Higher education has had an unprecedented public profile recently. Parliament, government, students, parents and the media hotly debated the pros and cons of introducing variable and increased tuition fees. Even now, after the Higher Education Act 2004 has gone on to the statute books, this interest in higher education shows no signs of abating.

Gone are the days when universities were regarded as ivory towers: today they are big and complex businesses, playing a fundamental role in the UK’s economy and society. Today, there are 170 higher education institutions in the UK with an income of some £15.6bn per annum. Employing over 300,000 people, universities are often the major employer in their local area, tailoring some of their courses to the needs of local businesses.

Higher education is a major engine of economic growth, and there has been an increasing recognition of the wider benefits that it brings to the UK. Research conducted for Universities UK estimated higher education’s economic contribution to be some £35bn per annum through direct and “knock-on” effects.

The UK accounts for 4.5% of world spend on science. With only 1% of the world’s population, the UK produces 8% of total scientific papers and 13% of the most highly cited. It wins 10% of internationally-recognised science prizes and has produced 44 Nobel Prize winners in the last 50 years. The UK produces 16 research papers for every $1m invested, compared with the 10 produced in the US and four in Japan.

Virtually all this research takes place in universities. There are areas of international research excellence across the sector, and the UK is undoubtedly a world leader in scientific research, second only to the US on most indicators of output and quality. There are a number of “research-intensive” universities, usually heavily involved in medical research. Some are also major international players in other scientific research and in engineering and technology development. UK higher education is strong on innovation, with all universities increasingly active in technology transfer.

British higher education delivers an efficient, focused experience to its students over a huge range of disciplines, levels and modes of study. Subjects range from traditional degrees such as English, Philosophy and Mathematics to new degrees with a strong vocational focus, such as Tourism and Leisure Management. As new technologies emerge, so, too, do new subjects, for example nanotechnology.

All universities offer undergraduate and postgraduate courses. In 2002/03, there were approximately 1.3 million students in full-time courses, and almost 860,000 studying part-time. There were 213,000 international students and 104,000 students from non-EU countries in UK higher education institutions.

This is a vital and growing, but volatile, market for the UK. International students are culturally and economically important to the UK. They provide significant geopolitical and cultural benefits, as well as broadening the educational experience of UK students and ensuring the diversity of the student body. In addition, fees from international students bring in a welcome contribution to universities’ income, and add to the wider UK economy. A recent study of the global value of education and training exports calculated that higher education contributed around £4bn annually to the UK’s export earnings. In addition, UK universities are international organisations with long-established links with universities and other agencies around the world. These links include research collaborations, academic exchange, student exchange and consultancy.

In the past 20 years, the UK university sector has changed out of all recognition, with a rapid expansion in both the number of students and of universities, the latter as a result of 1992 government legislation that enabled the former polytechnics to become universities. The concept of mass higher education is a fairly recent phenomenon in the UK, and arguments still rage over whether the government was right to aim for a target of 50% participation by 18-to-30-year-olds by 2010.

The UK has also signed the Bologna Agreement, which commits it – together with 40 other European nations – to developing a common framework for degree structures across Europe. This approach will include credit accumulation and transfer and will be supported by an overarching qualifications framework, which will be approved by government ministers in May 2005. This framework accommodates the range of diverse qualifications in Europe and, by enhancing transparency, will make recognition easier and stimulate student and staff mobility across the European Higher Education Area.

Quality is paramount. The UK has in some ways anticipated wider European developments. It has its own qualifications framework and takes care to underpin the same threshold standards for its degree courses across all institutions, irrespective of where they are offered. We are developing our systems of public information to make available detailed subject-level performance figures including employment rates for graduates and their satisfaction scores.

In the UK, students’ first-degree performance is measured by an “honours classification” system (first class, upper and lower second class, third class honours, and pass, that is, nonhonours). In addition, institutions are increasingly providing transcripts that show performance in individual modules and larger assignments, and this will form part of the European Diploma Supplement, which all our institutions will soon issue along with the degree certificate.

After the first Bachelors degree, about one in five students goes on to take a further Masters degree over a year full-time or, more often than not, part-time. This is efficient but demanding – the programmes assume a high level of preparation from the first degree and/or practical experience and run intensively for 45-60 weeks, usually including a substantial dissertation that students complete relatively independently. A smaller number move on to doctorate studies, usually the British PhD, which is based on the examination of a substantial thesis that reports the student’s original research. The PhD is often studied part-time and is typically completed within three to four years full-time.

