left to my own devices – occasional thoughts on higher education

An important stage in the ageing process is when there are so many ways in which the world is different to how you remember it, that you stop noticing or noting the new ways in which this is the case.  I like to think I’m not at that point yet, but suspect that it’s heading towards me at pace.

change

I’m now old enough to remember when in the UK people rented their TVs and bought their cars. Now we buy our TVs and rent our cars.  But thankfully I’m still young enough to notice this, and think (however misguidedly) that this is worth noting.

I’m also old enough to remember when significant block grant capital funding was available to universities from the funding council, so that public funding was providing a significant element of the investment in the infrastructure of our universities.  Then we had the reform of higher education in early 2010s, and the ‘near disappearance’ of public capital funding to universities.

We entered into the brave new world of the maintenance and development of the fabric of our universities being largely dependent on debt financed by projected income streams – largely the increase (for the short-term at least) in fees for home undergraduates, and the expansion of international recruitment.

consequences

We all know that the impact of this was huge.  Just how much so, is clear from this table showing the total amount of debt of UK universities (excluding specialist providers) outstanding annually over an extended period:

Bell, A R, Brooks C and Urquhart, A (2022), ‘Why have UK universities become more indebted over time?’, International Review of Economics and Finance 82, pp.771-83 (figure on p.775); https://doi.org/10.1016/j.iref.2022.08.008

The overall growth (c.£100M to c.£250M), and the acceleration from 2015 in particular (c.£150M to c.£250M), is striking and largely reflects the need for universities to take on debt to support capital investment in their infrastructure once funding council capital grants massively reduced during this period.

contention

This growth in debt, and the consequential investment in the development of universities’ physical (and sometimes digital) infrastructure, isn’t something that has gone unremarked over recent years.

For a while now, there has been a significant and vocal part of the sector bemoaning how this debt has funded spending on developments they describe as vanity building projects by universities.  And ithis has developed into the tendency to claim that this has created an unsustainable level of debt that is now playing a significant role in the current financial storms universities are facing.

I’m not really in a position to enter into that debate, though as a non-specialist in this area I can’t help but feel that the main root of our current financial challenges in the sector lies fundamentally in the challenges to the revenue position of UK universities of an unsustainable funding model for education (fee and maintenance levels) and research (the failure to pay full costs).

But there’s another dimension of this to which I think we need to pay attention.

value

There’s no denying that there has been significant capital spending by universities in recent years, funded by universities taking on significantly increased levels of debt.  A crucial and sometimes overlooked question for the future, though, will be the ongoing value to those universities of this recent capital spending, as for the foreseeable future university budgets are highly likely to continue to be challenged and for many (most?) universities the scope for future capital investment will be much more limited.

(As much is suggested by the recent OfS financial sustainability report: noting that actual levels of capital spending for 2022-23 were 27% lower than forecast; questioning whether projected levels of capital spending in 2023-24 would be delivered due to financial pressures on providers; and stating that many providers expect falls in capital spending over the forecast period).

In that context the quality of decision making on the capital spending in the 2010s and 2020s will become critical.  Has this been on vanity projects that add little value (as some claim)?  Or has the spending been on projects that have strengthened key physical and digital infrastructure, and which will stand a university in good stead for the remainder of this decade and into the 2030s?

I suspect we’re likely to see quite a bit of variation between universities.

variation

Some will enter this period having invested more in their underpinning physical and digital infrastructure than others.  Those that haven’t been investing sufficiently in their infrastructure may well find the coming years more challenging, as the funding to make good that underinvestment will be more difficult to put in place.

But we’re also likely to see variation across those universities that did invest in the recent past.

Some will have done so in ways that added genuine value, so that while the coming years will be difficult they will be approaching this with a firmer foundation in terms of their physical and digital infrastructure.  Others may find that their investment decisions have added less value, so that they are carrying the financial implications of that investment but are still left with significant challenges in the quality of their physical and digital infrastructure.

too early to say

All of which underlines an important issue about the timescales on which we assess the quality and impact of institutional decision making.

In many cases it’s likely to be years before we are able to assess whether the capital investment decisions made by a university in the last five to 10 years added value and prepared them well for the period ahead; or if they left crucial, fundamental developments undone.  And by the time we can assess the outcomes of these decisions on capital investment, those decisions will be a decade or more old.

As individual organisations, or a sector, do we often enough assess the impact of institutional decisions over a sufficiently long timeframe?