How the Tories pushed universities to the brink of disaster

Given Britain's stagnant economy, dilapidated public services and near-bankrupt local authorities, there isn't much public concern left over for its universities. But 14 years of Tory rule have damaged them just as grievously as the rest of the public realm, and in some ways more recklessly.

As many academics have warned, the funding system of higher education is heading towards disaster. One reason why this story has struggled to gain traction is that, as with so many areas of Britain's highly unequal society, the elite end of the spectrum continues to thrive: according to the recent QS world university rankings , four of the world's top 10 universities are in Britain.

But the news from the rest of the sector is increasingly grim. Revenue has struggled to keep up with spiralling costs, even while academic salaries have been falling in real terms. A sense of emergency took hold last autumn, when it became clear that there had been a sharp drop in international students , whose higher fees have become pivotal to the funding model of higher education in the UK. Cue panic, as universities scrambled to bring in whatever students they could, slashing entry tariffs for postgraduates and even poaching them from one another, sometimes midterm.

Although tuition fees for home students are still viewed as unacceptably high, most universities now make a loss on every one they recruit, as inflation has steadily (and then rapidly) devalued the £9,250 annual fee, last set in 2017. As the profitable overseas students have declined, something has had to give: well over half of UK universities are now cutting staffing costs, be it through compulsory redundancies, voluntary severance schemes or freezes on hiring and promotion. And outside the rarefied global elite, many prestigious institutions are losing ground in the reputational battlefield of international league tables. At some point, there is going to be a high-profile bankruptcy or clumsy last-ditch merger, unless the next government acts quickly and decisively.

Applications to university from within the UK show no sign of decline, and – despite the best efforts of Rishi Sunak and the rightwing press – there remains a considerable cultural and economic premium attached to a university degree. Labour market prospects for graduates are not what they were prior to the 2008 financial crisis, but they remain considerably better than for non-graduates, which exerts more influence over application rates.

However, the experience of university has become a less happy and rewarding one for many – students and teachers alike. More students (inevitably from less privileged backgrounds) are having to take paid work to support themselves while they study, while lecturers are now confronted with a crisis of attendance, which began with the "pivot" to online teaching during the pandemic. Online engagement has become the default for many students. The campus and lecture hall are no longer seen as indispensable. Whatever benefits this offers in terms of convenience, it also risks loneliness and disaffection.

Then there is the debt. The average undergraduate now leaves university owing £45,000, with a commercial rate of interest accruing. For postgraduates, you can add another £24,000 on top. The government's repayment scheme raises a graduate's marginal rate of income tax by a further 9%, resulting in the highest marginal tax rates for any workers in Britain.

When it comes to research, Britain has been desperately patching up some of the damage done by Brexit, scrambling to rejoin the Horizon Europe science funding scheme last year. But many leading researchers had already taken jobs on the continent in order to retain access to EU funding, while elite European scholars are now less likely to take up jobs in British universities. Britain is no longer the dominant force that it once was in the capture of international research income.

In an economy as regionally unequal as the UK's, higher education is one of the few countervailing forces, spreading revenue and jobs to parts of the country that otherwise have little to fall back on. Despite whatever schadenfreude might be enjoyed by Daily Telegraph columnists and Tory backbenchers, a financial crisis in this sector does not only impact on lecturers.

If a university, with several thousand students halfway through a degree, did go under, the wider crisis of confidence in the sector would be hard to control: we might see something like a bank run, as students sought to flee from one institution to another en masse, or to quit with whatever accreditation they could lay their hands on. The Office for Students, established in 2018 as a regulator for this "market", has no doubt stress-tested such scenarios – but we are entering unknown territory. Political insistence that higher education must operate like a market has led to many of the worst pathologies of market societies.

How did the past 14 years of Tory governments achieve such a spectacular mess, in a world-class sector, which is simultaneously a leading export industry, an unrivalled source of "soft" power, and perhaps the last remaining check on the economic dominance of London over the rest of the UK – not to mention a crucible of critical inquiry dating back several hundred years, and a gateway to adulthood for now half the population?

For many, the beginning of the Tory era is associated with those famous scenes of young people being kettled on Westminster Bridge, storming Milbank Tower and (a moment apparently scripted by Richard Curtis) barracking a limousine containing the now king and queen. The protests in December 2010 against the trebling of tuition fees, from £3,000 to £9,000, were a formative political moment for what would later become the beating heart of Corbynism.

