Why record A-Level results won’t stop universities from struggling

0:02Sky News, the full story first.

0:12It's A-level results day and a record number of young people are heading into a university sector that's fighting for financial survival. This is why.

0:26Hello, Ed Conway here. Here's what might sound like a slightly random question. What do AirPods, bananas and a pair of shoddily made running trainers from the 1970s have in common? On the surface, not very much. But on my podcast, Stuff Matters, I will uncover the deeper stories behind each of them. You will see how together they tell a fascinating new story about the world we live in. The first full series of Stuff Matters is out now. Just search for it on your podcast app and follow.

0:59How are you feeling? A bit nervous. Understandably. When you're ready. I got A-star on three A's. Oh my goodness, that is fantastic! Hi everyone, Neil here. First things first, congratulations to everyone who got their A-level and other results today. Also a pat on the back for the parents who've spent the past few months putting up with the nerves, the moods and being told not to mention results day. In fact, a record number of 18-year-olds have secured a university place this year. So on the face of it, higher education actually looks in pretty good shape. The universities taking them, though, are in a bit of a state.

1:34There are universities up and down the UK, a lot of them actually, that have been running big deficits. So the amount they're spending is significantly higher than their income. And some have been doing that for multiple years. Many have been laying off staff, closing courses. So it's a moment of flux. And this is the bit that feels slightly back to front. You'd think more students means more fees and more fees means healthier universities. But the sums just don't work like that anymore. Nick Hillman runs the independent think tank, the Higher Education Policy Institute.

2:09Nick, lovely to see you. This is a confusing topic for me because on the one hand, I keep getting told universities in crisis, universities are failing. But on the face of it, what we have heard from UCAS today seems pretty positive. A record 262, 820 UK students will be making their way to university. And of course, first and foremost, congratulations to them. Well, thank you for having me on because this is the single most important day in the university's annual calendar. For all the reasons that you say from today on, they know roughly how many students will be enrolling this autumn. And it does indeed look like very good news.

2:44And that wasn't predictable, by the way, because after COVID, there was a real drop off in demand for higher education. And that has now recovered. And it seems that we're going to have a very high number, as you say, about a quarter of a million school leavers enrolling in higher education this autumn, which is good news for universities. It doesn't take away all the other problems they're facing, but it does mean that many lecture halls will be pretty full this autumn. Just though in terms of the numbers themselves, I mean, is this just a simple consequence of demographics? broadening population, you're going to see more people going off to university?

3:15Or is this really a moment that we should be celebrating? Well, there are two main driving factors when you're talking about demand for higher education. The first is exactly as you say, just how many 18 year olds are there? What was the birth rate 18 years ago? And the number of 18 year olds is currently growing. And it starts falling again after 2030. But at the moment, it is growing. And then the question is, well, what proportion of the total number, whatever the total number is, are going to higher education. And this year, it does look as if most of the growth is coming from the fact that there's just more 18-year-olds.

3:48It's not that a much higher proportion of the 18-year-olds are going. It's that the proportion stayed about the same, but there's just the cake is bigger. There are just more of them. But in the round, a good news for universities because it means more money for the universities. So just if you can, explain what the problems have been of late. Well, there's a few things here. So you said in the round a good day for universities, and I agree with you. But there are about 150 universities up and down the UK, and there are actually over 400 institutions that deliver higher education. They're not called universities.

4:19And some of them are in much better health than others. The really famous, really old ones, Oxford, Cambridge, Imperial, Manchester, Edinburgh, they are going to fill all the places they've got available. Others are struggling to a much greater degree. And something else that's not really the story today, but is nonetheless on the minds of university vice chancellors is the big drop in the number of international postgraduate students, thanks to some policies actually Rishi Sunak introduced. And those are the students that really pay far more in fees than it costs to educate them. The British students who we're talking about today, who are going to university this autumn, if anything, universities actually lose a little bit of money on each one because tuition fees have not been going up, even in line with inflation until very recently.

5:03So international students, in essence, subsidise British students going to university? Yes, and everything else universities do. So universities are very large businesses. They're also charities, so they're not looking to make a profit, but they're looking to make a surplus to reinvest in their estates, to expand, to make themselves a stronger institution to how they used to be. And the international students are the one thing the universities do that subsidises everything else. So yes, they subsidise home students. They also subsidise university research, which is the other really big thing universities do, of course, you know, discovering the cures of diseases for the boundaries of knowledge, all those other things.

5:44So international students support everything our universities do. You mentioned Rishi Sunat's kind of policy changes there. Just explain what you mean, because when people are coming to this country to study, they're not coming in the numbers that they used to, are they? That's absolutely right. So it's much easier to crack down on legal migration than illegal migration. And students are the single biggest group of legal migrants. And so what the previous government did, although it's supported by the current government as well, is they stopped master's students, students on one-year taught postgraduate courses, from bringing dependents with them.

