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Public funding of universities in Europe: challenges and tensions

Higher education systems across Europe currently use a variety of funding instruments, with increasing levels of complexity evident. This piece highlights some of the main issues involved, as described in the EUA study “Allocating core public funding to universities in Europe: state of play & principles”.

In recent years, much attention has been given to the public funding of universities across Europe. While in the second half of the 2010s, most countries were re-investing in universities, the long-lasting impact of the economic crisis led many governments to consider not only the amount, but also the modalities of their support to higher education. The EUA study “Allocating core public funding to universities in Europe: state of play & principles” highlights some of the areas of tension in this process.

Increasingly complex funding ecosystems. Looking at the higher education systems across Europe, it becomes clear that most use a combination of funding instruments. Public authorities typically – though to different extents – allocate core funding as a block grant through various means, such as a so-called fixed grant or a funding formula, perhaps accompanied by a multi-annual framework agreement containing other types of objectives and associated resources. Multi-annual contracts or agreements are becoming increasingly common. They have rapidly spread across Europe as a strategic steering instrument for public authorities that allows for a more bespoke approach, ideally tailored to the individual institution’s profile and needs. However, there is growing evidence that the use of this specific funding tool departs from its original purpose, as extensive and detailed objectives and rather complex processes create a new frame for micro-steering.

An excessive focus on performance in the debate? Much of the discussion around funding models relates to the use of performance-based funding, with the assumption that this will increase the efficiency of public resources. This has been reinforced in an economic context that has pushed the efficiency and effectiveness of public funding to the forefront of the debate. A great deal of attention has been given to technicalities, such as which indicators to use in funding formulas, their weight and scope, and whether they should reflect past activity or future targets. Funding reforms have less often included a needs and purpose analysis to determine the most suitable funding mix for a specific system. Nevertheless, it remains rare for funding allocation to be primarily output-oriented, owing to the highly rigid cost structures of universities, particularly when allocation covers both teaching and research activities. When output-oriented funding instruments represent a large share of the total core public funding, thus making it more performance-based, they tend to be based on the most “stable” elements, e.g. the number of degrees awarded (for which the input-oriented equivalent would be enrolled student numbers). Output-oriented instruments that account for more limited shares of the funding model may focus more specifically on particular items that reflect certain policy goals.

Importantly, various higher education systems in Europe nowadays continue to operate without a well-defined funding model, privileging an incremental, historical approach to funding allocation. This has been the case in Spain, where the regional governments suspended the models in the wake of the economic crisis, and in France, which has failed to come to an agreement to replace the previous model and has since created various schemes on top of fixed allocation.

Recovery and resilience for universities, too? The pandemic has taken a toll on universities in a number of ways. In several countries, the urgency has led authorities to shelve or put on hold reform plans that were in progress. Some of these have found their way into the EU member states’ national recovery and resilience plans, supported by European grants and loans. In these plans, higher education funding reforms all tend to bring on board the same concepts and tools: increased share of performance-related funding tools, development of framework agreements and a greater link between funding and national strategic goals. What matters here is that there is a shared understanding that universities are key contributors to the long-term resilience of societies and economies, and that revising the principles for the public funding they receive should be done in a way that enables them to fully play their role.

Some things cannot be repeated enough. That a funding model should be understandable by all parties and transparent, for instance, is not always a given. Combining funding instruments selected for specific purposes may be the way to go, provided that the overall logic and coherence of the model are not lost. Stability of funding to accommodate rigid cost structures does not mean relying on historical models, but rather taking account of evolving pressures on institutions. Finally, while funding models provide steering capacity for public authorities, they should also be supportive of the autonomous, strategic development of universities.

The reasons for resorting to more detailed steering, such as using public resources as much as possible for reaching short-term goals, are understandable. But there is no evidence that this could be better achieved by micro-management than by autonomous university decision-making combined with long-term overall steering. There is a lot to be gained by approaching the funding model as a toolbox, from which one should choose wisely. The EUA “Allocating core public funding to universities in Europe: state of play & principles” report lists some important principles for funding reforms and questions that decision-makers should consider before reforming or designing new funding instruments. We encourage everyone embarking on a funding reform to apply those principles.

“Expert Voices” is an online platform featuring original commentary and analysis on the higher education and research sector in Europe. It offers EUA experts, members and partners the opportunity to share their expertise and perspectives in an interactive and flexible exchange on key topics in the field.

All views expressed in these articles are those of the authors and do not necessarily reflect those of EUA.

Enora Bennetot Pruvot

Enora Bennetot Pruvot is Deputy Director Governance, Funding and Public Policy Development at the European University Association

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