Given the scale of its contribution to the modern knowledge economy, it is perhaps unsurprising that higher education has moved up the political agenda. However, much of the recent debate has focused not on the universities’ successes, but on the problems facing the sector as a result of long-term underfunding. This has arisen because expansion has not been matched by an appropriate increase in funding. Between 1989 and 2002, there was a 37% fall in the public funding that universities receive for teaching. Student numbers over the same period increased by 94%.

Universities UK, the membership body representing all the universities in the United Kingdom, has consistently stressed that the UK’s future success and ability to compete internationally, notably with the US, depends on universities having sufficient resources. It, together with the Standing Conference of Principals (SCOP, representing around 40 colleges of higher education) has consistently put the case for additional public funding. Although they are partly-funded by the state, the UK’s universities are self-governing, autonomous bodies with charitable status. They do not have the freedom enjoyed by US universities to decide the level of fee they charge to home and European Union full-time undergraduate students.

Full-time undergraduate students in England, Wales and Northern Ireland pay an annual tuition fee of £1,150. This was introduced in 1998 on the recommendation of a national inquiry into higher education, which established a principle, accepted by universities and the Labour government, that it was reasonable to ask all beneficiaries of higher education – including graduates – to contribute towards the cost.

The question of adequate funding, however, remains a key concern for the sector. Universities are actively building alternative sources of income, from spin-out companies to endowments built up through charitable giving. It will take time to grow a culture of giving in the UK that will enable it to build the substantial endowment funds enjoyed by some US universities.

In the meantime, however, the next major source of extra funds will come in 2006, when as a result of the Higher Education Act 2004, universities will be allowed to charge up to £3,000 pa for their courses, provided they satisfy the Director of Fair Access that they have put robust widening participation plans in place. This is, for graduates, a “buy now, pay later” scheme, as the student will only pay after graduation once their salary reaches £15,000 per annum.

Universities UK supports these changes, which will bring in much-needed additional income and allow institutions more flexibility to react to local circumstances. In fact, variable fees are already paid by the majority of students, that is, those who are part-time, postgraduate and overseas students from outside the EU.

The new graduate contribution scheme for full-time undergraduates is a step towards providing the resources that UK universities so badly need. Even this, however, is only part of the solution. It is vital that governments are sufficiently convinced of the value of universities so that they continue to provide adequate public funding. Then, universities will be able to maintain the highest quality tertiary education and compete effectively on the international stage.

Business–university collaboration
Knowledge and technology transfer from universities is seen as a key part of the UK government’s economic strategy. Contributing to economic growth is known as the “thirdstream” of university activity – the two other streams being teaching and research. Commercialising intellectual property through patenting, licensing, and “spinningout” new companies are key elements of universities’ third-stream activities.

The Lambert Review of business–university collaboration (2003) commissioned by the government and carried out by Richard Lambert, former editor of London’s Financial Times newspaper, recognised the success of the UK HE sector in reaching out to business, and universities have continued to build on this success.

The Higher Education Business Interaction Survey 2004, published in February 2005 by the Higher Education Funding Council for England (HEFCE), shows that there has been a significant shift in the way that UK universities and HE colleges transfer knowledge in engaging with business, the public sector and the wider community, with significant increases in consultancy income and expenditure by companies on research.

It is apparent that the UK’s HE institutions (HEIs) are establishing stronger commercial links with the business sector and succeeding in knowledge transfer activities.

The main findings of the 2004 HEBI survey were:

• The level and quality of interaction between universities and business have generally increased, with 89% of HEIs now offering a single enquiry point for business and 79% helping Small and Medium Enterprises to determine their needs
• Turning ideas into business is also on the increase, with the number of patents granted to HEIs up substantially and new applications up by 26 per cent. There has also been an increase in the level of employment created as a direct result of university spin-out companies

Other key findings of the survey include:

• Income generated by consultancy is up by 38% from last year to £168m regeneration
• Funding to HEIs has increased by 16%
• UK universities created one spin-off firm for every £17m of research expenditure, compared with every £60m in the US

Universities UK has welcomed additional funding from government for links between industry and higher education. Most of this funding is provided through the Higher Education Innovation Fund. The outcome of the 2004 Spending Review in relation to DfES expenditure was announced on 13 December 2004. The government allocated an additional £40m over the three years for HEIF. UUK bid for £140m additional funding for knowledge transfer over three years.

The Lambert Review also recommended that an additional £140m was needed to raise HEIF funding to an appropriate level.)

However, it is essential that funding for knowledge transfer and links between industry and higher education is permanent and predictable so that universities are able to plan long-term development.