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Government must avoid further cuts to public funding for teaching undergraduates
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Universities UK is warning government against further cuts to public funding for higher education, as it prepares to make decisions about the level of next years’ Strategic Priorities Grant (SPG) – the main way in which it directly funds undergraduate education.
New analysis from London Economics produced on behalf of UUK shows how, since HE funding was reformed in 2012, the cost of getting a degree has shifted significantly towards graduates and away from government.
When government increased tuition fees in 2012, it envisaged covering 54% of the cost of teaching English undergraduates. However, the report found that for students starting university in 2025/26, government will be contributing just 23% - less than half the proportion originally planned.
UUK says that while recent decisions to increase tuition fees in line with inflation are welcome, government must avoid undermining this decision by cutting the SPG and putting more of the cost of getting a degree onto graduates.
If we want to retain world class universities that deliver for students, employers and the economy, government needs to maintain public investment.
Vivienne Stern MBE
Chief Executive of Universities UK
Anticipated per student funding from government for teaching has fallen sharply since 2012/13, declining in real terms by two thirds, from £7,720 (under the original Plan 2 system and macroeconomic conditions in 2012/13) to £2,480 (under the current 2025/26 system). This has happened as universities face rising costs and growing expectations on teaching quality, student outcomes, access and support.
As government makes decisions about the SPG in the coming weeks, universities are calling on ministers not to further shift the balance of funding.
Vivienne Stern, Chief Executive of Universities UK, said:
Universities are incredibly grateful to the government for taking the tough decision to increase fees in line with inflation. However, further cuts to government teaching grants risk undermining the good work they have done.
Getting a degree benefits individuals because they go on to earn more, so it is right that they contribute, but it also benefits society and the government which get greater tax revenues and a stronger economy from a more highly skilled workforce.
Universities are now teaching with far less funding per student than a decade ago, while expectations on quality, access and outcomes keep rising. If we want to retain world class universities that deliver for students, employers and the economy, government needs to maintain public investment.
It is not fair to students and future graduates to keep raiding funding for higher education to meet growing costs elsewhere in the education system
Vivienne Stern
Chief Executive of Universities UK
Dr Gavan Conlon, Partner at London Economics, added:
There has been a fundamental shift in the balance of contribution to higher education in England since 2012-13. Graduates pay considerably more, and the Exchequer pays considerably less. The higher education sector contributes substantially to economic growth, so there is an ever-present economic rationale for the government to make a significant contribution to the funding of the sector.
Dr Gavan Conlon
Partner at London Economics
Key findings
Analysis by London Economics for Universities UK, April 2026
- When government increased tuition fees in 2012, it envisaged covering 54% of the cost of teaching English undergraduates. Under the original Plan 2 terms and the original discount rates, the Exchequer was expected to contribute £7,720 per student in 2012-13.
- For students starting university in 2025-26, government will be contributing just 23% of total teaching funding per student, ca. £2,480 based on Plan 5 loans. Anticipated per student funding from government for teaching has fallen by two thirds in real terms since 2012-13.
- Across every measure/scenario, the level of Exchequer contribution to total teaching funding per student in England has declined since 2012-13. On a like-for-like comparison using consistent discount rates, the Exchequer contribution still fell by £1,840 (43%) in real terms; even after accounting for the various changes to the Plan 2 system since 2012-13, it remains £1,100 lower (31%).
- After accounting for inflation, average total teaching funding per student declined in real terms, from £14,380 per student in 2012-13 to £10,610 in 2025-26 (-26%/-£3,770). English HE providers now receive £3,770 less teaching funding per student in real terms in 2025-26 than in 2012-13.
- The graduate contribution has also decreased in real terms from £10,070 to £8,130 (-19%/-£1,940). The high levels of CPI inflation have eroded the nominal increase in tuition fees and associated graduate loan repayments.
- Instead of contributing £0.30 to every £1 of teaching funding for higher education providers, the Exchequer now contributes only £0.23.