For the protesters, the policy embodied the cultural devastation of austerity, the mendacity of the Liberal Democrats and the trashing of the intergenerational compact. But to its architects and defenders, it had a certain economic logic on its side – which the previous Labour government had largely endorsed. It was Labour, after all, that first introduced "top-up" fees for university tuition, arguing that it was "regressive" to fund higher education through general taxation, given that graduates go on to earn more money than non-graduates. It was Peter Mandelson in 2009 who appointed Lord Browne, former CEO of BP , to conduct a review of higher education funding, which recommended that the cap on tuition fees be abandoned altogether. A graduate tax would have addressed the funding problem, but would have kept universities tethered to the Treasury for their revenue. By contrast, fees had the aura of the free market.

The particular policy that the coalition government adopted was the brainchild of David Willetts , who at least had some interest in universities (unlike several of his successors in the post of universities minister). In theory, and at the outset, the policy appeared comparatively progressive. Any university would now be allowed to charge up to £6,000 a year, but in "exceptional cases" a university could charge up to £9,000 if it made certain commitments to widening access to higher education. Students would be offered income-contingent loans, which would only be repayable once graduates hit a certain earning threshold. Students would also have access to various maintenance grants (for people from low-income backgrounds) and loans to help them get through university. Whatever debt was still outstanding 30 years after a loan was taken out would be simply written off. Historically low interest rates at the time further sweetened the pill.

For the wonkish Willetts, who (irony of ironies) had recently published The Pinch , a book with the subtitle How the Baby Boomers Took Their Children's Future – and Why They Should Give It Back, the policy no doubt combined the best of market forces with the best of government. Universities would become more enterprising and student-focused, in their competition for revenue, while students – especially low-income ones – would be protected from the full force of the market and private finance. Being individual "loans", the debt wouldn't appear on the public balance sheet, contributing to George Osborne's mission of bringing down the national debt, and relieving the taxpayer from having to subsidise middle-class careers. University vice-chancellors were thrilled that they were finally free from financial dependence on Whitehall. The government, meanwhile, could boast that student numbers showed no sign of falling. Universities appeared to have been saved from the austerity engulfing so much else.

So coherent was this story that, until Jeremy Corbyn's shock victory in the 2015 Labour leadership election (partly won on a promise to scrap tuition fees) few people – other than students themselves – bothered to seriously question it. The centrist stance was that this was a simple common sense way to finance "human capital" investment, and Ed Miliband, when Labour leader, never promised to reverse the scheme. Meanwhile, at a time of extraordinarily cheap credit, universities began a wave of debt-fuelled construction and expansion, secured on the assumption of an effectively infinite supply of overseas student recruitment, mostly at postgraduate level, very often from China.

During the period when Osborne was slashing his way through local government and the benefits system, universities had never enjoyed such opulence. It was an open secret within the sector that new postgraduate courses were being concocted not for pedagogical reasons, but on the assumption that a few dozen overseas students would pay upwards of £20,000 to take them, thereby bankrolling the research time of academics and the vanity projects of vice-chancellors. One shouldn't underestimate how quietly content and complicit the universities were (if not many academics, and certainly not their unions) with the pre-Brexit Conservative agenda. While academic salaries were falling in real terms, remuneration for senior managers pulled in the other direction .

Fourteen years on, the 2010 framework might now be said to combine the worst of the market with the worst of government. Universities and students are left with mounting financial risks, while the state continues to meddle and regulate in ways that only seem to exacerbate their distress.

For those who insist that higher education is a public good in an ethical sense, the original Willetts plan was always an abomination. But to see why it has led to disaster – even on many of its own terms – one has to look beyond the realms of higher education policy, towards the wider political and economic landscape. No sooner had the new tuition fee regime come into effect than a succession of decisions and crises occurred that altered the landscape, often without warning. First, the discipline of the market began to bite harder. This was soon followed by a series of "cultural" controversies placing universities in the crosshairs of the right.

In December 2013, Osborne announced a removal of the cap that had limited each university's student numbers. The Willetts policy had already proved a disappointment in one respect, namely that every university had – to nobody's great surprise – decided that it needed to charge £9,000 a year, so there was no effective price differential between institutions. Removing the cap on student numbers had a certain neoliberal logic: if the power of competition was to be unleashed within the sector, there had to be no limit to how much fee income could be made. The eyes of Russell Group vice-chancellors lit up, while universities (and humanities departments especially) further down the increasingly influential league tables felt a shudder of existential anxiety.

