Funding Universities in England and Wales

Government policy in the UK has moved decisively towards a more consumerist model for funding higher education.  Traditionally we have taken the view that the wide economic benefits of having a workforce educated beyond age 18 will more than pay for the investment required to get them there.  That is to say that the economic benefit of investing in education will be seen in higher levels of economic activity and growth and therefore more tax income for the government.  On that basis the ‘taxpayer’ is more than able to bear the cost of University and still be ‘quids in’.

The balance of the argument has now moved on.  First we introduced top up fees a decade ago.  This means that currently students pay up to £3290 per year for their courses which they receive as a student loan repayable after graduation.   It is essentially requiring students to pay for a part of their education out of the enhanced lifetime income stream it gives them.  Seems reasonable.  We are now facing the prospect of increasing the top up fees to some £7000 and perhaps more.  We must wait and see the full debate as it passes through the Parliamentary process.

More fundamentally
it now makes the decision to go to University a much clearer consumption decision by the student.  Universities might well see their ability to increase domestic students’ fees as the mechanism by which they replace cuts in government student funding.  They might be tempted to see this as the ability to carry on business as usual.    But they will now be facing students who will be wanting to get the right education that will justify the payment as they see the level of their student debt rachet up by over £7000 each year – and that is before they even think about accommodation and other living costs.

There are many other economic arguments about fees or no fees such as how it affects overall demand for University degrees, whether it creates a shortfall in the supply of certain types of education and how it impacts on access to University for all groups within society irrespective of their family income levels.  But a major concern I have is how well Universities can respond to the massive – what I call consumerist - pressures from future student cohorts under this new scheme.   It is right that we create space in the University system for people to ‘think and research’ on our behalf.  They should be appropriately protected from a purely financial and self-interested assessment of whether or not a specific course will add to someone’s lifetime income.  The global status and reputation of our educational system has been built on that premise.  In a more competitive and consumerist system, Universities will need to significantly increase the quality of the teaching and support for their students and the quality of resource access they have as students become more vocal about what they want, like and what they do not value from the courses.   

The policy to increase fees while reducing government funding is both a financial issue – driven by the goal to reduce the government fiscal deficit – and a principals led decision – to marketise the system further.   While much of the debate is focused on the former, the impact of introducing a more commercial market system into Higher Education will have much greater potential impact over the longer term.  It is a policy that has been made in relative haste that we may well regret at our leisure as we watch large parts of Higher Education close down just as we should be ensuring we sustain our world-class status.