OfS Faces £108M Funding Cut as Government Announces £1.3B Higher Education Grant for 2025-26

The UK government has unveiled a £1.3 billion Strategic Priorities Grant for the 2025-26 academic year to support high-cost subjects and widen participation in higher education. However, this capital funding for universities in England comes alongside a significant £108 million cut to the Office for Students (OfS) budget, raising concerns about the future of regulation and quality assurance in the UK’s universities.

The grant focuses on funding disciplines that demand intensive resources, such as lab-based science courses, and programs aimed at improving access for underrepresented groups. It also targets specialist providers that enhance the UK’s global educational standing. Yet, subjects like journalism, media studies, and publishing will receive reduced or no funding, sparking debate about the government’s academic priorities.

Dr. Alison Johns, Chief Executive of the OfS, cautioned:

"Reducing our budget at a time when the sector is under pressure risks weakening oversight and support for students. We remain committed to working with universities to uphold high standards despite these challenges."

Breakdown of the Funding Package

The £1.3 billion allocation reflects the government's continued emphasis on skills-based and high-cost courses. Key highlights of the funding include:

• £600 million allocated to high-cost subjects such as medicine, engineering, and science.
• £286 million earmarked for student access and participation support.
• Additional support for degree apprenticeships and strategic reforms.
• Continued investment in higher technical education and workforce development.

Despite these investments, the OfS faces a budget reduction that threatens to impact its ability to regulate and support the diverse needs of the sector.

The £108 Million Funding Cut to OfS

Concurrently, the OfS is facing a £108 million reduction in its budget for the 2025-26 period. This cut represents a significant portion of the funding previously allocated to the regulator, potentially impacting its ability to oversee and support the higher education sector effectively.

The Russell Group, which represents 24 leading research universities, also expressed concerns, warning that cuts could impact world-class teaching and research.

With 43% of UK universities forecasting a deficit in the 2024-25 academic year, these cuts come at a time of mounting financial pressure for institutions. Many universities are also predicted to be in the red by 2025-26, which raises questions about the sustainability of the higher education system.

OfS Budget Reduction: Sector Response

The £108 million cut to the Office for Students has raised alarms among university leaders and education policy bodies. Universities UK (UUK), representing 140 institutions, expressed disappointment in the decision. 

A UUK spokesperson said:

"Cutting funding at a time when students and institutions face increasing financial pressures sends the wrong signal about the government’s commitment to higher education."

Sector representatives argue that the funding reduction could:

• Reduce resources available for widening participation initiatives.
• Undermine the OfS's capacity to oversee student welfare and quality assurance.
• Limit innovation in teaching and learning.

Financial Sustainability of Higher Education Institutions

The financial outlook for universities in England has been increasingly concerning. The OfS's annual financial sustainability report indicates that 43% of institutions forecast a deficit for the 2024–25 academic year, marking the third consecutive year of expected financial decline. This trend is attributed to factors such as lower-than-expected international student recruitment and rising operational costs.

Additionally, approximately 75% of universities are predicted to be in deficit by the 2025–26 academic year, with some institutions having fewer than 30 days' worth of cash reserves. This situation underscores the urgent need for sustainable funding models to ensure the long-term viability of higher education institutions.

Government Perspective

The Department for Education (DfE) maintains that the funding strategy aims to support key government priorities: boosting high-value skills, strengthening the pipeline into STEM careers, and improving graduate outcomes.

A DfE spokesperson emphasized:

"We continue to invest significantly in higher education, targeting funding where it will make the most impact for students, employers, and the wider economy."

Conclusion

The £1.3 billion Strategic Priorities Grant for 2025–26 reflects targeted investment in critical skill areas and student outcomes. However, the significant £108 million funding cut to the Office for Students has raised concerns about the regulator's ability to safeguard equity, quality, and innovation in UK higher education. As institutions and stakeholders call for clarity and support, the future effectiveness of the OfS will be under close scrutiny.