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Universities in England that are still coping with the impact of Covid-19 face “significant” financial risks from high dropout rates and high pension costs, according to an analysis by the Institute for Fiscal Studies (IFS).
The IFS annual report on education spending says there will be a funding shortfall at colleges and universities, where the pension deficit has risen from £ 3.6bn in March 2018 to an estimated £ 21.5bn last August .
Researchers say there will be mounting long-term costs to the government, with a predicted £ 12bn shortfall in student loan repayments as graduates struggle to find work in a job market ravaged by the pandemic. For universities, there are likely to be additional losses for accommodation, lectures and catering.
Ben Waltmann, an IFS research economist and co-author of the report, said the number of students entering higher education had held up better than expected this summer, but said universities are still facing financial deficits from no-shows or a drop. higher than usual. rates.
‘By far the biggest source of risk now appears to be the large shortfall in the main college pension scheme, which has risen from £ 3.6bn in March 2018 to a monumental £ 21.5bn in August 2020, according to the last preliminary estimate, “he said. said.
“With contributions already accounting for more than 30% of earnings, it is difficult to see how a deficit of this scale, if confirmed, could be leveled without further cuts in the scheme’s generosity.” Disputes over the pension plan have already sparked extended and widespread strikes on campuses.
According to the IFS, lowered interest rates and depressed rates of return will cost universities an additional £ 8 billion to meet existing pension promises, double the IFS ‘previous estimate.
The report also highlights financial problems in higher education (FE), which Education Secretary Gavin Williamson has prioritized, as well as in sixth-grade colleges, where large increases in student numbers are likely. due to better GCSE results this summer. lead to a drop in funding in real terms for each student, despite £ 400 million in additional funding this year.
IFS’s analysis of state school funding, released in September, showed that schools in England suffered their worst decline since the 1980s, with secondary schools and schools in the poorest areas hit the hardest. The decline was so deep, the IFS said, that the additional £ 7 billion promised by the government would not be enough to reverse the cuts by 2023, leaving school spending 1% lower than in 2009-10.
On college and sixth-grade funding, Geoff Barton, general secretary of the Association of School and College Leaders, said: “The government talks about the importance of higher education, but it just doesn’t put its money where its mouth is, as this report shows starkly.
“The additional investment of £ 400 million in the sector this year hardly affects the sides after years of cuts in real terms and the likelihood of an increase in student numbers. Colleges and sixth-grade schools urgently require a significant increase in funding that matches the government’s rhetoric. “
David Hughes, Executive Director of the Association of Universities, added: “With the spending review just a few weeks away and the FE white paper shortly after that, there is a real opportunity to get college funding back on the level. that it should, not only to improve opportunities for youth and adults, but also to help build the resilience and financial security of universities to face what is undoubtedly the most difficult year on record ”.
University and College Union Secretary General Jo Grady said: “The government urgently needs to address the continuing uncertainty about funding for higher and higher education, after years of underfunding and commercialization that have been exacerbated by the pandemic of coronavirus and its economic consequences “.
A government spokesperson said: “We understand that this has been a challenging time for the education sector, so we present a variety of support to help colleges and universities manage their finances and protect students.
“We have protected funding for grants for higher education, worth more than £ 3 billion for a full year, and increased investment in education and training this year for young people aged 16 to 19 by 400 million pounds additional.
“We also advanced more than £ 2 billion in tuition payments for universities and announced a major package of £ 280 million to stabilize research funding.”
