Fee rise will not fix ‘financial pressures’ facing universities due to NI hike

An increase in tuition fees will not alleviate “severe” financial pressures facing universities as the rise in national insurance contributions will squeeze budgets further, sector leaders have warned.

Education secretary Bridget Phillipson announced on Monday that undergraduate tuition fees in England – which have been frozen at £9,250 since 2017 – would rise to £9,535 next year.

She said it was necessary to “secure the future of higher education” amid financial challenges.

But Professor Robert Van de Noort, vice-chancellor of the University of Reading, said the rise in tuition fees in line with inflation will only stop their real-terms value declining further than they already have.

He said: “It may help to prevent things getting progressively worse, but does not entirely alleviate the severe financial pressures facing the sector, which increased this month with the increases to national insurance employer contributions.”

Last week, the Universities and Colleges Employers Association (UCEA) warned that changes announced in the Budget around employers’ national insurance (NI) contributions would cost the sector £372 million and amplify the funding challenges facing institutions.

University leaders have repeatedly warned of significant financial concerns as a result of frozen tuition fees paid by domestic students and a fall in the number of international students.

Nick Hillman, director for the Higher Education Policy Institute (Hepi) think tank, said universities need a fee rise that is “significantly above inflation even to stand still” due to the extra costs they face as a result of the NI changes.

He added that “worries about financial instability will continue” in light of the 3.1% rise in fees.

Raj Jethwa, chief executive of the UCEA, said: “Any increase in income is helpful, but HE employers will continue to face very difficult cost challenges from the recent increase in employer NI contributions, on top of eye-watering overlooked increases in TPS pension costs.”

The Department for Education (DfE) has said longer-term funding plans for the higher education sector will be set out in due course.

If the Government chooses to increase tuition fees in line with inflation each year, the maximum tuition fee could reach £10,680 in 2029/30, according to the Institute for Fiscal Studies (IFS).

Kate Ogden, senior research economist at the IFS, said: “If the Government is planning to continue to raise the fee cap with inflation, it should say so – and provide some certainty to universities and prospective students alike.”

Professor Shitij Kapur, vice-chancellor of King’s College London, previously suggested that universities needed between £12,000 and £13,000 per year in tuition fees to meet costs.

On Tuesday, Health Secretary Wes Streeting defended the Government’s decision to increase domestic undergraduate tuition fees saying it was a “proportionate and reasonable thing” to do.

The Labour Party has faced criticism for raising fees for the first time in eight years after Sir Keir Starmer supported abolishing them during his leadership campaign in 2020.

The University and College Union (UCU) called the tuition fee rise “morally wrong”, while the National Union of Students (NUS) said students were being asked to “foot the bill”.

Mr Streeting told Sky News: “I think the risk is if we didn’t put the fee price and the maintenance support up in line with inflation then students really would be sold short because the investment in their teaching wouldn’t keep up with rising cost pressures.”