University of York vice-chancellor: "We can only afford to teach British undergraduates because of fees from international students"

Why so acute? Well, put bluntly, the income for teaching UK students - but also for doing groundbreaking and often world-leading research - is now nowhere near enough to cover the costs of doing the teaching and research.

While governments are quick to talk about universities being fundamental to the UK’s status as a ‘science superpower’, and how integral their research is to driving economic innovation, they have presided over a system which covers at best 80% of the cost of that research.

And frozen fees and government grants that have fallen well below inflation so teaching is now also seriously underfunded.

Pressures on university finances

Inflation has also driven up the other costs of operating universities, adding to the pressures on finances. One consequence has been to limit the scope for pay awards, so university staff - like NHS staff, like teachers - feel under-appreciated and under-paid for the work they do.

The only thing that has been holding the system together are cross-subsidies that balance the funding shortfalls. And the biggest source of cross-subsidy are the higher fees paid by international students.

UK higher education has a brilliant reputation worldwide, which means we can attract some of the brightest talent worldwide to study here in the UK. But we are now in a situation in which it is only because of the international student fee income that we can afford to teach home students.

Do not believe the stories we often see in the media about international students ‘taking away’ places from home students. At the University of York, and across the Russell Group, home student numbers have grown significantly over the last decade.

So to be clear, international students do not crowd out home students. International tuition fees fill the gaps left by policy decisions to underfund both teaching and research.

That is the cold, flawed logic of the way we fund universities in the UK.

But now there is further risk, as the government’s failure to get to grips with illegal immigration leads it to turn attention to things it can control, like student visas. We have seen two sets of further restrictions on student visas in the last twelve months.

And now the government is contemplating a third round, which could remove the possibility for international students to work for a further two year period in the UK after graduation. So we don’t want bright global talent to work in an economy which could take all the talent and gumption it could get? Really?

All this creates a moment of peril for the sector. Some universities have been hit hard already and more will follow.

A rough guess is that about half of the sector - older and newer universities alike - is responding by cutting jobs and courses. Perhaps ten per cent of the sector has the financial capacity to sail through more or less unaffected. Another chunk is waiting for something to turn up, perhaps after the next election.

What could we expect from a new government?

That is a forlorn hope. Yes, every opinion poll says there will be a change of government but any new government will inherit a major fiscal challenge.

The best the sector can expect from a new Labour government in the short-term is funding to reduce student hardship and that it would not put additional obstacles in the way of recruiting international students.

But even if a future Labour government were more supportive of recruiting international students, we have to ask whether it is in the UK’s interests for its universities to be so dependent on international student flows. We are seeing how vulnerable this dependence can make us to domestic policy changes and exchange rate fluctuations.

It also makes us vulnerable to geopolitical turbulence. Some universities now see over 80 per cent of their student fee income coming from international students. This does not seem like a sensible or sustainable basis for funding the sector.

Building a new case for universities

What we urgently need is an honest debate about what and who our universities are really for. And we in universities need to make a better case in that debate.

So what might that case look like? Consider whether there have been any big new ideas or technologies in the past 50 years that didn’t come from universities, through ground-breaking research or the skills of graduates, or startups and established companies adopting those ideas and technologies.

The answer is clear enough: we wouldn’t have that innovation without our universities.

And this is not just innovation in science and technology, the STEM subjects. It is also about social science and the arts and humanities, about focusing imagination and analysis on what humans are capable of so we can pursue the positives and avoid the pitfalls.

Why is that important? Because artificial intelligence needs an anchoring in ethics and regulation; because our creative industries rely on a powerful mix of new technologies and artistic creativity; because the potential of genetic biotechnologies needs balancing with an understanding of what ordinary people think is right and acceptable; and so on.

We don’t get this balance without the different kinds of expertise we nurture in our universities.

And we won’t open up access to all of the potential this innovation can bring to all parts of our society without universities. Universities of all types - ancient, modern and inbetween - care about opening up opportunities to benefit from the innovation we seed, working hard to offer choices that would otherwise not exist for young people from our more disadvantaged communities.

And we are not, as some claim, somehow in opposition to further education or apprenticeships. If we want to succeed in AI or the creative industries or biotechnology, we will need a labour force with a wide range of skills from FE to PhD.

Universities are increasingly anchors of economic development and social opportunity in our cities and regions, working with the new regional authorities run by elected Mayors, connecting across public and private sectors, and businesses large and small.

The international reputation and reach that attracts international students is an asset too - to our local economies, to the UK’s export economy and its international influence.

We need this international dimension of universities to be less reactive to funding pressures and far more strategic: a way of bringing global talent into our regions, a way of building collaborations between universities here and abroad.

These are the terms on which we might look to engage with an incoming government: how we harness our contributions to innovation, social mobility, economic development and international engagement as a higher education strategy rather than piecemeal policies and dysfunctional neglect.

Mapping our way out of crisis

But if we succeed in this, it will take time. For the next few years we are unlikely to see much in the way of additional funding. So, for now, we are on our own and have to make our own luck.

Some of that will be about new and creative approaches to student recruitment.

Some will be about working collaboratively in our regions as they become more important settings for policies on innovation and skills.

And some will be about changing the way we work to reduce our costs of operation. There is plenty of cost-cutting already under way, as we can see in regular headlines about universities announcing cost-reduction programmes.

Beyond all that we need a deeper reflection, which aligns how we work to a new case for universities, rooted in the contributions we make to our society and economy at home, and in a strategic mobilisation of our international reach for purposes of collaboration and shared interest, not a need for cross-subsidy.

A future view from the University of York

I am determined that the University of York will be a leader in shaping its own destiny. We need to act to secure the quality of our teaching and research as we look to the next decade.

York is one of only four universities (alongside Oxford, Cambridge and Imperial) to have won the top ‘Gold’ award overall in the most recent national assessment of university teaching and to be placed in the top ten in the most recent national research assessment of the UK’s quality of research.

It also has a strong sense of purpose as a university that exists for public good. We were set up in 1963 to do research and teaching for ‘the amelioration of human life and conditions.’ That is a powerful mission which we are committed to continue.

To underpin the quality and purposes of our universities we need to mark out a future beyond the current funding model.

We need to build new and different relationships with organisations in the public and private sectors, to harness the value of our research for the economy and our public services. And we need to engage creatively with the government - local, regional and national - to deliver outcomes of economic opportunity and social mobility that underline the importance of universities to the wider public.

I set out my view - a ten-point plan - on what is required to create long-term stability for the sector and, most importantly, to secure its benefits for our society.