How is higher education funded in the UK?
Universities in the UK are funded primarily through three means:
- Income from tuition fees
- Grants from public funding bodies (for teaching and research)
- Income from research grants and contracts
Across the UK as a whole, university income from tuition fees comprised 44.5% of all income in 2013/14, and funding body grants a further 19.8%. This represents a shift in balance since 2008/09, when these two sources of income represented 28.7% and 34.8% respectively . The main policy change responsible for this shift is the reforms to undergraduate funding across the UK in 2012-13, with increase in fee caps alongside reductions in grants for teaching funding.
In 2013/14, 47% of English and Welsh universities’ income came from tuition fees. In Scotland, where students domiciled in Scotland and the EU pay no fees, this was 27% .Undergraduate tuition fees: Comparing the UK with other countries
Within the EU, there is substantial variation in how higher education systems are funded. The balance between income from private sources (e.g. tuition fee payments) and public sources (e.g. grants) is by no means uniform.
A number of European countries, such as Austria, a number of German provinces, and most of Scandinavia, do not charge tuition fees for full-time undergraduate students. At the other end of the scale, as of 2014/15, fees in England are the highest in the EU.
However, looking outside the EU, the charging of tuition fees is more common. In the United States; Australia; Canada; New Zealand; Japan and Korea, average fees set in 2013 all exceeded USD 4,000 .There are also differences in who determines fee levels. In some countries, including France, the Netherlands and Spain, the government or local authorities determine the fee that universities can charge. In others, universities set their own fees but a maximum fee is determined by authorities that cannot be exceeded, this is the case in England, Portugal and Italy. There are also examples of countries in which fees are set by universities alone, such as Greece, Poland and Serbia .
Why is there such divergence in fees charged?
The OECD points out that: “there simply is no free university education” . Divergence in tuition fees should therefore be viewed within a wider context of variation in the overall level of investment in higher education across countries, and sources of the investment.
Three rather distinct national funding environments are detailed below.
Zero fees with investment funded by high taxation
Governments in the Nordic countries, where tuition fees are not common, are able to fund public investment in universities via steeply progressive tax systems. These tax systems typically affect graduates, who are likely to be among the highest earners throughout their working lives. For example, the rate of income tax in Finland can rise as high as 61.96%, and in Sweden 59.7%.
Low fees with low investment
In countries such as Germany, France and Spain, where fees tend to be low or non-existent, investment in higher education as a percentage of GDP is low compared to that in the UK. In Germany, expenditure (from public and private sources combined) represents 1.2% of GDP; in France 1.4%, and in Spain 1.2%. This compares to 1.8% in the UK; 2.3% in South Korea; 2.5% in Canada, and 2.8% in the United States . According to the OECD, because governments in these countries are neither willing to put in the required funds nor allow universities to introduce or increase tuition fees, the result has been a compromise on quality and restrictions on access to higher education. The impact of such models has meant that “workers end up paying for the university education of the rich parents’ children” .
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