Where else are you going to go? Tuition fees and the university system as a cartel

Posted: April 1, 2015 in politics and ideas
Tags: , , , , ,

In the run-up to the 2015 UK General Election, the emotive issue of university tuition fees has re-emerged recently as a topic for debate. Scotland has a vastly different Higher Education funding model to that of England and Wales, with the Northern Irish system different again. As such, the debates around the justification for or against fees can be rather confusing, and the talking heads who take sides in the debate rarely display much of an appetite for nuance.

Data is available about student fees and student numbers, however, which I think help us navigate these choppy waters more easily. I gather it together below and give it some thought, before considering the moral, political and economic arguments for and against university tuition fees. I hope to convince you that this is a much more complicated topic than it may first appear.

I’ll begin by explaining how tuition fees vary between the Home Nations, before offering some observations on the consequences of these four fee regimes on student numbers and student movement. After that I’ll discuss arguments for and against tuition fees from the perspective of society, the individual, the universities and the government. I’ll then conclude with some alternative proposals.

(If you’re not much attracted by numbers and charts you might want to scroll down to the ‘Arguments for and against tuition fees’ section further on).

Tuition fee levels in the UK

Scotland

In November 2014, the then-First Minister Alex Salmond visited Heriot-Watt University to unveil a monument to himse…sorry, to free university tuition. The monument immortalises a classic moment of Salmondese, when he claimed “the rocks will melt with the sun” before he would countenance the imposition of fees on Scottish students. The new First Minister has maintained Salmond’s commitment to government bearing the cost of university teaching.

The leader of Scottish Labour, Jim Murphy, has himself been moved recently to commit himself to free university tuition, which might be thought surprising bearing in mind his track record on the issue.

In short, advocating tuition fees is electoral suicide in Scotland at the moment, as Johann Lamont can attest. With the SNP settling down for a long stay at the crease, it would be surprising indeed if any significant moves were made in Scottish public policy circles to shift the reality on the ground.

University tuition is, of course, only covered by the taxpayer if you are a Scottish-domiciled student, or from the continental EU.  Students from the rest of the UK (RUK) are charged around £7000 per year of study for a four-year Honours degree.

For the avoidance of doubt, Scottish universities receive around £7000 per Scottish/ other EU student from a government quango called the Scottish Funding Council – but they don’t receive any public funding to teach students from England, Wales or Northern Ireland. The fees charged to RUK students therefore ostensibly cover the notional cost of teaching them.

England and Wales

By contrast, south of the border, Ed Miliband is challenged as profligate and reckless for proposing to merely reduce tuition fees from a maximum of £9000 per year in England and Wales to around £6000 per year. Assuming a student completes her degree in three years, she will pay £18,000 in tuition fees under a Labour government, compared to £27,000 under continuing Tory-led rule. The £9000 fee applies to students from anywhere in the UK.

That said, Welsh students studying anywhere within the UK only pay the first £3810 of their fees every year – with the rest being covered by the Welsh government.

Northern Ireland

Meanwhile in Northern Ireland, fees have settled at just under £4000 per year for home domiciled students and students from continental EU. Honours degrees take four years to achieve in Northern Ireland, so home/ other EU students pay £16,000 by the time they finish their undergraduate studies. Students from Scotland, England and Wales are charged up to £9000 per year.

The above points can be summarised as follows:

If you’re English…

…you’re going to have to pay a lot of money each year for university tuition. In England or Wales it’ll cost you up to £9000 per year for a three year degree (ie £27,000). In Northern Ireland it’ll depend where you study, but it could be as much as £9000 per year for four years (£36,000). And in Scotland you’ll be charged around £7000 per year for four years (£28,000).

If you’re Welsh…

…the government ensures you’ll pay no more than £3810 per year anywhere in the UK: £11,430 for a three-year degree or £15,240 for four years.

If you’re from Northern Ireland…

…you’ll pay no more than £3810 per year studying at home (£15,240 for four years), but be liable for the RUK fee in Scotland (£28,000 over four years) and the full fee in England and Wales (up to £27,000 over three years).

If you’re Scottish…

…the Scottish taxpayer will cover your fees in full if you study at home, but you’ll be liable to pay the full fee in England and Wales (up to £27,000 over three years) and Northern Ireland (up to £36,000 over four years).