6:18So their wife or their husband or their children, other people reliant on them. And they just said, if you're coming here on a one-year taught master's courses, it's got to be just you. Don't bring anybody else with you. And that had a big impact on the numbers. So at the moment, I think international students provide, what, around about a quarter of university income. Was it ever wise for universities to get to this place where they are that reliant on international numbers, given, as you say, they're going to start coming down? Personally, I think, yes. So universities are often criticised for being slow and the opposite of innovative and not at all entrepreneurial.

6:53Actually, our universities are quite entrepreneurial. And what happened was when the fees for home students were held down, they thought, well, we want to be a bigger, better institution tomorrow than we are today. How can we do that? And the demand to come and study in the UK is huge, partly because our universities do very well in the global league tables, and partly, quite frankly, because we speak English, and English is the lingua franca and people want to learn in English. At the moment, we're sort of tying one arm behind our back ourselves by changing all our migration rules. But at the moment, actually, lots of people want to come and study in the UK because, for example, Trump's America is a little bit less open to international students than it used to be.

7:35Ditto Australia and Canada that have been tightening up their own rules. And the other reason I'm a huge fan of having lots of international students in the UK, is that they make our lecture halls more diverse. You know, a university at its best is a melting pot. You're sitting next to people from different countries with different backgrounds, different experiences. And then after they've left British universities, they normally go on to positions of real importance in their home countries. We did a study last summer that showed about a quarter of the countries in the world have either a monarch, a president or a prime minister who's been educated in the British university system.

8:11And the soft power benefits of that for the country are tremendous. Well, aside from those soft power benefits that higher education brings overseas students, I mean, there are the financial benefits as well. So what sort of financial state are our universities in? Look, universities are in different sorts of financial positions. We've had one university in the last year or so effectively go bust in Dundee in Scotland. Now, the Scottish government have bailed it out. And that means that actually in the history of higher education in Britain, no university has officially ever gone bust because there's always been a deal.

8:44There's always been an arrangement. Another thing we've had since last year is University of Kent, which was in financial difficulties, merging with the University of Greenwich. So there's a lot of changes going on in the sector. As yet, no university has gone bust. I said to the chief executive of UCAS two days ago, should this year's A-level students be worried that the university they're about to go to could go bust in the next three years? She was fairly confident that they could be more hopeful than that. And she talked about the legal protections that students have. But there are universities up and down the UK, a lot of them actually, that have been running big deficits.

9:21So the amount they're spending is significantly higher than their income. and some have been doing that for multiple years. Many have been laying off staff, closing courses to try to shore up their financial position. So it's a moment of flux. I think that's one thing we can say with great certainty. Oh, 100%. I mean, I was looking at the data this morning. I mean, the regulator is saying 119 English institutions could report deficits without further action, 24 providers of higher education at risk of insolvency or market exit within a year. It is a concern, isn't it? and probably one that domestic students should be mindful of.

9:56Well, this is such an interesting area because, as I've said a moment ago, no British university has ever officially gone bust. And therefore, we don't know what will happen if one does go bust. The Minister for Skills, Jackie Smith, Baroness Jackie Smith, said to a group of MPs, a select committee, the Education Select Committee, some months ago, don't worry, the government's keeping its eye on everything. But some lawyers, some legal experts in this area, said to the same committee, It would be a catastrophe if one went bust because students would be very close to the back of the queue and would find their learning severely disrupted.

10:32In my view, our universities are typically such big institutions, they're so important to their local economies, as well as the students and staff that are there, that actually no government can just wash its hands and say, too bad if a university closes. Isn't another possible option, I mean, if, as you say, and quite clearly, It would be politically very, very difficult for a government right now to let a university, a higher education institution go to the wall and have all the attendant effects on the students and the community. I get that. But isn't it rather more likely that what we could see are universities shuttering departments?

11:06Oh, that's already happened. And when your demand for particular courses falls, as, for example, has happened at a lot of modern languages departments. so when it became voluntary to do a language at GCSE this is going back 20 years ever since then the number of school pupils taking languages at GCSE and then A level and then the number wanting to do it a higher education level has fallen off a cliff and there are modern languages departments that are under threat some of the creative disciplines as well things like music have been struggling to recruit and actually universities most universities in the country have been running voluntary redundancy schemes and reducing their staff.

11:45And most have been doing course portfolio reviews. So they're looking at which courses are viable, whether any department should be merged. Even Russell Group universities, you know, those famous older universities, struggle to recruit to some of their language courses. So that will absolutely continue. And what we lack as a country, sadly, is some strategic oversight of this. Which kind of leads on to this. I mean, if not every university department deserves to be saved or indeed can be saved, I mean, is it the case that every university should be allowed to continue? Well, I mean, that's a very good question, but universities can change.

