With this year’s rise in tuition fees to £9,000 per year for students beginning courses in 2012, we investigate why the University is charging the higher fees for home students, and how it spends the money that we give it.

Under the government’s new financial arrangement for universities, the Higher Education Funding Council for England (HEFCE), which provides government funding for university teaching and research, has significantly reduced the amount it makes available to universities in the form of teaching grants.

The £8,300 per student that Cambridge was receiving from the government under the old fees regime has been cut by as much as 80%. While some support for high-cost subjects that are perceived to be of strategic value, such as engineering and medicine, has continued, government funding for most humanities and social science courses has been severely reduced. Universities have been allowed to charge higher fees to cover the cost of the loss in undergraduate teaching grants.

As a result of the new fees, British and EU students are in some cases getting only a £4,000 discount on what overseas students pay for the same course each year at Cambridge. For international students, the University splits subjects into different groups on the basis of how much they cost to run. The majority of arts, humanities and social science courses are charged at £13,011 a year, while Engineering and Natural Science fees are £19,800. Medicine courses can cost overseas students £31,500 per year. The University council argued that despite this disparity in course costs, it was right for Cambridge to continue to charge the same fee to all home and EU students, making the point that whichever course a student takes, the fee of £9,000 is only a contribution to the larger overall cost.

Last year, the University’s Vice-Chancellor, Leszek Borysiewicz, argued that instituting the higher fees was the only way to avoid damaging
Cambridge’s “ability to sustain the highest quality of undergraduate education” and that there was “no other practical way to maintain Cambridge’s excellence in teaching”. He pointed out that the University and colleges already used other sources of income to supplement undergraduate teaching budgets and argued that the new £9,000 fees would “barely cover” the shortfall created by cuts to teaching grants.

Cambridge says that the average cost to educate an undergraduate per year came in at around £17,100 last year, significantly more than most other British universities spend on education. Under the previous system of higher education finance, around half of this amount was funded by the government in the form of grants, but new students are now meeting around half of this cost themselves. The shortfall is made up of money from University and college endowments, donations and income from University subsidiaries such as Cambridge Assessment and Cambridge University Press.

More than half of this amount goes directly towards maintaining the costly supervision system and funding lectures, labs, tutors, Directors of Studies and libraries. A significant amount also goes towards administrative costs and the funding of prizes and grants, as well as the maintenance of the University’s historic buildings.

The 2008/2009 figures, the most recent available on the University’s website, show that of the £15,700 cost per undergraduate in that academic year, nearly 20% was spent on upkeep of premises and 9% on administration, while 15% went towards grants, prizes, admissions and development.

Commenting on the higher fees, first year Richard Fletcher said that while it was wrong of the government to institute them, he could understand why the University was charging more. “I think this was a decision forced upon the University, really. They already use a lot of money from other sources to fund the cost of our courses. What the University provides costs a lot and they’d struggle to pay for it otherwise”. Jo Lloyd, also a first year, said: “It seems to me the University could have tried to find ways to keep the new fees down by minimising the amount it spends on admin and building repairs”.

The government has promised the new generation of undergraduates that higher fees would result in better quality degrees by encouraging greater competition for students between universities. Evidence suggests, however, that the initial response to the change in financial arrangements at Cambridge has been to cut back, for fear of failing to meet the funding shortfall. Last year Cambridge’s University Council agreed on a 2% funding cut to many academic programmes and took other steps to reduce costs, citing the “challenging economic environment” the university now finds itself in. The Council raised the prospect of new students paying more in fees although funding for their courses is actually being reduced.

There are already concerns that these changes are having unintended consequences on a national scale. A recent Higher Education Policy Institute report argued that the new system could in fact leave the taxpayer with a higher bill than the old fees system. The report found that the government will be forced to pay out more in student loans than anticipated and indicated that less than 63% of these new, higher loans is likely to be recovered.