So:

If you’re English, it makes little difference in terms of fee liability whether you study in England, Wales or Scotland – but you’ll  have an extra year of living costs to cover in Scotland if your Honours degree takes you four years.

If you’re Northern Irish or Scottish, it makes sense to stay at home.

And if you’re Welsh, your annual fees will be the same in any of the Home Nations, but you could have an extra year’s worth of living costs to cover in Northern Ireland and Scotland.

So how have these different fee regimes affected student numbers and cross-border flows in recent years?

Student numbers in the UK

Figures from a House of Commons Library report demonstrate that there have been three periods since 1994 when overall applications to university in the UK have fallen –  “in 1998 when tuition fees were introduced, 2006 when variable fees were introduced and 2012 when the cap was lifted to £9,000” (p.9). This will hardly be surprising. What might surprise you is that applicant numbers recovered almost immediately on all three occasions – and exploded after the introduction of variable fees. This chart shows the number of applicants increased by about one-third between 2006 and 2010.

So it would appear that demand for higher education is affected negatively by changes to fee regimes, but only very briefly. Otherwise demand is strong and growing.

It is useful to break these UK-wide figures down by Home Nation to see if this picture is replicated. I’ve used the 2014 UCAS End of Cycle Report to analyse the data since 2010/11.

The following figures therefore refer to enrolments rather than applications (which I will address later).

England

As you can see from Fig. 1 below, the number of new English students studying at English universities declined significantly in 2012 (when the cap on tuition fees was increased to £9000) before bouncing back straight away:

Fig. 1 – English entrants to English universities

(N.B. for this and every subsequent chart, click on the blue title above to download a higher resolution version)

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But did the introduction of £9000 fees affect the decisions of English students about where to study? It doesn’t look like it. Fig. 2 shows where new English entrants chose to study over the past five years. (Please note where the x-axis begins!):

Fig. 2 – Country of study for new English entrants

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As you can see, almost 96% of English students studying in the UK remained in England across the five-year period.

The tiny percentages of English students studying in Scotland and Northern Ireland disguise a large increase in raw numbers, which is worth acknowledging. For example, there were 3245 English entrants to Scottish universities in 2011, compared to 4675 in 2014 – a 44% increase. Meanwhile the number of English students entering Northern Irish universities more than trebled from 220 to 680 between 2010 and 2014.

These are no doubt intriguing personal narratives, but they make little difference to the overall picture. Between 2011 and 2014, the proportion of English students remaining at English universities rather than studying elsewhere in the UK decreased by 0.1%.

Wales

You’ll recall from the previous section that the Welsh Government covers the tuition fees of Welsh students beyond the first £3810, wherever in the UK they study. You’ll also recall that they’d have to study for an extra year if they studied in Northern Ireland or Scotland.

The data for the last five years reflect this in interesting ways. Firstly, there was no negative impact at all in 2012 when the fee cap was raised to £9000, since Welsh students were not liable to pay any more than they were already paying. In fact, the number of new Welsh students entering British universities actually rose that year, and the general trend has been upwards since 2011.

However Fig. 3 illustrates the strongest trend in Welsh higher education over this period – the movement of Welsh students to England:

Fig. 3 – Country of study for new Welsh entrants

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As you can see, there has been a significant swing from 65% of Welsh entrants remaining in Wales and 35% studying in England, to a 60:40 split just five years later. There is no financial penalty for Welsh students studying in England as opposed to Wales, so they might as well. (Almost no Welsh students study in Scotland or Northern Ireland, where they’d have to support themselves for an extra year).

Northern Ireland

I found this one a bit confusing. As you’ll recall, fees in Northern Ireland are considerably lower than the top fees in England and Wales (about £15,000 over four years rather than £27,000 over three). But about one-quarter of new Northern Irish students entering UK universities opt to study in England!

This figure has remained fairly static over the five-year period, while there has been a modest reduction in Northern Irish enrolments at Welsh and Scottish universities, resulting in a slight increase in the proportion of students studying at home (to around 68% in 2014) as is reflected in Fig. 4 below.

Fig. 4 – Country of study for new Northern Irish entrants

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You’d think the £12,000 fee differential between Northern Ireland and England would discourage so much student movement, wouldn’t you? Maybe there just aren’t enough university places to satisfy demand?

