Pandemic leaves higher education facing “significant funding shortfalls” – IFS

A new report from the Institute for Fiscal Studies warns of funding issues and a widening of inequalities throughout the education system

While universities and colleges struggle to come to terms with the immediate problems posed by Covid-19, longer-term funding challenges left in its wake will be no less acute.

That’s according to today’s (November 3) report from the Institute for Fiscal Studies (IFS), which warns of “significant funding shortfalls” in HE and a widening of inequalities throughout the education system.

Funded by the Nuffield Foundation, the ‘2020 annual report on education spending in England’ points to a number of areas of concern.

While student numbers have held steadier than expected thus far, the IFS finds that a large-scale dropout and commensurate fall in income remains a distinct possibility.

Of course, pandemic conditions have an effect on alumni, too. The IFS predicts a fall in loan repayments as high as £12bn for university entrants up to the 2020 intake, under the Office for Budget Responsibility’s pessimistic forecasts, and around £5bn under its central scenario.

Nevertheless, these concerns pale in comparison to those presented by pension costs.

“By far the biggest source of risk [to universities] now appears to be the large deficit on the main university pension scheme, which has increased from £3.6bn in March 2018 to a monumental £21.5bn in August 2020, according to the latest preliminary estimate,” said report co-author, Ben Waltmann.

There are additional financial pressures across all stages of the education system – Tim Gardam, Nuffield Foundation

“With contributions already at more than 30% of earnings, it is hard to see how a deficit on this scale, if confirmed, could be evened out without further cuts in the generosity of the scheme,” he added.

The forecast is no more clement for the pre-university years.

We are in a period of considerable demographic shift, with the number of 16- and 17-year-olds set to grow by 13% between 2019 and 2023. Coupled with the pandemic greatly reducing training and employment opportunities, and GCSE results hitting an uncommon high, student numbers in further education colleges and sixth forms are set to climb.

Even including the pledge of an extra £400m funding for FE and sixth forms from the 2019 spending review, the report concludes that these exceptional circumstances “could still generate a real terms fall in funding per student”.

The sector has seen the biggest spending falls of any in education since the Conservative coalition came into power in 2010; funding per student in FE and sixth-form colleges fell by 12% in real terms between 2010–11 and 2019–20, while in school sixth forms it dropped by 23%.

The IFS argues that there is a “strong case for greater funding targeted at more deprived schools and areas”, with evidence pointing to a widening of educational inequalities during lockdown.

Having already seen higher falls in school spending per pupil over the last decade than their more affluent counterparts, these schools “are likely to face faster growth in costs associated with higher teacher starting salaries, given they are more likely to employ new teachers”.


In related news: The Covid-19 crisis sees 13 universities at risk of bankruptcy, IFS warns


Finally, in early years education, spending per hour has been falling in real terms since 2017–18. In 2019-20, funding for early education and childcare places for three- and four-year-olds stood at £3,800 per child, down £100 on the previous year.

“This report shines a powerful light onto education funding in England and the new challenges posed by the impact of Covid-19,” said Tim Gardam, chief executive of the Nuffield Foundation.

“There are additional financial pressures across all stages of the education system and educational inequalities are at risk of widening even further. The IFS analysis demonstrates why it is important to target funding at children and young people most at risk of losing out on educational opportunities, such as pupils attending schools in deprived areas, and young people attending further education colleges.”

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