Funding higher education

01 June 2016

Article by Anne Thomas, National Assembly for Wales Research Service

How will the new Welsh Government strike a balance between making higher education affordable for Welsh students and funding a strong and competitive higher education sector?

Is it possible to fund a strong higher education sector and maintain the current student finance regime in Wales from a finite budget?

In 2012, annual tuition fees in England rose to a maximum of £9,000. The last Welsh Government responded, allowing universities in Wales to raise their tuition fees for full-time undergraduate courses to similar levels.

However, the Welsh Government also prioritised widening access to higher education. It was concerned that higher fees would discourage potential students, especially from disadvantaged areas. The Welsh Government therefore made a commitment that no Welsh full time undergraduate student would pay higher fees (in real terms) during the Fourth Assembly than students in 2010/11. This would be the case regardless of where they chose to study in the UK.

What was the policy solution in the Fourth Assembly?

To fulfil this commitment, the Welsh Government offered Tuition Fee Grants to Welsh domiciled students. Welsh students would only pay part of the new higher tuition fees and the Welsh Government would fund the balance. Eligible students (including EU students in Wales):

  • This is a picture of students at their graduation ceremony.

    Image from Flickr by Kevin Saff. Licensed under the Creative Commons

    were entitled to a new-non-repayable Tuition Fee Grant (up to £5,190 in 2015/16); and

  • could still apply for a repayable student tuition fee loan (£3,810 in 2015/16).

Around 57,000 students benefit from this policy each year. However the policy has its critics. Some key stakeholders say that funding the Tuition Fee Grant takes resources away from other parts of the Welsh higher education sector or from other policies and priorities. The Welsh Government estimates:

  • the projected cost of the policy in 2015-16 to be £241 million, rising to an estimated £257 million in 2016-17 (accounting for 16% of the total education and skills budget);
  • a total policy cost of £887 million over five years (2012-13 to 2016-17); and
  • of this £887 million, £564 million (64%) will be paid to higher education institutions in Wales and £324 million (36%) will be paid to higher education institutions elsewhere in the UK.The issue for the new Welsh Government is whether this is the most effective use of £257 million each year.
  • When challenged that the policy subsidised higher education in England, the last Welsh Government responded by saying that Wales is a net importer of students. As a result, each year £50 million more funding comes into Welsh higher education through other UK students’ tuition fees than goes out in Tuition Fee Grant payments to institutions outside Wales.

What are the views of stakeholders and students?

In April 2014, Huw Lewis, the then Minister for Education and Skills, asked Professor Sir Ian Diamond to chair an independent review panel to look at higher education funding and student finance arrangements.

The Diamond Review’s Interim Report (December 2015) summarises the evidence that it collected and outlines emerging themes and messages for the next Welsh Government to consider. For instance:

  • the majority of respondents believe that maintaining the status quo is not an option;
  • there is, generally, a lack of consensus on the way forward. Most respondents recognise that difficult choices will have to be made;
  • despite the sector’s protests to the contrary, many believe that the higher education sector in Wales has benefitted overall from a net increase in income since the introduction of the current fees and funding regime. The increase may not be as high as predicted and changes in income levels differ significantly between institutions;
  • there is concern, particularly in the higher education sector, about a large and increasing funding gap between higher education in Wales compared to elsewhere in the UK;
  • students domiciled in Wales benefit from having lower student debt levels on leaving university than those domiciled in England; and
  • the level of maintenance support available is inadequate to cover upfront costs incurred by students, and this is a bigger issue for students than the level of tuition fee loan to be repaid once they are in employment.

What about funding for part-time higher education courses?

The profile of part-time higher education students is quite different to their full-time colleagues. The Welsh Government deferred making a long-term decision on funding for part-time higher education provision, partly because the English model of loans and higher fees for part-time courses led to a steep decline in part-time student numbers.

A Welsh Government-commissioned report on arrangements for part-time students was published alongside the Diamond Review’s Interim Report. There is widespread agreement the part-time sector also urgently needs its own funding strategy.

What is likely to happen in the Fifth Assembly?

Professor Sir Ian Diamond’s review panel was asked to make recommendations that are deliverable, affordable and sustainable. Its final report will be presented to the new Welsh Government by September 2016. One of the early decisions for the new Welsh Government will be how to strike a balance between funding a strong higher education sector and supporting students to pay the costs of higher education.

Key sources

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