Responding to a new report on the value of universities, Skills Minister Jacqui Smith addressed the sector with strong recognition of its economic and social contributions to individuals, places and wider society.
However, she warned the sector of a challenging financial landscape to come, ruling out additional funding. She challenged the sector to reform, optimise, and collaborate, as well as to boost opportunities for all.
Are universities ‘worth it’?
The report, published on Monday by the Policy Institute at King’s College London and the Resolution Foundation, presents a strong case for higher learning, led by former Minister for Universities and Science Lord Willetts. It showcases an array of evidence that demonstrates the enduring personal, economic and social benefits of higher education.
The report looks to the history of edu-scepticism, finding that evolution and growth of the university sector has always faced opposition from a small minority. It comes following continued scepticism of the value some higher pathways create.
Notably, graduates continue to enjoy a wage-premium compared to non-graduates, with young grads earning £5,000 annually above their peers without degrees. While this gap has narrowed in recent years, lifetime earnings remain compelling, adding up to £280,000 more after taxes and loan repayments.
Economically, the report highlights that UK taxpayers benefit from a modest 23% contribution to higher education costs, well below the OECD average, while reaping significant returns from graduate contributions to the economy.
Finally, it evidences that higher education provides substantial non-economic benefits, including improved mental and physical health and cross-generational advantages, and the route remains popular. 81% of graduates say their degree was worth it, and 87% would pursue higher education again.
Science Minister acknowledges valuable role of Higher Education (HE)
Responding positively to the report’s findings at the Resolution Foundation launch event, Skills Minister Jacqui Smith strongly emphasised that the Government recognises the value universities add to national productivity, skills development, and social mobility.
She championed the sector’s role in addressing economic inactivity, enhancing workforce skills, and tackling pressing societal challenges like climate change and free speech.
Challenging financial landscape rules out cash injection
Despite the positivity, fiscal tensions remain. Against a backdrop of squeezed public funds, Smith acknowledged the financial challenges felt across the sector, but confirmed that no additional public funding would be injected, following action taken via the recent tuition fee rise.
Whilst this was a positive step that acknowledged the challenging landscape of university funding and sought to ease pressures, NCUB has previously highlighted that this move will not have the desired impact. The rise in National Insurance Contributions following the 2024 Autumn Budget will increase outgoings across universities and absorb these additional funds. NCUB continues to call for a more comprehensive financial solution for the sector. Stability of funding is not just important for the future of workforce supply, but also for place-based employment and university-led R&D. A thriving university sector is crucial to the success of UK industry.
Emphasis remains on reform
Continuing the direction of travel from 2024, the Minister urged universities that they must deliver operational efficiencies and improve access and educational delivery for students from all backgrounds, who are set to absorb the additional costs of tuition rises. This is driven by the Government’s ambition to break down barriers and increase opportunities for all.
She cited the need for institutions to adapt to the challenging landscape by exploring new ways of working, collaborating with employers and embedding their engagement with local devolution planning, to meet workforce skills needs. As the Government continues to drive devolution, it must enable universities to work alongside businesses and other regional stakeholders, including on skills development, regional R&D planning, and cluster and zone development (such as the recently announced AI Growth Zones).
Universities play a pivotal role in boosting local living standards and economic growth, and are strong collaborators with private sector and public body organisations. Monitoring trends of this collaboration, evidence from NCUB’s State of the Relationship report showcases how these collaborations have weathered financial storms in recent years, and on the most part endure, due to the strength of place, purpose and financial returns. Greater support – both financial and through incentives such as KEF and HEIF – is needed to further develop and strengthen collaboration activities, particularly with SMEs in light of the cessation of ERDF funding and uncertainty over the future of the Shared Prosperity Fund (SPF).
Exploring the mechanisms delivering and supporting these collaborative approaches was the focus of NCUB’s 2024 Collaboration for Future Skills project, which investigated the topic of collaborative skills development and delivery. This work will lead into a Future Skills Inquiry in coming months, which will develop practical solutions to enable collaborative skills delivery for the future.
Beyond this, Smith discussed the future of HE in the context of a wider skills system, and advocated for the need for diverse educational pathways, in order to support learners at the scale required to meet future skills demand. She outlined universities as a critical supplier of modular learning, accessible to all via the Lifelong Learning Entitlement (LLE), though roll out and finalisation of this remains delayed, and a recent review identified a range of challenges around delivery, uptake and financial feasibility. To deliver modular learning, universities need clear direction, resource and sufficient student demand. Coming alongside reforms to the Apprenticeship Levy and the publication of the expected Post-16 Education Strategy, the collective reform of these pathways and modularisation is an area that NCUB will continue to watch.
In coming months, the Government will continue to develop a “long-term” university funding model, likely due to be published in Summer 2025. NCUB will report updates as this progresses, and advocate for solutions to the key challenges facing the sector. Watch the session back, and see the response from the Minister, here.
Policy Lead - Impact
Share this article
