The Great University Gamble: Money, Markets and the Future of Higher Education
232
The Great University Gamble: Money, Markets and the Future of Higher Education
232eBook
Available on Compatible NOOK devices, the free NOOK App and in My Digital Library.
Related collections and offers
Overview
The Great University Gamble outlines the architecture of the new frontier for higher education, surveying the financial and policy details, Andrew McGettigan asks the big questions: What will be the role of universities within society? How will they be funded? What kind of experiences will they offer students? Where does the public interest lie? With privatisation infringing on our universities and colleges education is threatened with transformation from a public good into a private, individual financial investment.
Product Details
| ISBN-13: | 9781849647656 |
|---|---|
| Publisher: | Pluto Press |
| Publication date: | 04/05/2013 |
| Sold by: | Barnes & Noble |
| Format: | eBook |
| Pages: | 232 |
| File size: | 2 MB |
About the Author
Andrew McGettigan lives in London and writes on philosophy, the arts and education. He is the author of the report, False Accounting? Why the Government's Higher Education Reforms don't Add Up ( Intergenerational Foundation report, 2012) and the book The Great University Gamble (Pluto, 2013).
Read an Excerpt
CHAPTER 1
The Mass Higher Education System and its Funding
To understand the new level of tuition fees in England and the cuts to direct grant funding of institutions, one needs to understand the recent history of the sector, which has been transformed in the last 20 years or so by an initially rapid expansion. This has placed the funding of students and the financing of universities at the centre of policy debate and brought the Treasury into the dominant position when it comes to decision-making.
THE ADVENT OF A MASS SYSTEM
Expansion of higher education began under Kenneth Baker, Secretary of State for Education in the Thatcher government. Initiated by the 1988 Education Reform Act and the 1992 Further and Higher Education Act, participation rates by age cohort leapt from around 15 per cent in 1988 to close to 35 per cent within a decade. Contrary to popular misunderstandings, this participation rate was not the simple result of polytechnics being reclassified as universities: those attending polytechnics were already included in the higher education participation statistics. But, the polytechnics and their successor institutions did expand, some dramatically: Hatfield Polytechnic, as it became the University of Hertfordshire, saw an expansion in its student numbers from around 5,000 to over 30,000 during the 1990s.
Figure 1.1 illustrates the dramatic spike in participation between 1988 and the mid 1990s. The two lines on the graph reflect different methods of measuring the initial participation rate in higher education. The lower line shows the Age Participation Index (API) of those under 21 as a percentage of the cohort, which has more recently been replaced by the Higher Education Initial Participation Rate (higher line) which covers those aged between 17 and 30.1 Doubts about API methodology mean that is only used here to illustrate the relative change in participation.
There are now over one million Home undergraduates studying full-time and many more part-time, not to mention postgraduates and students from outside the EU. Despite populist and popular grumblings, this approach, expanding to meet demand, has largely found cross-party support, underpinning both Baker's initiative and Tony Blair's 1997 election campaign mantra of 'Education, Education, Education', which set a new target of 50 per cent of school leavers moving on to higher education. In some ways, the advent of a mass system is the consummation of the 1963 Robbins Report which argued that 'courses of higher education should be available for all those who are qualified by ability and attainment to pursue them and who wish to do so'.
FUNDING THE MASS SYSTEM
The flipside to expansion is the question of funding. Figure 1.2 shows the funding per student in 2006/7 prices between 1948 and 2009.
Funding per student declined precipitously in real terms from 1981 and declined even faster with the expansion of the late 1980s and early 1990s. The last two major reviews of higher education, Dearing (1997) and Browne (2010), focused on this question of funding. Dearing recommended a means-tested upfront fee of £1,000 per year, the introduction of which stabilised the per-student resourcing (black squares in Figure 1.2). This move established the principle of 'co-payment', whereby the benefit accruing to the private individual from higher education should be reflected in more than taxation on higher earnings.
In 2004, Labour pushed through the contentious policy of 'variable fees', winning its passage by only four votes despite its large parliamentary majority. A new maximum fee was set at £3,000 per year. (Thereby introducing the legislation used by the Coalition for its snap vote in December 2010.) These fees, however, were no longer paid upfront and were instead covered by an expansion of the student loan scheme, which had previously been restricted to loans to cover some of the costs of maintenance while studying.
All institutions soon moved to this new fee level and no pricing variation occurred at undergraduate level. It is important to note that, in contrast to the latest reforms, these fees did not replace any central funding but provided additional resourcing to universities and college and so restored per-student funding to a level comparable to the 1980s (black triangles in Figure 1.2). Advocates of fees have in mind the manner in which their introduction broke with government rationing of resources.
THE BROWNE REVIEW
In 2009, Peter Mandelson, then Labour Secretary of State for Business, Innovation and Skills, published a report, Higher Ambitions, which set out a vision for a more entrepreneurial higher education sector less reliant on central funding. (In the course of 2010, the Labour government announced a reduction in the higher education budget for 2010/11 of £135 million.)
