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A financial crisis for universities

London Metropolitan University

6 min read Partner content

Many universities in England and Wales are facing a “financial crisis” and neither the Coalition nor Labour has developed a solution to the problems, the former Education Secretary has said.

At an event hosted by London Metropolitan University, Charles Clarke said the resilience and sustainability of higher education institutions were under threat as a result of the “wobble” that began in 2010 when the Government decided to increase the cap on fees to £9,000 a year and reduce state funding. He also criticised the decision to increase the threshold at which graduates begin paying back their loans to £21,000 a year.

“The changes they made, in my opinion, were unwise. They shouldn’t have put up the fee as they did and they shouldn’t have changed the threshold as they did. But whatever the merits or demerits of those decisions in general social terms, the consequence is a system that is much less resilient, much less strong, much less independent and forthright than it, in my opinion, needs to be.”

But Mr Clarke, who as education secretary from 2002 to 2004 introduced top-up fees, also criticised Labour’s policy to reduce the fees to £6,000, saying it was not “thought through” and was a “wobble coming down the line”. The proposals were “dangerous”, he argued, because Labour was not committing the Government to filling the funding gap caused by the £3,000 reduction.

“It’s completely unsustainable. You could cut it from £9,000 to £6,000 if you, in addition, put the £2.5bn in to cover the gap; but if you don’t put the £2.5bn to cover the gap, you’ll find this university and other universities, there will be significant cuts in terms of the staffing levels and basic facilities and so on which are essential to a high-quality education.

“So I think that’s a very dangerous proposal and I’ve argued with my colleagues in the Labour party about this and it’s not entirely clear what the final solution would be, but if that change were to be made – if Labour were elected and that change were to be made – that would lead to a further wobble following the Conservative wobble in 2010.”

The Opposition is yet to confirm that the £6,000 policy will be in its manifesto.

Mr Clarke set out a plan for tuition fees which he claimed would help to address the problems. Lowering the threshold at which graduates pay back fees from £21,000, keeping the cap on fees at £9,000, incentivising people to pay back their loans early, and a rising scale of repayments according to income in later life, would help to secure the financial grounds, he said. “It’s not in the right place now; it needs to be put in the right place,” he said. However, he was downbeat about the likelihood of higher education funding becoming a major electoral battleground next May.


In light of his criticism of his former party’s higher education policy, Mr Clarke was asked after his speech whether he believed Ed Miliband was the right person to lead Labour into the general election, but said only: “I don’t intend to comment on that.”

He was speaking on the same day as the ‘Free Education’ march on Parliament to urge politicians to commit to abolishing tuition fees. Mr Clarke, however, described the suggestion of ‘free education’ as “misleading” because of the necessary trade-offs in other budgets that would be required to fund such a move. “At the end of the day, somebody is paying for that,” he said.

‘Drivers of change’

Mr Clarke was delivering a lecture on the future of higher education institutions. He identified seven key “drivers of change”: an intensification of competition among institutions, new forms of learning such as online courses, more workers seeking higher education as part of their professional development, a greater concentration of funding for research among traditional ‘elite’ institutions, a fall in overseas students, greater internationalisation of higher education, and the effects of government cuts. Laying out the challenges facing universities, Mr Clarke, who has also served as president of the National Union of Students, said it was “not possible for universities to stand still” and that “hard decisions” were ahead.

“What I see is universities which are looking at this and rather hoping that the change won’t happen and it won’t be necessary to face up to these issues,” he said.

As well as financial reform through tuition fee changes, course options, research and international collaboration were the other three areas Mr Clarke suggested for reform.

Universities needed to offer more variety in the structure and content of courses, Mr Clarke said, since it was a “complete non-starter” for so many institutions to continue holding similar structures.

On research, he called for an end to a perceived link between quality of research and the quality of teaching. Many universities that prioritise research in fact subsidise the studies with money brought in from elsewhere, for instance overseas students’ fees, he said. He also pointed out that in disciplines such as law and management, universities were in competition with for-profit organisations that had no research responsibilities whatsoever.

Finally, on the situation abroad, Mr Clarke recalled a meeting of Commonwealth nations when African ministers expressed anger that many of their brightest students came to Britain to study and subsequently stayed there. Consequently, he said, many nations were now intent on ensuring that their own institutions could cater for the need of their nations and therefore Britain could no longer rely upon a large number of overseas students. “I would not bet the bank on this flow of people internationally coming to this country continuing,” he warned.

Theresa May

Particular criticism was reserved for Theresa May for her work as Home Secretary. Mr Clarke, who held the post in the Blair government, admitted having a “very low opinion” of Ms May’s work at the department.

“One of the reasons I have that low opinion is that she’s taking political decisions on decisions [that should be] in the interests of overall society – small party-political decisions because she’s trying to appeal to the, I think, very inward-looking Tory backbench anti-European group that she thinks will be a very important factor to determine the future leader of the Conservative party. And she’s trying to canvass their support rather than look at the overall interests of the country.”

He singled out changes to the visa regime undertaken by this Government as “very damaging”, and said that overseas students should not be included in broader immigration statistics. As for the chances of getting a new Home Secretary in six months’ time, Mr Clarke said only: “The best chance is voting Labour.”

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