Policy Analysis: increasing high-cost subject funding for Chemistry

July 4, 2024 Michael O'Neill

HE in England is in a funding crisis, mostly driven by the gap between fixed (home) tuition fees and rising costs. The inflation precipitated by the “mini budget” of the Truss government is part of this picture, but the responses of energy markets to the Russian invasion of Ukraine are also particularly significant for Chemistry (which demands a great deal of energy to run equipment and lab space).

In this context, some Universities are being forced to make difficult decisions. Unable to financially sustain their current trajectory, they are looking to increase incomes (which is difficult) or cut costs (which is also difficult). Of the two approaches, cutting costs is the only one which Universities can accomplish unilaterally, which often makes it more viable. So there have been lots of news stories recently about Universities making staff redundant, and some stories about Universities dismantling Departments (either through closure or radical “schoolification”).

Chemistry is particularly threatened by this general financial situation. An energy-intensive subject with high contact hours and specialist teaching spaces (labs), Chemistry has always been an expensive degree to provide. Cutting the Chemistry Department instead of Biology – or even Physics – could be a rational decision for a Vice Chancellor who wants to keep their University open whilst maintaining a strong STEM portfolio.

This blog post proposes a lobbying objective which would soften the overwhelming financial rationale for shutting Chemistry Departments. I propose it because it is a hopeful response to a very difficult situation, though I am open to criticism and other ideas.

International Funding Models

Briefly examining marketised approaches to STEM HE funding internationally is instructive. Australia charges students more to do a STEM degree than an Arts degree, justifying this by appeal to increased earning potential. The USA operates a much broader model of degree-level learning (you can’t study solely Chemistry), making the intensity of lab teaching fairly low (with significant consequences for the form and duration of a PhD).

Responding to the same pressures in a non-marketised situation, Austria provides generous state funding for teaching but only for the elite who survive a first year designed to winnow the cohort (costs go down in second year as there are fewer students). Germany provides fairly generous funding to a larger number of students, but this seems to be closely linked to the income/business tax systems of the Laender (loosely: counties).

The English Funding Model

The Tuition Fee

Much of the public conversation around English HE focuses on the Tuition Fee. Full-time students with “home” status currently pay £9,250/year. Inflation has meant that the 2012 £9,000 level should be worth about £12,500 today: fixing the fee has reduced Universities’ spending power. Despite the sum being eye-watering to students, Bloomberg reports that Universities currently lose about £2,500 per year on each home-fees student they teach.

Internal Logic: the cross-subsidy

In recent years, the internal logic of Universities has been to pay for expensive subjects through (i) redistributing profits from teaching cheap subjects; and/or (ii) increasing international student numbers. In brighter times, the cost of Chemistry was shouldered by subjects like English (with much lower teaching costs). in the last five-or-so years, the financial calculus has meant that teaching Home-status undergraduates has become (slightly) loss-making, and the increased commercial focus on international students has been intensifying (largely to cover research costs).

It is perhaps worth stating that two other cross-subsidies are also significant. Subsidising research through teaching (boosting teaching income to fund the full economic costs of REFable research), and subsidising capital infrastructure through teaching (e.g. servicing the debt on that shiny building once interest rates became significant).

Government liability for the Tuition Fee

There are important questions about the fairness for students of the Tuition Fee model (and even larger questions about living costs), but there are two policy facts for the purposes of this blog.

The £9,250 goes to the University, and is often conceived of as a loan from the taxpayer to the University (via the student); and
The Government is liable for students’ unpaid loans after a certain length of time.

This liability is important, because graduates who earn more money are ultimately cheaper for the Government to fund (or their debt gains a better price if the Government sells it). Whatever the merits of using these metrics to rank things, Chemistry graduate earnings are fairly high. Recent changes to the repayment system have weakened the argument, but it remains true that Government gets a good deal on underwriting the debt of Home-fees Chemistry students.

Grants: high-cost subjects

Some subjects are recognised as being particularly expensive to teach. Medicine, for example, demands a great deal of placement teaching. Chemistry, too, is seen as being expensive, and government provides money on a per-student basis for teaching it. To give some sense of scale, in 2023-24 this extra funding was worth about £13,000/year for a medicine student, £1,700/year for a Chemistry student, and £280 for an IT student.

High-cost subject funding is administered through the Strategic Priorities Grant, which in 2024 was slightly less than £1.5 billion. The SPG also funds other major schemes, such as the development of Degree Apprenticeships, but the 2024 SPG increased funding for high-cost subjects by £18 million and the 2023 SPG increased it by £50 million (though this was tied to increasing the number of medicine places). Despite inflation, it seems true that funding high-cost subjects has been attractive to government.

Policy Objective: increasing the high-cost subject grant

I suggest that increasing the high-cost subject grant is an attractive policy objective for Chemistry as a discipline.

Specifically, I suggest that the doubling category B funding (for subjects like Chemistry) could be a constructive goal because:

It would materially improve the sustainability of the subject;
It is a central policy which could be approached by bodies like the RSC in ways which support the whole sector without inflaming competition;
There is a strong rationale to increase the amount as energy prices and post-brexit chemical shipping increase the cost of lab teaching;
There is scope to build a common lobbying objective with (powerful) bodies representing other high-cost subjects (e.g. the bodies representing Physics, Engineering);
The objective is compatible with both populist (“mickey mouse degrees”) and progressive (“accessing high quality regional STEM degrees”) policy agendas, as well as an industrial policy which is pointing the UK towards services and high-tech manufacturing;
The scale of funding is limited by the relatively low numbers of students (the “ask” of government is plausible);
There is a strong economic return on government spending in the SPG (£5-9 return for every £1 spent) according to government’s own figures. At the same time, it is important to acknowledge that the evaluation suggested there was scope to spend this money more impactfully.

The Alternatives

Bluntly, the alternative to fixing the funding gap is that Chemistry Departments close. This will likely mean that smaller institutions keep closing Chemistry Departments and mid-sized institutions restructuring Chemistry somehow - either organisationally (e.g. fewer staff) or pedagogically (e.g. by developing Natural Sciences degrees).

There are actions which might mitigate this future; lowering the requirements of Chemistry degrees (e.g. mandating 100 lab hours rather than 300 for an accredited BSc) would lower the financial burden of degrees, for example. But it is also possible that the RSC would prefer that Departments close rather than lowering standards: Departmental closures are – in a sad way – a policy success in terms of sustaining students’ lab hours.

Conclusion

The current trajectory is bad for the Discipline. My proposal is one specific way we might lobby to change that trajectory. But whether or not you (or the treasury!) find this particular angle convincing, it is critical that the community starts to think creatively about how to make sure Chemistry survives the next ten years in a desperately fragile HE system.

My hope is not to convince you that I am right, only to convince you that the funding gap needs fixing as soon as possible if Chemistry is to be capable of flourishing in the UK over the twenty-first century.