Subsequently, a review panel was established, led by John Browne, formerly chief executive of BP. Its remit was to set in place a sustainable system of financing higher education that would lighten the burden on public finances, but also enable the sector to expand to meet the current unmet demand for undergraduate education. Its final recommendations were published in October 2010 as Securing a Sustainable Future for Higher Education, after the change in government. A short report of 60 pages, it had eight main recommendations:
1. Massive reduction in direct grants including the removal of direct public funding for arts, humanities and social science degrees.
2. The abolition of the current tuition fee cap allowing universities to set whatever fees they wished.
3. A levy scheme, or 'soft cap', requiring universities to return an increasing proportion of those higher fees to central coffers for each thousand pound increment above £6,000 (see Table 1.1). It was designed to dissuade universities from setting fees indiscriminately, since universities do not bear the cost of non-repayment on loans, the Exchequer does.
4. A change to the parameters of the loan scheme so that repayments would only begin once the graduate was in receipt of more than £21,000 per annum from 2016.
5. The introduction of real interest rates on the loans, i.e., above inflation, which were previously subsidised against the government's cost of borrowing.
6. The removal of all institutional recruitment caps (bar medicine and dentistry).
7. An increase in maintenance loans, grants and other financial support to full-time students.
8. Extending access to loans for tuition fees to part-time students.
On the one hand, the proposed system would be more 'sustainable' by having more funding return as loan repayments. On the other hand, removing all 'supply-side' restrictions on universities by abolishing fee and recruitment caps would mean on average that institutions would receive more income providing demand remained constant.
While there was consensus on the objectives of the reform of higher education funding (increasing participation, improving quality of provision, and making the funding solution sustainable), the solution of opening up competition by removing all direct public support and hiking fees was not unanimously received. Indeed the sole piece of research commissioned by the review revealed that: 'Most full-time students and parents ... believed that the government should pay at least half the cost of higher education. This is because the personal benefits of higher education were seen by many to match the benefits to society.' This striking finding did not appear in the final report and had to be revealed through a Freedom of Information request produced by Times Higher Education.
The report argued that it had balanced the trade-off between public and private benefits accruing to the individual, but its private sector-style solutions reflected the background of its Chairman and several of its members, with CVs that included stints at the management consultancy firm McKinsey.
THE GOVERNMENT'S RESPONSE
Although the previous Labour administration had commissioned the Browne review, when it reported in October 2010 many of its suggestions were acceptable to the Conservatives now in government. The first recommendation, cutting direct central funding to institutions, was accepted. The Comprehensive Spending Review later in October announced the reduction in central grants to universities and colleges: around £3 billion per year by 2014/15 when the new regime is to be fully implemented. BIS will no longer offer any direct funding for degrees in the arts, humanities, business, law and social sciences, thus removing one impediment to competition from private providers. (The new higher fees will replace lost funding and therefore do not significantly alter the per-student funding seen in Figure 1.2.)
In a formal response to Browne the following month, the proposed interest rate taper and the higher loan repayment threshold (£21,000 in 2016 as opposed to £15,000 today) were both accepted. However, the 'levy', Item 3 above, proved unpopular with universities who wanted to keep more of, and more control over, the higher fees they expected to receive. In addition, the removal of a maximum tuition fee cap (Item 2) was unacceptable to the junior Coalition partners, the Liberal Democrats. Their 2010 Election manifesto had committed to abolishing tuition fees; they had actively campaigned around the issue and had signed an NUS pledge promising to vote against any increase.
Instead, a compromise was reached with a new maximum tuition fee (and no levy). Through a snap vote held in the House of Commons on 9 December 2010, the maximum fee allowed was raised from £3,375 per year to £9,000 for undergraduates commencing their studies in September 2012. Almost two years later, Nick Clegg, the Deputy Prime Minister and Leader of the Liberal Democracts, felt compelled to issue a filmed apology to the nation: not for the policy, but for signing the NUS pledge.
It was a political coup to bring that vote forward using existing secondary legislation before publishing a White Paper and detailed proposals on the actual functioning of the loan scheme and the new market in undergraduate recruitment. No detail could be examined; the House of Lords, which voted the following week, was deprived of its now conventional role as a revising chamber.
Had the new maximum fee moved through Parliament slowly, accompanying primary legislation, it may have been lost and split the Coalition. As it was the vote narrowly passed. This abuse had the desired effect of spiking the guns of those opposing the remainder of the plans and confusing potential activists about just what had been won or lost on that occasion.