Scotland

Meanwhile, 95% of new Scottish students opt to stay in Scotland and enjoy their free university tuition, so they aren’t daft. Most of the remaining 5% of new Scottish students move to England. There was a very modest drop in the proportion of new entrants studying in England after the fee cap was raised south of the border, but the most notable aspect of the flow of students from Scotland to England is how steady it has remained throughout the last five years.

Fig. 5 demonstrates this stratification clearly:

Fig. 5 – Country of study for new Scottish entrants

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Summing up

So what do these data tell us?

1. Scottish students generally stay in Scotland, apart from one in twenty who will head south of the border to England regardless of the fees situation. It’s notable that the proportion of students heading to England wasn’t affected significantly by the rise in fees south of the border. Meanwhile, overall numbers of new Scottish students are fairly static.

2. Welsh students have become slightly more adventurous over the last five years and headed across the border to England in greater numbers than before, since they don’t have to pay any more money in England than at home. They aren’t bothered about heading further afield though, since they’d have to study for an extra year in Scotland or Northern Ireland. There has been an increase in Welsh student numbers.

3. Northern Irish students continue to study in England in substantial numbers, despite paying a significant financial penalty for doing so. Overall numbers of Northern Irish students have risen in recent years.

4. Numbers of new English entrants to university fell markedly in 2012 when the fee cap was raised, but recovered immediately and continue to rise. English students are even more likely than Scottish students to study at home. The proportion of new English students studying elsewhere in the UK has barely moved in five years.

Applications

Before changing tack, it is worth noting the trend in student applications to study in higher education, as opposed to actual enrolments. It may be argued that the application figure reflects demand for higher education more subtly than the final enrolment figures, since the latter data are constrained by the availability of university places.

Fig. 6 shows numbers of university applications by English people over the last five years:

Fig. 6 English applicants for university study in UK

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As you can see, university applications by English people fell from almost 500,000 to just over 450,000 in 2012, when the fee cap was raised. Applications have grown in subsequent years, albeit not quite back to the 2011 level.

I’ve separated the data for the other Home Nations into Fig. 7 below, to make the chart easier to read:

Fig. 7 Sco, Wales, NI applicants for university study in UK

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As you can see, applications are fairly steady in the rest of the UK. There’s a slight downward trend in Scotland, and a slight upwards trend in Wales and Northern Ireland, but it’s difficult to claim any major shifts in underlying demand for higher education in these three nations over the past five years.

The increase in Northern Irish applicants matches the increase in student numbers from that country, but the increase in Welsh student numbers outstrips the increase in applicants. Maybe the quality of university applications from Welsh students has been improving?

Sub-conclusion

Demand for higher education shows some sensitivity to price changes. The number of English people applying for university study in the UK fell by 8.5% when fees were raised in 2012, and while this figure has risen in the two subsequent years it still hasn’t fully recovered. That said, the number of English new entrants to UK universities (that is, the number who get a place) has recovered to and then exceeded pre-2012 levels. The size of the university population is therefore growing faster than the pool of applicants – at least for now.

Scottish student numbers are more or less static, which one might expect given that Scottish students have not had to adapt to a changing fee regime in recent years. The same goes for Welsh students, whose fee burden is held down to some extent by the Welsh Government with the result that their university ‘price’ has remained steady.

I still can’t get my head around the 25% of Northern Irish students who opt to pay substantially higher fees in England than they would do at home…

But when you add all this together, the unavoidable conclusion is that people seem to be prepared to pay tuition fees at the level they are set, even if they might take a year to adjust to a new fee regime.

Arguments for and against tuition fees

So those are the facts of the matter. But are fees justifiable in the first place? This is a complex question. I want to consider it from the following four angles, which I recognise are far from exhaustive:

1. Implications for society (focusing on social mobility);

2. Implications for individuals (focusing on rights);

3. Implications for universities (focusing on income); and

4. Implications for governments (focusing on expenditure).

1) Tuition fees and social mobility

You may have noted a deliberate mistake in much of the above discussion. To keep things simple I assumed that students were liable for the full fee appropriate to their domicile status, but in fact they might not be. Universities operate fee waiver schemes to reduce the fee burden on students from low income households. The schemes I’ve looked at online are hardly earth-shattering in their generosity, but they are something.

Nevertheless, the Scottish Government’s position is that charging Scottish students any fees at all is always wrong, and the argument one hears most often in support of this view is that fees act as a disincentive for poor students to go to university. This argument generally rests on the idea that access to university promotes social mobility for people from poorer backgrounds. Therefore, tuition fees will disincentivise the poor from accessing university, and thus undermine social mobility.