Two years later, Osborne pulled another rabbit from his hat. Maintenance grants would be replaced with maintenance loans, increasing the amount of debt taken on by low-income students. In addition, the threshold at which graduates would start repaying would be frozen for five years. Students had originally been promised that the threshold would rise in line with earnings, but Osborne was growing anxious about the speed with which the loans were being paid off. There was a dawning recognition that these "student loans" were behaving far more like a "graduate tax" in practice, and that a vast amount of money was never going to be paid back at all, unless the system was made less generous.

In 2016, the marketisation agenda was ratcheted up by a white paper, Success as a Knowledge Economy . Where the original 2010 plans had been largely welcomed by universities, a more ominous quality had now emerged. If the first phase of marketisation was built around financial "carrots" – incentivising universities to carry on recruiting en masse and widening access – the next phase was far more about "sticks". The audit culture that had long plagued public services such as schools was now turned upon universities, with the aim of tightening the grip of market forces and disciplining those who still hadn't got the ideological message. The most eye-catching proposals concerned a new teaching excellence framework and the creation of the Office for Students, which aimed to empower students to behave more like consumers. The white paper was unsettling for many universities (or what it could only bring itself to describe as "providers"). The central message was stark: this was now going to be a genuine market, meaning greater ease of "entry" (so the title of "university" would become easier to acquire) but also a material risk of "exit" for those who ran into financial difficulties.

The most serious blow to the government's original vision came from an unexpected source. Given the spiralling student loans that would never be repaid in full, in 2018 the Office for National Statistics suddenly announced that this needed to be accounted for in the national debt, destroying one of the principle virtues of the Willetts plan from the perspective of the Treasury. The Tories now had a clear fiscal incentive to rinse young graduates as hard as possible.

At a certain point along the way, the tuition fee for home undergraduates went from being a cash cow for universities, to being a financial straitjacket, while remaining sufficiently hated that no government felt able to raise it further. But it wasn't so much the feelings of students or young graduates that the Tories were mindful of, but of their own allies, who had come to view universities as a kind of enemy within that had had it too good for too long. On to the fiscal and financial dilemmas was layered a set of cultural controversies, which the nationalistic post-2016 Conservative party was only too happy to encourage.

The divide that the Brexit referendum exposed running down the middle of British society was, as much as anything, about higher education . Graduates were overwhelmingly likely to back remain, and non-graduates (older on average and more numerous) to back leave. The divide could also be witnessed geographically, at least in England. Outside the high-productivity triangle linking London, Oxford and Bristol, and the major metropolitan centres, much of the remain vote was clustered around universities.

Whipping up "culture wars" around education is scarcely new, though it had traditionally been "loony left" schoolteachers and local authorities that powered reactionary fantasies. But the rapid expansion of participation in higher education from the late 1980s onwards, the conversion of polytechnics into universities in 1992, and the limited but undeniable spread of critical theory and historical revisionism in the humanities and social sciences, meant that universities had become the more popular object of paranoia by the 2010s. Fringe conspiracy theories from the American far right about "cultural Marxism" (and subsequently "critical race theory") began to make inroads in Britain. Controversies surrounding " free speech " on campuses escalated from 2018 onwards, fuelled especially by new disputes over gender identity.

Meanwhile, some observers were belatedly cottoning on to the fact that, while public services and wages were being squeezed, universities had been on a growth trajectory. Austerity breeds resentment towards those who escape its clutches. In one of the stranger episodes of the last 14 years, the former Labour minister (and former academic) Andrew Adonis waged a one-man Twitter campaign against the pay packages of vice-chancellors and the level of tuition fees, culminating in the resignation of the vice-chancellor of Bath . Whatever the rights and wrongs of Adonis's argument, the effect was to heighten animosity towards universities even further.

The narrative that universities were a cartel of censorious "wokeism", which were disloyal to Britain and "the west", was spun initially and most forcefully by conservative newspapers such as the Times, together with a handful of interested rightwing academics. But it certainly didn't leave the Conservative party untouched. By the time of the party's surreally undignified 2022 leadership battle between Liz Truss and Rishi Sunak, the latter was promising to crack down on Chinese infiltration of British universities . Later, he would promise to target "rip-off degrees", defined as those whose students don't go on to a typical graduate career, by capping the number of students they were permitted to recruit. This promise to override "consumer" preferences was proof that the original Willetts agenda had lost all credibility, on the right as much as the left.

