Cutting tuition fees in England or holding them steady could make it harder for the UK government to reach its research spending target by reducing the opportunities for cross-subsidies, a new report warns.

A published by the Higher Education Policy Institute highlights that university research is already underfunded against its true costs to the tune of ?4.3 billion, with England and Northern Ireland accounting for ?3.7 billion of that. Currently this shortfall is filled in part by cross-subsidy from international students¡¯ tuition fees. According to Transparent Approach to Costing data, each international student in the UK pays an average of ?5,100 more each year than it costs to educate them.

But the status quo could be disrupted by the government¡¯s response to the Augar review of post-18 education funding in England, which recommended cutting tuition fees in England to ?7,500. If this revenue is not replaced by public funding, the shortfall on educating domestic students ¨C currently ?200 million annually ¨C could rocket to ?2.3 billion, the Hepi report says. Even if fees were held steady, the gap would grow to ?700 million.

The Hepi report says that, in this scenario, income from international students might be needed to cross-subsidise the teaching of domestic undergraduates, not research activities, and this could result in the research funding deficit spiralling as high as ?4.9 billion in England and Northern Ireland alone.

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This would make it increasingly difficult to hit the government¡¯s target of spending 2.4 per cent of gross domestic product on research and development by 2027, and would limit the impact of increased public investment, the report warns.

The risk is particularly acute following the government¡¯s decision to split the universities and science minister post in two, with Michelle Donelan and Amanda Solloway taking on responsibilities in the Department for Education and the Department for Business, Energy and Industrial Strategy, previously held by Chris Skidmore. The division triggered warnings that the importance of cross-subsidies might be overlooked in spending decisions.

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The report adds that sluggish private investment, the loss of European Union research funding, and competing political priorities could slow progress towards 2.4 per cent. Greater political involvement in research spending decisions also could ¡°herald ¡®the pub test¡¯, whereby¡­some research is blocked for seeming too far away from the priorities of the general public¡±, the report says.

The report was published on 9 March, two days ahead of the UK Budget.

Nick Hillman, director of Hepi and author of the report, said it was ¡°crucial that the Chancellor recognises the interdependencies between teaching and research in his budget and the subsequent spending review¡±.

¡°Put very simply, universities roughly break even on teaching home students, make a big loss on research and fill in part of that gap from a surplus on teaching international students. They currently face a looming big loss on teaching home students, for example because of tweaks to tuition fees in England. If that happens, they will have to use international students¡¯ fees to subsidise home students and there will be less money for filling in the gaps in research funding,¡± he said.

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¡°We need to redouble our efforts to ensure widespread understanding of the interdependency between teaching and research in the face of the latest Whitehall changes, which mean we now have one minister for universities and one minister for science.¡±

chris.havergal@timeshighereducation.com