17 January 2013

New report: Behind the Headlines: What's the Value of a UK Degree?

University education generates high rates of return for individuals, taxpayer and HM Treasury

University think-tank million+ publishes a new report ‘What’s the value of a UK degree?’, in partnership with the economics consultancy firm London Economics. The report assesses the rates of return for the Treasury, taxpayers and individuals arising from investment in higher education. Once all the costs are taken into account, the report concludes that the Treasury reaps very high rates of return on its initial investment, amounting to a rate of return of 10.8% for an undergraduate degree and 25% for a Master’s degree.

The monetary value of a UK degree (quoted in today’s prices) and the significant rates of return on investment include:

• The net Treasury rate of return of financing an undergraduate degree in England is 10.8% - equal to a net Exchequer benefit of financing an undergraduate degree of £94,000
• The average net benefit (earnings premium) for an individual of an undergraduate degree, over a working lifetime, of £115,000
• A Master’s degree adds an additional average net benefit of approximately £59,000 for an individual
• The Treasury benefit from a Master’s degree is approximately £62,000, equivalent to a 25% rate of return
• Higher education exports are valued at £8.788 billion, of which approximately £7.576 billion is associated with international students coming to study in the UK.

The report also assesses the monetary risk of a decline in student numbers and concludes that the potential cost to the UK economy, in aggregate, of a reduction of 30,000 undergraduate student numbers would be at least £6.6 billion for each reduced cohort of undergraduates.

Professor Patrick McGhee, Chair of million+ and Vice-Chancellor of the University of East London said:

“Government investment in higher education remains a remarkably good bet, even in these challenging economic times.

“As well as opening up new opportunities for individuals, the Treasury reaps exceptionally high returns from its investment.

“If efforts to increase access to university are not sustained, these significant benefits could be eroded with longer term consequences for the economy as well as individuals.”

What’s the Value of a UK degree? concludes that even in the downturn, graduates have a better chance of being employed and achieve enhanced salary outcomes and earnings over a lifetime.

Additional sources of value identified include, ‘spillover effects’ of higher education attainment on the wider economy. Spillover effects can result in enhanced productivity and earnings achieved by other workers from working alongside graduates. The report highlights evidence suggesting that the spillover effects of higher education can be as great as the direct effects.

The report identifies the knock-on effects to postgraduate study and attainment should numbers of undergraduates fall, and the significant role higher education plays in educational exports.

The analysis in the report is based primarily on research work commissioned by the Department for Business, Innovation and Skills, and undertaken by London Economics.

Ends

Notes to editors
1. million+ is a leading university think-tank, working to solve the complex problems in higher education www.millionplus.ac.uk. For more information please contact Jean Candler, Head of Public Affairs on 0207 717 1659 or out of hours 07900 277 819.
2. London Economics is one of Europe’s leading specialist economics and policy consultancies, and undertakes work for a range of public and private clients, including Government.
3. Higher tuition fees, up to £9,000 per annum, were introduced in 2012. For the purposes of this report the analysis is based on an estimated fall in student numbers of 30,000. The actual number, year-on-year, may be lower or higher.
4. million+ is holding a roundtable on ‘What’s the value of a UK degree?’, hosted by Paul Uppal MP (PPS to Universities Minister, David Willetts), to coincide with the launch of this report, in Parliament on 17 January 2013, with politicians, business and higher education representatives.
5. ‘What’s the value of a UK degree?’ is the first of a series of Behind the Headlines pamphlets being produced by million+ and London Economics on the economic outcomes and options of different funding regimes for higher education and student support.  
6. Download the full report and summary here.