At the same time, the nature of overseas student recruitment was shifting. Numbers rose sharply in 2021 , aided by the post-Covid difficulties of getting entry to the US and Australia, but the nationality of applicants was changing. European applications plummeted after Brexit was completed, but this was ameliorated by a sharp rise in student visas issued to Indian and Nigerian students, who were also more likely to bring dependents with them. A new graduate visa introduced by the Johnson administration gave international students the right to work in the UK for two years after graduation. There was also a rise in the number of overseas students switching to skilled worker visas , the majority of whom took jobs in the care sector. In contrast to a decade earlier, all of this was now having a significant impact on net migration statistics, sending political shock waves through the Conservative party and the rightwing press.

As the whole mood of the Conservative party and its outriders swung against universities, so higher education policy became aimed at harming the very sector it once existed to serve. Just as the marketisation agenda turned more punitive, treating universities like bloated utilities that needed whipping into shape, so reactionary commentators heaped scorn on the quality of research, tuition and assessments. Degrees became routinely painted as "low value", a term that evoked cultural and financial resentments. This pincer movement amounted to a form of sadism: making universities suffer became a positive economic and cultural achievement. In 2021, the "London weighting" subsidy, which had helped to cover the much higher costs faced by London-based institutions, was removed. Funding for creative arts courses at English universities was cut , as was funding for Uni Connect, a government scheme dedicated to widening access.

Boris Johnson had a troll-like habit of appointing to provoke, and rarely was this clearer than with the universities brief. Michelle Donelan (2020-22) and Andrea Jenkyns (July-October 2022) brought little to the role other than an instinct for seeking conflict with academics at every turn. In Donelan's case, this would eventually descend into the disgrace of the taxpayer footing her £34,000 libel bill , after she was found to have falsely accused Prof Kate Sang of Heriot-Watt University of supporting Hamas. More consequentially, it was Johnson who first gave Suella Braverman an air of political respectability, when he appointed her as attorney general. From there, this increasingly extreme figure was elevated to home secretary by Liz Truss, where she remained until last autumn .

This brings us back to the proximate cause of universities' current crisis: the decline in overseas students. In May 2023, Braverman announced that overseas postgraduates would no longer be permitted to bring their dependents with them. The effect was instant and as intended: student visas issued to Indians and Nigerians, who had propped up the sector since Britain's departure from the EU, fell dramatically. Cue last autumn's panic, followed by deepening gloom and mounting redundancies.

The moral of this story is one that traditional Tories, raised on the ideas of Edmund Burke and Friedrich Hayek, should be familiar with: of how overambitious plans are subverted by unintended consequences and unforeseeable events. Perhaps Willetts had imbibed so much of that conservative creed, that he was unable to imagine that he was now the modernising planner whose vision would be tragically but inevitably undone as it came into contact with reality. As the political economist Abby Innes has recently argued in her book Late Soviet Britain, the British state has run up against the limits of its abstract ideological fantasies, just as the Soviet one did.

Against the naive liberal understanding of political economy, in which the market grows as the state shrinks (and vice versa), higher education reforms of the past 14 years have demonstrated a central truth about neoliberalism, that the power of the market and of the state can grow in tandem with one another. Right now, universities are buffeted by too many market forces and too much government control. Policy has forced them to engage in feverish competition with one another, but without ever leaving them alone, either. Political risk is now one of the main threats that all universities are striving to hedge against. Hilariously, the government's recent Augar review of higher education funding took universities to task for spending too much money on marketing. (Just wait until the Tories find the people responsible.)

The marketisation agenda has fallen apart because, like so many utopian plans, it was too optimistic. It underestimated the perverse incentives it would create for universities, for senior managers in particular, and what might happen when the media woke up to these. It overestimated the health of the graduate labour market, and the speed with which loans would be repaid. Perhaps it also underestimated George Osborne , and how little he cared about the longer-term consequences of his fiscal ambitions.

Nobody expects that agenda to be suddenly undone or reversed thanks to a change of government. But there is one toxic ingredient from the last eight years of Tory rule, if not the last 14, that can be eliminated more easily: the constant drip-feed of paranoid, xenophobic and anti-intellectual rhetoric from the ruling party, which seeks to win approving newspaper headlines with mindless attacks on academics. This is within the gift of the incoming Starmer administration, though whether they will be able to resist the odd jibe remains to be seen.

Universities are certainly culpable for some of what's gone wrong over the last 14 years; hubris and greed within the sector have played a part. The fact remains that Britain is still the second most popular destination for international students in the world, after the United States, and a government which celebrated that fact – and the reasons for it – would at least offer the sector a stay of execution. The alternative would be to carry on trusting this state-enforced "market" to sort itself out, with universities – including well-known ones, on which thousands of jobs depend – "exiting" altogether. Only from the most skewed cultural perspective, of an increasingly deranged Tory party and press, could that be viewed as a policy success.