The UCAS report cited earlier unsettles this taken-for-granted view. Figs. 71-3 on page 74-5 of the report outline changes in the social composition of 18-year old entrants to the student population in each of the Home Nations since 2006.  This is a snapshot of school-leaver activity so it doesn’t give a complete picture of the student population, but it’s still worth considering.

In England, the proportion of the new 18-year old student population drawn from the poorest fifth of society increased every year between 2006 and 2014, including in 2012 when fee levels rose. In the other Home Nations also record an upwards trend (albeit on a more bumpy path) over this period.

Notably, the proportion of new 18-year old entrants to the student population drawn from the most affluent fifth of society decreased sharply in 2012, before recovering again.

Fig. 73 is perhaps the most interesting of the three charts. It shows the ratio of new 18-year old students drawn from the poorest fifth of society compared to the richest fifth of society. The downward trend means that the ratio has become more balanced in all four Home Nations since 2006 – that is, each student population contains a more equitable distribution of poor and rich 18-year old entrants now than it did in 2006.

In England and Northern Ireland, 18-year olds from the richest fifth of society were about four times more likely to be new entrants to university than those from the poorest fifth in 2006 – whereas in 2014 they were about two and a half times more likely. Still not an equitable distribution, but much better than it was. Meanwhile in Wales, the 18-year olds from the richest fifth of society were about three and a half times as likely as the poorest fifth to enter university in 2006 – and this figure also dropped to two and a half times as likely in 2014. Therefore rich 18-year olds are 250% more likely to enter university than poor 18-year olds in England, Wales and Northern Ireland, where fees are charged.

In Scotland, rich 18-year olds were three and a half times more likely to enter university than poor 18-year olds in 2014, falling from five and a half times more likely in 2006. So in supposedly socially-just Scotland, with its long tradition of valuing education, and no fees, the 18-year old university population is considerably less representative of society than it is elsewhere in the UK.

Just to drum home that message: rich 18-year olds are 250% more likely than poor 18-year olds to enter university in England, Wales and Northern Ireland (where fees are charged). Meanwhile, rich 18-year olds are 350% more likely than poor 18-year olds to enter university in Scotland (where no fees are charged).

The other point to emphasise is that the 18-year old student population in all four Home Nations is becoming more socially representative over time. This trend was unaffected when variable fees were introduced in England.

So are tuition fees a barrier to social mobility? Well, there is no evidence from these macro figures that school leavers from poorer backgrounds in England, Wales or Northern Ireland have been dissuaded by tuition fees from going to university. The proportion of the school-leaver population entering university from poorer areas has increased everywhere, more or less year on year, since 2006, and the ratio of poor-to-rich entrants has narrowed.

Meanwhile in Scotland, the poor-to-rich ratio has also narrowed but it remains much wider than elsewhere in the UK. Nor has the ratio narrowed any faster than in other Home Nations. The student population has become more socially representative in all four Home Nations since 2006, at broadly equivalent rates. Free university tuition in Scotland has not accelerated this trend.

There’s a danger of reading too much into macro figures so I’ll try not to over-claim here. But it seems reasonable to suggest that the social mix of the Scottish university population (at least among school-leavers) has not evolved any differently to the equivalent population in the rest of the UK, despite fees being scrapped in Scotland, maintained in Wales and Northern Ireland and increased in England.

2) The right to free tuition

Arguments about tuition fees are frequently articulated in terms of a right to free university education. It’s worth reflecting on whether such a right does or should exist.

To help establish this, let me introduce you to Wesley Newcomb Hohfeld. Hohfeld wrote in the field of jurisprudence and is best known for his analytical work distinguishing between different types of rights. For Hohfeld there are four categories of rights that are often conflated but actually operate quite differently. They are, respectively, (i) claim-rights, (ii) liberties, (iii) powers and (iv) immunities. I’ll explain the differences briefly.

(i) A claim-right is something that someone else has a duty to grant – that is, in order to realise a claim right, someone (indeed, everyone) must do something. The example often given is the right not to be killed, and the corresponding duty not to kill someone.

(ii) A liberty is the privilege to do something that would normally be a breach of a duty – that is, it is the opposite of a duty. An example would be the liberty of a soldier to kill an enemy combatant on the battlefield.

