This autumn the government will announce how heavily spending cuts will fall on each area of government support. This paper sets out clear evidence on why these savings must be made in ways which can sustain the recent expansion in higher education provision. The analysis focuses on what the 2020 knowledge economy needs from our higher education system and how scarce public funds can best be focused to deliver this.

Despite fears that higher education has expanded too rapidly in recent years, the paper demonstrates how the shift towards a knowledge intensive economy has increased the demand for highly skilled graduates in line with this increased supply. Given this evidence we can expect that the speed and strength of the UK’s economic recovery will depend to a great extent on developing and sustaining the skills of our workforce. Although graduate unemployment continues to create headlines, there is still a strong case for sustaining the recent expansion in higher education provision. Policy must focus on a broader understanding of the high-level skills that drive innovation and reform the funding of the sector so that it can deliver these in the context of public spending cuts.

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