12:19And we've had that over the years. I mean, I went to Manchester University. When I went there, there was Manchester University. And down the road, there was an institution called UMIST, the University of Manchester Institute of Science and Technology. They merged 20 years ago. And that's why Manchester is today the second biggest university in the country. So I think we could see mergers. The one thing that nobody is talking about that they should be talking about is also the likelihood of private money coming in, because the government is not going to want to bail out universities to the tune of 10 million here, 20 million there.

12:49You know, Dundee's cost not that far off 100 million in Scotland to protect and keep going. There are universities that have been in the newspapers being in financial trouble, and they immediately get phoned up by private equity, by global university chains, by for-profit providers saying, well, we'd be quite interested in taking you over. Are you up for that conversation? And to date, they've not really been up for that conversation, but I think we'll see more of that sort of activity as well.

13:23Hello, Ed Conway here. Here's what might sound like a slightly random question. What do AirPods, bananas, and a pair of shoddily made running trainers from the 1970s have in common? On the surface, not very much. But on my podcast, Stuff Matters, I will uncover the deeper stories behind each of them. You will see how, together, they tell a fascinating new story about the world we live in. The first full series of Stuff Matters is out now. Just search for it on your podcast app and follow.

14:00Let's talk about fees just for a second. Currently, they are running for a UK student, what,£9 ,790 a year. Nick, explain to me how a student paying£10 ,000 a year isn't covering the cost of their higher education. Well, the way we got there is by the fact that good quality higher education costs a lot of money to deliver. So as well as the teaching staff who you want to be highly skilled, you want well-stocked libraries, you want good IT facilities. You also want things like good sports facilities so you get an all-round education. and while£9 ,000 sounds like a huge sum of money, when you think of all the things you're getting for it, I mean, a state school will get a little bit less than£9 ,000 to educate each pupil, but they get a whole load of extra money for buildings and things like that on top, whereas the£9 ,000 a university's getting, nine and a bit now, is to cover all the costs and a good quality all-round higher education does cost a lot of money, but in more than normally, normally, not always, but normally more than pays for itself in the long run because graduates are less likely to be unemployed they're more likely to be in well-paid work there are all sorts of professions that are simply not open to people unless they're graduates and a lot of people think that's wrong i i don't you know teaching teaching used to not be a graduate profession i'm really pleased my kids teachers are graduates nursing used not to be a graduate profession hospitals with a higher proportion of graduate nurses being shown to be safer environments for patients.

15:30So I think that's a good thing. So normally it pays for itself. It doesn't always pay for itself. But if you never get, you know, fairly well paid work, then you don't actually pay back the entirety of your loan anyway. So it's a fairly safe bet for the learner. It must be quite confusing being a 17, 18 year old at this particular point, because whilst on the one hand, you have people like yourself, absolutely rightly espousing the benefits of going off spending three, four, five, six years at university and ending up with a better life all round as a result of it. The mood music in the background from the government and from others is slightly different at the moment though, isn't it?

16:04Yeah, there absolutely has been lots of years actually worth of negative rhetoric from both sides of the political spectrum. And what's so interesting today is it doesn't seem to have put people off. You know, we've got record numbers of people going. And I think there are two reasons for that. The first reason is young people are not stupid. They do their homework and they look at that the second reason is frankly doesn't matter how much the politicians say go and do an apprenticeship instead if apprenticeships are not available higher level degree level apprenticeships for school leavers there were fewer than 10 000 young people that did those last year because an apprenticeship is a job with training attached and you need employers to be offering these things for young people to even be able to look at them and so every time a politician says oh we should be more like Germany and more people should do more vocational routes rather than traditional three-year degree programmes.

16:55My question back is, well, where are these opportunities that you're telling young people they should be doing? Because frankly, the structure of our labour market and the way we run our apprenticeships mean most apprenticeships are done by people who are much older and already in work. So actually young people, A, they're doing the right thing for them, in my opinion, but B, the alternatives are not nearly as good as people like to pretend they Nick, it has been an absolute pleasure talking to you. Thanks for your time. Thank you. Well, that's your lot for today. Do remember to get in touch with your thoughts on what you've heard.

17:28Yesterday's episode focused on the crisis in our prison service and the fact we might see some pretty violent criminals released early. Liam got in touch to say, wouldn't it be easier to release people who haven't committed violent crimes, i.e. fraud and other financial crimes? And James says this, why not just say any person who's committed violent or sexual crime against another person does not get released? Or is that too difficult for members of Parliament to work out? The email address to send in your thoughts, why at sky.uk. We're back tomorrow.

18:08Hello, Ed Conway here. Here is what might sound like a slightly random question. What do AirPods, bananas and a pair of shoddily made running trainers from the 1970s have in common? On the surface, not very much. But on my podcast, Stuff Matters, I will uncover the deeper stories behind each of them. You will see how together they tell a fascinating new story about the world we live in. The first full series of Stuff Matters is out now. Just search for it on your podcast app and follow.