The UK university sector won’t solve it’s financial problems by prioritising diversity goals over research quality, says Paul Ormerod
The university sector in the UK often seems to live in a dream world.
Research England, for example, is proposing to order them to “robustly” promote diversity and inclusion in order to qualify for access to £2bn of taxpayers’ money available to them for research.
The plans have apparently been drawn up with the universities themselves.
Diversity, equity and inclusion (DEI) will account for 25 per cent of the weight in the assessment of the submissions which universities make for the cash. Incredibly, their research output itself is downgraded to only 50 per cent of the weight.
To be fair, around 200 academics, most of whom have genuinely prestigious research pedigrees, have objected in no uncertain terms.
This is against a background of serious financial difficulty for the university sector. More than 50 universities are making job and budget cuts.
The Higher Education Policy Institute thinktank has stated that there is a risk of a “domino” effect if one or two universities go under. Lenders could start calling in their debts “left, right and centre”.
Such an outcome would be wholly desirable. Many of the weakest universities in research terms exist almost entirely on taxpayer subsidies.
Students can now take out a tuition fee loan of £9535 a year. We can think of this as a bounty on their heads. If you can corral them into your institution, the money goes into the bank account.
The problem arises when it comes to the students repaying these loans from the taxpayer.
Student loans are repaid under a complicated formula, but as a rough guide you have to make more than national average earnings before you have to make any noticeable repayments. The simple fact is that substantial numbers of students will never earn enough to repay their loans.
On the latest official data, courtesy of the House of Commons library, in March 2024 the value of outstanding loans was£236bn. It will now be comfortably above £250bn. At least £100bn of this will never be repaid.
This money could be put to much better use in Further Education colleges, working with local industries to develop the practical skills which they will need.
The polytechnic model
This valuable activity used to be the hallmark of the polytechnics which became universities under the 1992 Further Education Act. These institutions were usually under the control of local authorities, which reinforced their connections with the places in which they were based. They delivered for local communities.
More generally, the interaction between universities in Britain and private sector companies is weak.
This is surprising, particularly given that private research and development budgets often dwarf those of the public grant giving bodies on which universities traditionally rely.
In the current circumstances, it seems unlikely that their income from student fees will grow. If anything, it will fall as overseas students look elsewhere in the world. The more prestigious ones receive the bulk of publicly financed research monies. But with Rachel Reeves and the Treasury on high alert, these are not going to be expanded.
The logical thing to do is therefore to try and work more closely with the private sector under the umbrella of its research and development budget. In addition, the obstacles which many still place on start-ups in the university, such as demanding 30 per cent of the equity, need to be removed.
A handful already understand this. Manchester, for example, under its new Vice Chancellor Duncan Ivison (full transparency: I am an unpaid honorary professor in the business school), has created a dedicated outfit, Unit M, precisely to engage more widely.
But the sector as a whole needs a really good shake up and the poor performers need to be allowed to go to the wall.
As published in City AM Wednesday 7th May 2025
Paul Ormerod is an Honorary Professor at the Alliance Business School at the University of Manchester, an economist at Volterra Partners LLP, and author of Against the Grain: Insights of an Economic Contrarian, published by the IEA in conjunction with City AM
