Rise in fees required to counteract universities' increasing debt
British universities are borrowing millions in order to finance plans to improve their campuses in response to students' demands for better facilities.
Some institutions are hoping the government will raise the £3,145 cap on fees in the 2009 Review in order to cope with their increasing debt.
Although the introduction of tuition fees has raised billions of pounds, universities are in more debt at the current time than at any point in the past decade.
Steve Egan, the Higher Education Funding Council for England's deputy chief executive, said: “The level of borrowings, as compared to the level of total income, is the highest since 1997. In actual terms - the amount rather than the percentage - the levels of borrowings in 2005-06 were higher than ever before.”
This comes at a time where UK universities face further financial difficulties, particularly as a recession is thought to be imminent.
Dropout rates remain steady at 22 per cent, despite an £800 million drive to reduce them. Furthermore NUS are demanding that universities repay the £24 million owed to students from bursary funds.
Phil Harding, chairman of the British Universities Finance Directors Group, said the National Student Survey, which asks students to rate their university, had put pressure on universities to increase their spending on buildings.
Mr Harding said: “I think we are borrowing with a degree of confidence and a reasonable expectation the cap on tuition fees will either come off or be lifted so that universities will be able to charge higher fees.”
Concerns have been raised that future generations of students, who already struggle with financing their university careers, will be further burdened with the effects of universities’ ambitious spending plans.
A spokesperson from Universities-Scotland, said that Scottish higher education institutions have not been borrowing on the basis of expected future income.
He told The Journal: “A decision has been made by Scottish politicians of all parties that Scottish universities will be publicly funded and so we don’t have in place conditions which would lead to speculative borrowing.
“In Scotland we simply have to work within the budgets available to us and to be ingenious in raising more income from other sources.
“Scottish universities are not going into debt. We believe that the real answer is to build a national consensus on why higher education is a national priority and why it is in everyone’s interests to invest in universities.”
Last year Scottish university leaders announced that they would need £168 million to compete with their English counterparts. However they originally received only £30 million from the Scottish Executive and an additional £10 million in January.
The Scottish Government have stressed that they are committed to maintaining a competitive university system which generates education, science and research ideas that make Scotland attractive for economic growth.
A spokesperson for the Scottish Government, said: “The real issue at stake now is the timing of any review of top-up fees in England and the implications of that for universities in Scotland. The first year when any lifting of the cap can take place is 2010-11 and, even then, we’re unlikely to find ourselves looking at a free market free-for-all with individual universities setting their own fees.
“That’s because the cost of fee loans will have to come from the government in the first place so we can expect the Treasury to keep a firm grip on the purse strings.
“Here in Scotland we’re considering the future for universities through our joint futures taskforce which is considering what we want our universities to be in the future and how we can achieve that.”
However, last week, Sir Roderick Floud, former vice-president of the European University Association, warned that universities can no longer rely on international students for revenue as it is predicted that the number of international undergraduates attending UK universities will fall as other countries, such as China, cultivate their own institutions.
Higher education development overseas is likely to have a negative impact on Scottish universities.
James Alexander, president of NUS Scotland, said: “Although Scottish students don’t have to pay fees, institutions in Scotland have for years been relying on the revenue raised by international fee paying students.
“Universities should not be funded by a rise in fees which will have a detrimental impact on students but by a general taxation. Universities don’t just benefit the attending students, but the whole of society. The country needs doctors and lawyers, just as it needs garbage workers.”
Edinburgh College of Art (ECA) has recently consolidated its campuses onto one estate. The move involved the purchase of a new building.
Sarah Beattie-Smith, president of ECA Students Union, said: “This means we are now in some debt and as far as I understand some of this debt will be repaid through fees from international students as fees go into a central pot.
"However, the main source of funding which the institution used to make the estates changes was money from the Scottish Funding Council."
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