MISTAKE AND COMPROMISE
Browne had warned the government not to cherry-pick from his proposals and to treat them as a coherent whole, but political compromises and mistakes frustrated this further. With no levy as per Browne to encourage universities to set lower fees, the government proposals contained only the bare maximum of £9,000 per year. In early 2011, most universities moved to set their fees for 2012 entry at this level, thus challenging the Coalition's pledge that the average, mean figure would be £7,500 per year. Treasury models had been constructed on that latter assumption in Autumn 2010.
However, a huge mistake had been committed in the rush to push through the snap vote. It had been assumed that a quango, the Office for Fair Access (for more on Offa see Chapter 2), had powers to negotiate with universities wishing to charge more than £6,000 per year and to limit what was set. This would have enabled direct control of higher education expenditure and underpinned Vince Cable's public assertion that only in 'exceptional circumstances' would any university set the maximum fee. But Offa has no such legislative powers. It can only determine whether or not a publicly funded higher education institution should be able to charge more than £6,000 in tuition fees. Depriving any institution of the higher level of fees is the so-called 'nuclear option' available to Offa.
A second problem resulted from compromise. On the eve of the December 2010 vote, only a last-minute concession persuaded 27 Liberal Democrats to vote in favour (21 voted against and 8 abstained). That concession committed to ensuring that the repayment threshold of £21,000 in 2016 would be increased annually in line with average wage inflation.
BIS's intention had been to review the threshold every five years. A review could decide to freeze the threshold, move it up or move it down. It is a straightforward mechanism for ensuring the sustainability of the loan scheme since the threshold both triggers when former students start repaying and determines the amount repaid monthly (see Chapter 3 for more detail). The concession to index-link the threshold altered the workings of the scheme in its fundamentals and introduced problems not intended in its original design. In effect, were this pledge to come into force from 2017 it would lower repayments and therefore increase the burden on the Treasury and the taxpayer.
The government therefore had to manage two problems, one the larger than expected loan outlay owing to higher fees, and the other, a compromise that meant that repayments are likely to be lower than was anticipated back in Autumn 2010. This combination threatened the viability of the scheme and ensured that Browne's aim to expand the system had to be rejected: supply-side restrictions on numbers would have to be maintained. Indeed, planned numbers were reduced by 10,000 owing to the expense of the government borrowing needed to finance the new higher loans.
THE 2011 HIGHER EDUCATION WHITE PAPER
The White Paper setting out in full the government's detailed plans had been due in early 2011 but was repeatedly delayed and was only published in late June. The delay was largely attributable to this need to fix the finances on which the government's plans had been based.
Students at the Heart of the System concentrated entirely on the reform of undergraduate education. Such a document is supposed to set out a clear vision for future changes to policy and legislation, but this one was a frustrating read. Mostly covering measures already undertaken, much of the detail one might have expected was displaced into a series of reviews and consultations (I counted at least fifteen) that launched, reported and concluded at various points over the following months.
The political function of the various consultations was to map out what might actually require primary legislation and to gauge in advance where opposition might lie. Following the eruption of opposition prior to the December 2010 vote, the government has been keen to avoid the focus for protest that primary legislation – with its long progress through Parliament – would represent. Instead, the plans were to be implemented little by little in piecemeal fashion using various means. These methods include budgetary cuts, instructions to quangos, secondary legislation, and what are termed 'statutory instruments' (which can even be issued quietly over the summer while parliamentary representatives are on holiday: they come into law if no objections are tabled). As far as possible the government is using powers that already exist or giving existing bodies new tasks.
The major new announcement in the document concerned the new restrictions on undergraduate recruitment. These market reforms, designed to drive down price but also allow the more prestigious universities greater freedom to expand, are set out in detail in Part 2.
However, the complicated recruitment mechanisms it introduced combined with the off-putting nature of the leap to £9,000 annual fees seems to have contributed to a large reduction in places. At the beginning of September 2012, UCAS was reporting that there were 50,000 fewer accepted places for 2012 entry as compared to 2011. Although a drop in places was also seen after the higher fees were introduced in 2006, this was only around 15,000 lower – a third of the impact. The Treasury may welcome this development, but the university sector does not.
(Continues…)
Excerpted from "The Great University Gamble"
by .
Copyright © 2013 Andrew McGettigan.
Excerpted by permission of Pluto Press.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
Table of Contents
Preface&AcknowledgementAbbreviations
List of Figures and Tables
Introduction: Privatisation the plan and the gamble
Part I Funding: Fees and Loans
1. The Mass Higher Education System and its Funding
2. Tuition Fees
3. Student Loans – the basics
Part II Marketisation
4. Why a Market
5. Market Mechanisms
6. Regulating the New Market
7. ‘New providers’, for-profits&private equity
Part III Privatisation
8. University Finances and Overseas Income
9. Corporate Form, Joint Ventures&Outsourcing
10. University Bonds&other credit products
11. Governance
Part IV Financialisation
12. Loans – the government’s perspective
13. Managing the Loan Book
Conclusion
Glossary
Index