Why Labour may need to pump more money into UK universities to save them from collapsing

A freeze on tuition fee levels, higher running costs and the introduction of more stringent immigration policies, which has led to a fall in overseas students, has severely affected the finances of all but the most prestigious universities.

It has prompted calls for the government to funnel more money directly to universities via the Office for Students, or to increase tuition fees by around £600, bringing total fees up to £9,850 per student per year.

Universities Scotland, the higher education umbrella body, has revealed the number of students from overseas enrolling in taught postgraduate courses is down by more than 20 per cent in the 2023/24 academic year.

And The Scotsman revealed in May how Aberdeen University, the fifth oldest in the UK, faced significant doubts over its future earlier this year.

Nick Hillman, director of the Higher Education Policy Institute, said due to the freeze in tuition fees, universities had lost around £3,000 per student compared to when fees were tripled to £9,000 in 2012 due to inflation and higher running costs.

“By and large there is an agreement in favour of the funding model we’ve already got,” Mr Hillman said.

“The government could raise tuition fees; all they would need to do is look to Wales, where a Labour-run government is in the process of increasing its tuition fees and nobody has been particularly surprised by it. Any replacement system is likely to cost a lot of money.

“What is clear is that the government will need to do something, such as a short-term allocation of funding because there are several universities that are operating with major deficits and large amounts of debt.

“Otherwise, the big question for [Education Secretary] Bridget Philipson is whether she would save a university from going under?”

Labour stated in its manifesto that the “current higher education funding settlement does not work for the taxpayer, universities, staff, or students” and pledged to create a “secure future for higher education”.

But there are serious doubts within the sector the new Labour administration has a clear strategy when it comes to overhauling the funding system for the HE sector, which will take years to implement.

It comes as reports emerged over the weekend the financial crisis among universities could see institutions being forced to cut courses, close down departments or make redundancies before the start of the academic year.

The union warned at least three universities had been identified as being “close to financial collapse and would benefit from state intervention and support”.

But when asked whether tuition fees were set at a sufficient level, Exchequer Secretary James Murray suggested the Government was primarily focused on student loan repayments.