Funding shortfalls faced by Universities and Colleges

A report published by the Institute for Fiscal Studies (IFS) on education spending in England warns that the universities could be exposed to a range of financial losses such as falling international student numbers, more student failing to complete their degrees as well as reduction in other income streams. However, the report states that the largest source of financial risk for the universities is the large deficit in the main university pension scheme, which as per the latest estimates has increased from £3.6bn in March 2018 to a colossal £21.5bn in August 2020. In order to reduce this the universities will have to take more risk such as making further reductions in the pensions provided by the scheme, big rises in employees’ contributions or a combination of these. However, such measures will be controversial as experienced in the last academic year the lecturers went on strike over pensions as well as pay and conditions.   

The report further states that the further education colleges still face budget pressures despite a £400m cash boost pledged by the government. It is likely that the student numbers in further education colleges and sixth form are likely to increase this year due to a combination of reasons such as rising numbers of young people, unusually high GCSE results and significant reductions in training and employment opportunities. An exceptional increase in student numbers will lead to a reduction in funding in real terms per student. These institutions will also face challenges around educational catch and may also need to expand to accommodate the additional students as employment and apprenticeship opportunities dry up.

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