(iii) a power is the ability to change a legal relationship. For example, if you normally have the right to free movement, but the state withdraws this right after you are found to have committed a murder outside the battlefield, the state has exercised the power to change that legal relationship.

(iv) finally, an immunity is where there is no power – for example, if the state wants to exercise its power to remove your freedom of movement on account of that murder you committed, but can’t because you’re a state diplomat.

The right to free university education seems on first inspection to be encompassed most plausibly by (i) claim-rights. That is, an individual within a society has the right to claim a free university education, and the state has a duty to provide this.

However, the quote from Alex Salmond above arguably elevates the right to free education to (iv) an immunity, and I think this is the basis on which much of the discussion of tuition fees rests. People (the argument goes) should be immune from the power of the state to change the fee-basis of their university education. Enshrining this at the constitutional level would secure the right to free education as an immunity held by all individuals against the state.

Meanwhile English universities can exercise (iii) power (in a nice way) to vary the fees charged to students, depending for example on their financial circumstances.

Notwithstanding the above, I think the language of rights might be better suited to debates around university admissions, rather than fees. I’ll set this out below to augment the above discussion.

(i) One might argue that universities should have a duty to offer university places to students meeting the entry criteria, and applicants have a corresponding claim-right on a university place.

(ii) Equally, one might observe that universities are at liberty to reject any candidates they like, and applicants have no guaranteed right of access. The converse of this is that universities also have the liberty, rarely exercised, to vary entry requirements to help poorer applicants access university study.

(iii) Universities certainly have the power to withdraw offers or kick students off their courses at any time.

(iv) And what’s more, the removal of state funding for teaching in England and Wales could be said to render universities effectively immune from government influence over admissions.

The key point here is that there are three sets of legal relationships at stake here – (a) the relationship between the individual and the university; (b) the individual and the state; and (c) the university and the state.

(a) Applicants may then wish to hold a claim-right against individual universities, who would have a duty to consider the applicant on a fair basis. A right has to be realisable in court in order to be meaningful, so if government legislates on fair access then individuals can take action against universities if their rights are infringed.

(b) The state always has the power to change the law on tuition fees, unless (as suggested above) free tuition becomes enshrined in the constitution as an immunity held by the individual against the state.

(c) The state can exercise power over universities through legislation, but its capacity to influence university policy has been reduced significantly in England and Wales with the removal of state funding for teaching. By contrast the Scottish Government might be argued to hold a degree of power over universities to insist on (for example) affirmative action to support applicants from poorer backgrounds.

The most beneficial rights regime from the perspective of the individual, then, might be as follows:

  • University admissions principles are put on a legislative basis to ensure fair treatment, with individuals holding claim rights against universities to be treated fairly;
  • State funding of universities ensures the power of the state to require universities to vary admissions requirements in particular instances to support people from disadvantaged backgrounds; and
  • Free tuition is guaranteed in constitutional law as an immunity.

In reality, however:

  • the Office for Fair Access (Offa) and the Scottish Funding Council (SFC) provide guidance and attempt to influence university admissions, but ultimately universities can admit or reject anyone they like – rarely to the benefit of the poor;
  • the state will struggle to exert influence over universities now it doesn’t fund their teaching in England; and
  • we don’t have a written constitution in the first place, let alone a constitutional guarantee of free tuition in Scotland or anywhere else.

A complex issue, then.

3) Universities in the marketplace

Pity the poor university Principals trying to steer a path through all of this, eh?

I’m not sure if there ever was a golden age of academic freedom, but it certainly isn’t now. Universities, increasingly exposed to market forces, have been subjected in recent years to a curious form of democratic centralism. Increasingly desperate cries of anguish are heard from beleaguered staff and students; and not just the ones you might expect.

It’s fair to say there hasn’t been a tremendous stampede of university Principals rushing to oppose fees in England, Wales or Northern Ireland (although it’s arguably a little different here in Scotland). It’s not hard to see why. University Principals benefit from tuition fees in two obvious ways: (i) top-level fees are higher than the amount previously received from the state per taught student, so coffers swell, and (ii) if the state is not funding teaching then it’s easier for universities to ignore the government. And there’s an additional spin-off benefit for the modern Principal: if everyone is paying, then everyone’s a customer and the university looks more like a business – which might make it better at attracting even more lucrative international students.

