The latest Education Committee report (published on the 12^th of May 2026) concerning university finances in England makes it clear that the sector is in crisis. 124 institutions are expected to be in deficit this year and up to 24 institutions face insolvency over the next twelve months. Meanwhile, the sector is experiencing mass course closures and redundancies, while students face a cost of living crisis.

The solutions suggested in this report, however, do not go nearly far enough. With reference to our latest research, we argue that radical change is needed, not a continuation of a broken marketised model.

Starting with funding, the report points to the freezing of home student fees, and a 30% decline in the real terms value of fees since 2012, as a primary reason for the current crisis. This, however, ignores the fact that fees trebled to £9,000 compared to 2011. Go back one year further and we see that fees have actually risen in real terms since 2011 by almost 80%.

If the problem relates to frozen fee levels, then why was the sector not facing similar financial issues in 2011? The answer lies in the successive cuts to research and teaching grants and risk taking, encouraged by a newly “marketised” model of Higher Education.

Higher Education as a Market

In this context, marketisation refers to the introduction of metrics, rankings, performance measures, regulation and audit rituals that have transformed higher education and research into commodities that can be priced. Crucially, this allows for competition between institutions for research funding and student numbers (and therefore fee income).

Along with increasing fees, marketisation introduced new overheads in the form of debt interest, marketing, consulting, depreciation on non-current assets (essentially the ‘accounting cost’ of new buildings) and increasing levels of executive pay. They also saw universities take on increasingly complex debt arrangements and revolving credit facilities, sponsor internationally franchised degree programmes, and outsource key services. All of which contributed towards an inefficient and high-risk financial operating model.

In total, through the growth period that followed the trebling of domestic fees in 2012, universities also trebled their total debt – from £5.6 billion in 2010-11 to £15.2 billion in 2020-21. With this came more stringent debt covenants; essentially financial performance targets imposed by lenders that force the taking of ‘tough decisions’ that we hear so often from senior university managers.

The Education Committee report rightly notes the increasing exposure to international students as a source of income. But it fails to fully explain why universities became so exposed to this market in the first place or how their risky behaviour was actively encouraged by market reforms.

Our research shows that despite the current crisis, funding per student has reached near record levels in recent years.

^{Figure by James Brackley}

The problem is that the current system has become highly inefficient. A small number of low-cost, highly internationalised courses (across law, business, computer science and politics among others) cross-subsidise those now deemed ‘loss making’ activities that underpin the traditional universal model of education and research. Universities face becoming narrower, and be definition, less universal.

^{Figure by James Brackley}

This means that relatively small decreases in international student numbers quickly renders the business model of many universities unviable. This leads to the devastating loss in diversity across both research and teachingthat we are seeing today - the very richness and diversity that made the UK higher education system attractive to international students in the first place. 

Proposed ‘Solutions’

The Education Committee report sets out two alternative responses.

The first quotes advocate the market model: universities should be allowed to fail, and the government should set a ‘very high threshold’ for intervention. Under this vision, there appears to be little money or appetite for giving financially vulnerable universities a ‘bailout’ or, as Minister of State for Skills Jacqui Smith put it on behalf of the government: a “bung”.

The alternative to this view, advocated by the report authors, is for the government to ‘legislate’ to allow more orderly exits from the market, and to provide emergency loans so that students and research are protected in any transitional period. This sits alongside other suggestions, such as a new target to fund 80% of the cost of research and a call for the government to explain what “mitigation” it will put in place if future fee rises fail to match inflation.

Neither of these alternatives are desirable from an education or research perspective, nor are they likely to bring long term financial sustainability to the sector. Furthermore, allowing a large university to become insolvent would be devastating for staff, students and local communities, whatever transitional arrangements are put in place.

So what could be the solution? We would call back to a previous Education Select Committee, reporting in 2003 just prior to the first trebling of fees to £3,000. They stated that “We hope that the Government does not intend to seek to impose a market and believe it would be a very grave error of judgement if it did so.”

If the problem is the legacy of marketisation, then the solution is to fund, plan, govern and assess UK institutions democratically, for the public good.

Raising fees is not the solution. Neither is easing the way for more orderly exits from the sector. Instead, we believe the answer lies in stable, government-backed funding, collaboration rather than competition, and a more planned approach that prioritises delivering good education and research over ideological commitments to a failed market model.

Going forward we would urge future cross-party committees to hear evidence from those who are actually living the reality of the current crisis in Higher Education. This should include the many student groups, university staff, and academics – not invited to give evidence to this flawed review – who have been highlighting these issues for many years.