As higher education becomes more international, it is important to evaluate how the global recession has affected British universities compared with those in the United States. Seventeen of the 20 top universities in the world, as ranked by The Times (of London) Higher Education, are from Britain (four) or America (13). Both countries strive to maintain that distinction and are keenly aware of the status of the other. They often compete for students and research support, especially from industry sources.
In today’s difficult economy, both countries also share a fundamental challenge: Budget shortfalls have constrained how much money is available for supporting their operations. In America many states rescinded appropriations for public universities last fiscal year—even as applications to those institutions rose significantly—and many governors and legislators have already made further cuts this year. Meanwhile private universities, as well as public institutions with significant private fund-raising operations, have seen their endowment values plummet.
Britain is experiencing a somewhat similar scenario. Demand for higher education is rising amid a national goal of increasing the university-participation rate, now about 35 percent, to 50 percent in order to compete more effectively economically with other countries with higher educational-attainment rates. Applications to British universities have jumped by nearly 10 percent this year over the same period last year. Yet the British government—which supports all of the country’s 130 universities—announced that it will provide funds for only an additional 10,000 full-time undergraduate students this fall and just a 2-percent increase over this year’s budget for instruction. In response, many universities have announced the possibility of layoffs.
There are also important differences between the two countries. Students in America can select among institutions with varying tuitions and fees. In Britain the government gave colleges and universities the flexibility to determine their own tuition charges five years ago, as long as they stayed within a government-mandated cap. While an important goal of the legislation was to create a new revenue stream to help institutions strengthen the quality of education and their research capacity, another objective was to allow students to choose among different prices for their education. But establishing a price competition has been elusive, with virtually every institution charging the government-capped fee level of £3,145—approximately $5,000—this past year.
The government is already putting universities on notice that the years after next are likely to be tough, as financial support for higher education will grow slowly, if at all, given the economic situation and the competition for public money. That will lead to pressure from institutions to raise the fee cap substantially so they can increase revenues. In March, Universities UK, an advocacy organization for British universities, issued a report laying out scenarios for an increase in the fee cap to £5,000 or even £7,000.
The elite research-intensive universities have sufficient demand that they could raise their fees to the maximum with little concern for filling seats. Many less-prestigious institutions would set their fees below the cap to compete for students on price, but at the risk of increasing the gap in resources between them and their wealthier peers.
Given the circumstances, which country’s higher-education system is likely to come through the recession more unscathed? A sustained recession of any depth could possibly affect the British institutions more because of their greater reliance on government support. The economic crisis will also heighten the already widespread public resistance to raising tuition. In addition, government student aid in Britain is more tightly linked with tuition—politically, if not statutorily—than in America. Any increase in tuition would also push up the amount the government needs to put into student aid, which would further limit the appropriations available for universities.
But to create an adequate revenue stream for institutions, the government may have little alternative other than raising the fee cap. British universities will also probably have to solicit private money in a significant fashion for the first time, as well as seek out increased industry support for research to supplement government appropriations. While that sort of fund raising has a long way to go to match what is happening in the United States, it is already under way in a few elite institutions—signaled in some cases by the hiring of administrators who have fund-raising experience in America.
The choices required to maintain adequate levels of support—to substantially increase appropriations from the government or tuition revenue (or both), or to do more fund raising—will be difficult. Yet if Britain is going to compete in the world economy, it must somehow find the political and economic will to rise to the challenges.
British universities will also probably try to enroll more international (non-European Union) students and part-time students—none of whom are subject to the fee cap, so they have much more flexibility to establish tuition rates for those students. That would conflict with the goal of expanding access in the country, as traditional-age British students could find themselves squeezed out.
Increased recruitment of international students could also come at the expense of foreign enrollments in the United States, particularly if British research universities—which compete most directly with America’s elite institutions—become more aggressive. Indeed, the challenges confronting British universities have important implications for the United States. If Britain is able to overcome the financial constraints it faces, then its universities may gain ground on their American counterparts. In the global economy, where universities in each country compete not just with one another but with their peers in other countries, that may threaten the status that American higher education enjoys worldwide.
Yet it is unlikely that American universities will not respond to the challenges from British institutions. Even in the face of financial constraints, American institutions will probably ramp up their efforts to enroll international students as well as solicit research sponsorship from companies around the world. That will undoubtedly heighten the arms race between British and American universities.