HE InsightThe maximum English Postgraduate Master’s Loan available has risen steadily since it was launched in 2016 but that hasn’t been enough to stop its real terms value being eroded by inflation since the pandemic.
The maximum loan for postgraduate students starting in 23/24 is currently worth £9,293 in October 2016 terms, a decline of 7% from its initial £10,000 value.
An update to our modelling of the English undergraduate tuition fee cap’s real terms value decline, based on the Bank of England’s latest CPI forecasts.
The BoE expects inflation to fall faster this year than it previously thought, though news today that CPI in March unexpectedly remained the wrong side of 10% may give pause for thought.
Of course, the C in CPI stands for Consumer. This rate represents costs for individuals, not universities. Whilst we might expect the two to move together fairly closely, a significant factor in the revision to the BoE’s forecasts for this year is the government’s changing interventions in residential energy costs. The Energy Price Guarantee doesn’t cover the commercial energy market of course, so these interventions won’t have a direct benefit for university balance sheets.
Last month we posted about the falling value of the English undergraduate tuition fee, charting how inflation was eroding the real terms value of the tuition fee cap. Since then, the Bank of England has published its latest forecasts for inflation over the next few years and is expecting CPI to peak at 13.1% at the end of 2022.
We’ve updated our chart to show the impact of this forecast, should it come to pass, up to the end of 2023.
In the forecast scenario, the £9,250 English tuition fee cap would be worth only £6,300 in 2012’s money by the end of next year. This would represent a reduction in funding of approx. 30% since the current funding regime was implemented.
A high inflation economy is rapidly exacerbating the problems of the current funding regime for UK higher education.
The current English undergraduate tuition fee cap is now worth only £7,450 in 2012’s money, a drop of 17.2% since the introduction of £9,000 fees. Almost half of that drop in value has taken place since the start of the pandemic.
