With increases in both tuition fees and employer NI contributions announced, Dr Brooke Storer-Church argues that as the money is coming in one door it’s going out the other.

Recently, institutions across the sector received a letter from the Secretary of State, Bridget Phillipson, confirming inflation-linked tuition fee rises from 2025-26. Whilst a positive gesture, the value of that increase is largely offset by the Budget announcements about increases in employer NI contributions, which themselves exacerbate a larger financial burden related to pensions.

Teachers pensions scheme

The impact of TPS contributory increases is a significant hindrance to institutions’ ability to manage other financial burdens. One reason is because the liability is recurrent, whereas the inflationary increase to tuition fees announced as part of the recent Budget is a one-off increase, so can only offset some of those other cost increases for the financial year they are implemented.   

As I wrote in an earlier blog for Wonkhe, a clear and cost-neutral opportunity to provide some financial relief to institutions would be release from the liabilities from the Teachers’ Pension Scheme (TPS), which many institutions are statutorily bound to be members of due to their legacy as teacher-training colleges. For those institutions for whom it is the main pension scheme, the financial impact has been very significant; for example, one of our members must now find an extra £800,000 for TPS contributions on a turnover of c. £60 million.

Ongoing obligations and increases to the contribution rate are placing an extraordinary strain on institutions; a burden the government acknowledged earlier this year when it alleviated the strain for further education and sixth form colleges by increasing their public grants. Alongside this, independent schools have been relieved of their TPS obligations altogether. The fact that higher education institutions have not been afforded either of these opportunities feels not only a strong irony, but a detrimental oversight which could hasten the collapse of otherwise viable institutions focused on delivering teachers into primary and secondary schools across the country.

NI is adding even more pressure

The impact of the TPS increase is intensified by the recently-announced NI increase for those institutions affected by both. In the case of our member mentioned above, it will mean finding another £300,000 in the current financial year and then an extra £800,000 for the  2025-26 financial year.

These increases are big numbers and numbers that couldn’t have been anticipated. They are unrelated to institutional performance and could not have been planned for in an orderly way.  They impact directly on an institution’s capacity to employ staff at a time when at least 75 institutions across the sector are engaged in restructuring and redundancy schemes.

Will tuition fee rises be enough?

As has been covered elsewhere including by the BBC, the anticipated tuition fee rise from 2025 will not offset the increases in employer NI contributions for most across the sector.  For some institutions, the NI increases outstrip the fee increases and so leave them in a worse position than before the Chancellor’s recent budget.

The issue can be just as bad for institutions whose primary focus is apprenticeships. For one of our GuildHE members, most of their income comes from degree apprenticeships (more than 65%), with only 10% coming from SLC-funded students. Apprenticeships do not attract the index-linked tuition fee rise, and as such their income remains static for these apprentices. That institution has almost no scope to increase income, and therefore needs to ‘suck up’ the NI increases – which in their case is about £300k per year. 

How can we make sense of this?

Optimistically, we might read this tuition fee rise as a means through which the Department of Education shows that it understands the impact of the recent changes to the NI contributions and sees this as a way to both minimise that financial blow whilst also responding in some way to sector cries for inflation-linked tuition fee rises. The end result is that the financial damage of the NI increases are minimised by the fee increases.   

The offer to higher education institutions may dovetail well with relief promised just this week by Skills Minister Jacqui Smith to FE colleges. She confirmed that national insurance support for colleges would be forthcoming from the government, along with including colleges in the Local Government Pension Scheme Guarantee which will also provide significant savings.

These moves demonstrate a determination by our new government to plug financial gaps where they can see them, as far as they can, while they formulate their thinking about securing a sustainable educational landscape. At the Wonkhe Festival of HE, Sir David Behan suggested that we have perhaps 3 months to influence how and what DfE sees as the path forward for implementing reforms along the lines articulated in the recent Secretary of State letter, ahead of the anticipated spending review exercise next spring.

Reforms will need to ensure regulation does not increase and, ideally, is reduced or at least reconciled so that barriers to delivery across the system are minimised. This includes efforts within the sector to identify ways we can work more collaboratively and effectively ourselves, removing duplication where unnecessary and perhaps expanding shared services that we already use very effectively (eg, UCAS).  

And we must continuously return to our students – to see how this looks from their perspective and how any changes made may impact upon them. Already we are concerned that the headline increase in fees will raise further their expectations about ‘what they’re getting’ when in reality it will provide no additional funding to our institutions to offer more.

As I said this past week at the Wonkhe Festival of HE, we must be bold in our approaches to securing our sector not just for the sector’s sake, or even for the sake of our students, but for the sake of our democracy. Yes, we must make sure we have the right skills in the country to drive the government’s economic growth agenda – indeed, we all hope to benefit from greater economic growth. But chasing the carrot of economic growth for its own sake, without minding our deeper purpose, increases the likelihood of finding ourselves being pulled further into the sort of chaos that is currently settling on US soil. To ensure we are in a position to support our government, communities and citizens, we must work to secure our finances and we must also work to reach into communities with whom we don’t typically engage and make ourselves very clearly indispensable in all regions of our country.  

UUK is already gathering its thinking about next steps from its Blueprint, and we look forward to diving into that work with them quickly to help shape the thinking around how we deliver a better future for our institutions, our sector and our country.