Funding for New Zealand higher education has gone backwards in the 22 May budget, with teaching subsidies maintained only in ¡°targeted¡± areas and grant schemes cut to bankroll research institute mergers and civil service enhancements.

Students face more expensive degrees after the government authorised tuition fee hikes of up to 6 per cent for the second year in a row. But universities are set to earn less in teaching subsidies, with confirmation that a 2023 funding lifeline will not be renewed.

The government will boost subsidies by 3 per cent in nursing degrees and 4.75 per cent in ¡°high-demand¡± STEM, health and initial teacher education programmes. But the loss of the 4 per cent lifeline will all but neutralise these increases, while government funding for other disciplines ¨C including popular areas such as business, law and the humanities ¨C will decline.

Vocational education minister Penny Simmonds subsidies had been boosted in ¡°workforce demand areas¡± including health, energy, infrastructure and digital technology. Universities minister Shane Reti said fees had ¡°lagged behind inflation in recent years¡±, and the 6 per cent hike ¨C combined with the subsidy changes ¨C would help institutions ¡°sustain the quality of provision and further invest in priority areas¡±.

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The Tertiary Education Union said the allocations would not cover the sector¡¯s rising costs, even in STEM fields. ¡°The shortfall of new money will be met by job cuts, increased student fees and propping up the system by hoping more international students will come,¡± said national secretary Sandra Grey.

University of Otago biochemist Craig Marshall said allocations for STEM had ¡°almost¡± matched inflation, but universities would find it increasingly difficult to maintain ¡°viable¡± humanities programmes.

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Policy analyst Dave Guerin said universities would ¡°make a bit on fees, but my view is that they will be going backwards in overall domestic income. Overall, it¡¯s a tight budget. I didn¡¯t expect it to keep pace with inflation.¡±

Guerin said the budget included no inflationary adjustment to research funding, which was not unusual. He said the real value of research grants had declined substantially in recent years. New Zealand¡¯s inflation rate surged over 7 per cent in 2022, although it has since fallen to 2.5 per cent.

The government is saving NZ$212 million (?94 million) by cutting funding from several research and innovation programmes including the Marsden Fund, New Zealand¡¯s main support scheme for basic research.

The proceeds will cover the costs of reforms announced in January, including the rationalisation of government research institutes and the establishment of a gene technology regulator and a new Prime Minister¡¯s Science, Innovation and Technology Advisory Council.

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In addition, the research funding cuts will help bankroll a NZ$21 million enhancement of ¡°policy advice capability¡± on science, innovation and technology.

The budget also saves NZ$15 million by scrapping the , which support study abroad in Asia and Latin America.

While NZ$111 million has been allocated to cover forecasted tertiary enrolment increases in 2025 and 2026, NZ$62 million of it comes from a ¡°reprioritisation¡± of money already allocated to the Tertiary Education Commission. And the ¡°increased volume funding¡± may not be enough, a warns.

¡°Demand for tertiary education and training is currently forecast to exceed the volume able to be funded by current baselines from 2026-27,¡± it says. ¡°Additional funding may be required to continue meeting learner demand.¡±

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john.ross@timeshighereducation.com