Jo Johnson criticizes previous governments for legacy of poor university finances

The two-time former universities minister lamented the state of the university sector's finances as the House of Lords discussed a recent Universities UK report on the future of higher education.

Lord Johnson of Marylebone said allowing institutions' balance sheets to deteriorate had led to a real abdication by more recent governments, and he welcomed the government's announcement that fees would rise.

He echoed the concerns of Baroness Warwick of Undercliffe, a former director of Universities UK, about the depths to which finances had fallen.

Lady Undercliffe referred to a report from the Office for Students (OFS) which found that 40% of universities are expected to be in deficit in 2023/2024 and a growing proportion report having limited cash flow.

Lord Johnson said: The financial situation of the sector is deteriorating very rapidly.

Updated analysis suggests that up to three-quarters of the sector will be in deficit next year, suggesting conditions are deteriorating extremely quickly.

Like (her), I welcome the government's decision to increase fees in line with inflation for the next financial year, it is an important step.

The Conservative colleague added: Obviously it's a shame it's taken so long, it's a shame the sector has seen almost a decade, as (she) said, of erosion in real terms of undergraduate tuition revenue, but I am happy with this decision. was finally taken.

It is a real abdication of responsibility on the part of the most recent governments to let this issue drift like this.

This is no way to ensure certainty in the institutions essential to our success as a knowledge economy.

This has led to unnecessary job cuts, program closures, and an increased reliance on volatile earnings from international students, however welcome they may be.

Last week, the government announced it would increase the tuition fee cap for full-time students by 285, to 9,535.

The freezing of the current rate since 2017 has led some institutions to complain that they have struggled to keep up with rising costs, including inflation.

A poll commissioned by the Higher Education Policy Institute in October, before the government's announcement on tuition fee increases, found that almost a third of students feared their university would become insolvent.

In total, 31% say they are quite or very worried about the financial situation of their institution.

Lord Johnson told a fringe event at a Conservative Party conference in October that the party had been irresponsible in allowing university funding to remain the same during its last six years in power, according to the Times Higher Education .

Lady Undercliffe, a Labor colleague, said there was a widespread understanding among peers that university funding was not structurally sustainable and this had impacted on university research.

She said: Given the financial deterioration of universities, this has produced a huge funding gap and leaves this vital activity exposed.

International student fees currently represent a portion of this short term. But I think we can all agree that this is not a solid or even sustainable solution.

An ambitious, long-term approach is needed to ensure the UK can maintain its international competitiveness and continue to deliver the Government's ambitions for economic growth.

She added that the student maintenance allowance should be reintroduced and that in the long term tuition fees and student loans should be linked to inflation.

The financial sustainability of the university sector is not a challenge that can be avoided. Inflation also eroded the real value of tuition fees and maintenance loans by around a third, which proved unsustainable for both students and universities, she said.