Higher Education Funding

Some interesting contributions have been made recently to the debate over British higher education funding. Howard Hotson has criticised the use of the US system as an example for Britain to aspire to emulate, and his argument that US universities actually significantly under-perform their UK counterparts in global rankings, once the sheer quantity of money spent on HE in the States is accounted for, has found some favour in the Times Higher Education. Hotson clearly has a point. As the continual escalation of healthcare costs in the US demonstrates, the effect of market competition in an industry which a large proportion of the population does not feel it can afford to be excluded from is not necessarily the reduction of costs to the consumer or the generation of efficiencies.

The most interesting component of Hotson’s argument is the suggestion that allowing free-floating university fees leads to ever-higher fee levels, which are required to support ever-higher spending levels, themselves needed to justify ever-higher fee levels.  In effect, a vicious circle develops in which universities feel they need to charge more in order to provide ever-higher standards of service to their students. The problem with this escalation is that it lacks natural limits. Almost no-one in the US debate, and very few contributors to that in the UK, questions the assumption that a university education is a requirement for access to the professions, and thus to a reasonably comfortable middle class lifestyle. In addition, it is recognised that even with a degree, competition remains fierce; there is thus an additional incentive to study at the ‘best’ universities, generally defined ultimately by the level of their expenditure. Ivy League schools do not only splash out on beautiful campuses and lavish sporting facilities as Hotson describes; they seek also to provide cutting-edge study facilities and access to the very biggest names in academia. New computers are expensive. So are new textbooks, and access to electronic journal articles, and printing facilities because no-one likes reading articles on-screen. And there is a reason why British professors Niall Ferguson and Simon Schama teach history at Harvard rather than Oxbridge. In the UK, a professor earning over £100,000 a year is doing very well for himself. In the US the equivalent figure is closer to £500,000, and it comes with a much nicer office.

David Willetts argues that raising university fees will improve the quality of UK Higher Education, while increasing the number of people able to study without increasing the cost to the taxpayer.

He is wrong about the cost. As we have seen, the decision of most universities to charge the maximum permissible £9,000 per year has wrecked the back-of-the-envelope calculations hurriedly put together after the release of the Browne Report, which had advised against a ‘hard’ fee cap and instead proposed a ‘soft’ system of progressive clawbacks about £6,000 per year. The prospect of Oxford and Cambridge charging £18,000 a year was thought politically unpalatable. So the present system was hashed out instead, on the assumption the average charge would be £7,500. Whoops. The additional cost of supporting loans to cover £9,000 fees will mean an increase in costs to the taxpayer, as interest payments on government borrowing exceed the cost of just paying universities public money up front to cover the cost of teaching.

He might be right about the expansion of opportunities, but again it is a flawed argument. What he says is that, by reducing the cost to the exchequer of funding each student place, the new system will enable universities which are successful at recruiting students to expand, thus increasing the total number of places on offer. Leaving aside the fact that the government’s poor arithmetic means that limitations on student recruitment are going to be kept in place, what he really means is that the government is not prepared to spend the money necessary to make schools good enough so that the majority of school leavers can compete in the global economy, so individuals will be expected to cover the gap instead. What he neglects is the dangerous incentives his proposed system sets up; since quality control of degree standards focuses on processes rather than substance, there will be great pressure on universities to churn through large numbers of students, charging high fees covered by state-subsidised loans, while providing minimal education, which students will be happy with provided they get their 2:1 at the end.

And so we come on to quality. One of the main reasons universities have rushed to jack their fees to the maximum level permissible is that the fee rises have not taken place in a vacuum; they have been accompanied by massive cuts to state funding. Most universities need to at least double fees to make up the funding they have lost, before they will have any additional income to spend on improved quality. This is why they have decided to charge whatever they can get; in their students minds’, any increase in fees should be matched by an improvement in services. Charging the ‘break even’ figure of around £7,500 was never a realistic option, since students will never accept double fees for the same service. Since the direct relationship between fees paid and service received is opaque, however, students probably will accept £9,000 fees in return for an extra £2,500 of spending, especially if it is particularly visible.

Visibility is a problem, though, because it means spending money in ways which do not necessarily improve the education a student receives. New buildings look nice, but do they really improve learning? New computer technology is fun, but does it really make a difference whether a book is read in hard copy or online? Sports facilities are good to have, but expendable. Universities are expected to become more ‘efficient’ as a result of the market pressures they will be under. But if efficiency means making do with dilapidated accommodation, tatty books and creaky printers, most will opt instead to charge more so they can offer more.

Standards will suffer, too. The value of education is difficult to quantify. One can look at graduate starting and career average salaries to determine the raw economic benefits of a degree to an individual, but there is no measure that accurately gauges all of the social, cultural, psychological and intellectual gains made. So universities will be rewarded for producing high-earning graduates, which means focussing on more vocational subjects like accountancy, and maximising the number of graduates achieving top grades. Grade inflation has already begun to hit degrees. It is nearly impossible to get a graduate job with less than an upper second class degree, regardless of the institution from which one graduates. Fortunately, fewer and fewer students fall into this category, since universities know their reputations will suffer if they produce large numbers of unemployable graduates (and since they can now face legal action – thus far without success –  for awarding grades below a 2:1 without having made heroic efforts to support students through their exams). The days when the 2:1/2:2 boundary was supposed to be the average are long gone.

The point of all this, in a blog about public opinion, is to illustrate the dangers of assuming that the customer is always right in dealing with industries in which the customer does not necessarily know what is best for them or for society as a whole, and in which there is little prospect of bridging this knowledge gap. David Willetts does not care what the people actually teaching in universities think. They have pointed out each of the flaws in his proposed policy listed above, despite the fact they potentially stand to gain from increased competition between institutions for the best teachers, and increased pots of money for salaries. And they have been ignored. We will move increasingly towards a situation in which universities compete to provide more and more expensive facilities in which ever more heavily indebted students will be taught by the exact same academics who teach them now, whose pay will have doubled, and who will give every graduate a 2:1 to ensure good employment prospects, thus ‘justifying’ the high fees. Great.

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About jamesstrong

I'm a PhD Candidate in International Relations at the London School of Economics, writing a thesis on the public debate in Britain before the invasion of Iraq.
This entry was posted in Higher Education, Young People and tagged , , , , , . Bookmark the permalink.

One Response to Higher Education Funding

  1. Pingback: Higher Education Funding 2 | noonecareswhatyouthink

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