starting point. It concluded that students graduating today could ultimately pay as much as 95 per cent of the cost of their higher education in England, and recommended moving, over time, towards a 50:50 balance between the individual and the state.

I support that principle.

Graduates benefit from higher education, and it is right they should contribute towards its cost, but the country benefits equally, too. If governments continue to depend on universities to realise their policy ambitions, the state should contribute directly.

The committee is also right that the student finance system needs to regain trust. The government should reverse the repayment threshold freeze, replace RPI with CPI when calculating interest and give future borrowers protection against retrospective changes to the terms on which they took out their loans. Young people shouldn’t enter a significant, long-term financial commitment only to find the terms becoming less favourable after the event.

Reassuringly, Education Secretary Lucy Powell has recognised the need for action and said that student loans are at the top of her in-tray. But what matters now is whether this recognition turns into tangible action. There is an opportunity to do what successive governments have failed to do, and fund higher education in line with the role we expect it to play.

If he wants to realise his ambitions for the UK, Burnham can no longer afford to leave higher education funding unresolved.

Professor Koen Lamberts is Vice Chancellor at the University of Sheffield