I would suggest university Principals are familiar with the trends I outlined earlier in this piece, to the effect that demand for university study is fairly inelastic. When the cap came off in 2012 in England and Wales, universities fell over themselves to charge the full £9000 fee, or very close to it. You might have thought universities would operate like firms in a competitive marketplace and seek to defeat each other on price, but the high fees charged across the board suggest the higher education sector works according to different dynamics.

It actually looks like a monopoly, since the ‘firms’ effectively cooperated to maximise income by not competing on price. The price was maintained across the sector after 2012 as if run by a cartel. It’s a bit like trying to buy a beer at a music festival – it’s £6 at every stall. And if you are the consumer/ student – where are you gonna go instead?

And one characteristic of monopolies is the artificial holding down of supply to create excess demand. If higher education actually operated competitively then there would be lots more universities seeking students out. However there are significant barriers to entry for new providers (such as demonstrating quality assurance, financing a staff base, establishing a reputation and attracting students) which makes such a development rare. Overall student numbers have also been capped for some time (although it remains to be seen if the removal on the upper cap on student numbers in England will alter this situation).

These points explain in part why the language of entrepreneurship espoused by senior managers rings hollow with lecturing staff – universities are not operating in an authentic market situation. That is not to say they should, which is a different argument, but they definitely don’t.

The situation in Scotland is made more interesting by the very different fee regime across the border. I noted above that the Scottish Government pays universities (via the SFC) about £7000 per Scottish/ EU student to fund their teaching. This leaves a funding gap of about £2000 per student compared with the maximum amount charged by English universities. If you have 10,000 students, you’re missing out on £20m of teaching income compared with a similar-sized English university. So you can appreciate why one Principal might like to have another look at this.

I might have expressed some skepticism about the nature of the higher education market, but there can be little doubt that a £2000-per-student funding differential will start to have an impact on the financial clout of Scottish universities versus their equivalents south of the border. This is where the cross-border dynamics become interesting: flows of students might not have changed much over the last five years, but flows of money into university coffers must have done.

The key point here is that differential fee regimes across the UK have the effect of dramatically altering the financial power of universities in one Home Nation versus another, with implications for what they can then spend their income on. As such, national higher education systems line up against each other in a strange existential marketplace created by the different methods by which university teaching is financed in each Home Nation – something they can’t do much about. At the same time, universities within those national systems increasingly present themselves as dynamic businesses, even though they actually seem to exist within an uncompetitive domestic higher education cartel.

Is this an argument for or against tuition fees? Neither really, but it might be an argument for harmonising fee income across the UK, however each Home Nation elects to generate those fees.

4) Is all of this actually worth the hassle for the government?

Whither the state in all of this?

The government (I appreciate it’s not the same thing as the state) has a number of reasons to be interested in the condition of the higher education sector. It’s a major employer, for one; there were nearly 400,000 people employed directly by Higher Education Institutions in 2013/14, including academic and non-academic staff.

The higher education sector has a significant impact on the UK economy in other ways too – Universities UK calculated that the sector generated over £73bn of output and £27.9bn in revenue in 2011/12 , when multiplier effects are taken into account. You might expect Universities UK to overclaim a little here, but I daresay the authentic economic impact of our universities is still enormous.

The role of our universities goes deeper than this, though. Universities have been central to government efforts to raise UK productivity for some time now. Whether or not that particular agenda has been successful, the transformation of Britain’s economy over the last thirty years has been made possible by the expansion of the university sector into a mass education system, producing a constant supply of well-educated graduates.

The repurposing of universities as drivers of economic growth helps explain some of the despair in humanities departments across the country. As government has prioritised STEM (science, technology, engineering and mathematics) subjects as good economic bets, humanities subjects have been deprioritised in turn. This might not be such a problem if English universities, freed from the obligation to listen to government as attentively as they did when it funded their teaching, were minded to support humanities regardless of the perceived benefits to the economy of STEM development. But they appear even less keen to subsidise subjects areas in the critical-radical tradition than are the government.

The shift away from state funding of university teaching in the UK (apart from Scotland) might therefore be seen as both good and bad from a government perspective. Requiring students to fund their own teaching saves the government a great deal of money (sort of, as we’ll see). £9000 fees have also allowed English and Welsh universities to increase their income, which enables them to invest more in research, which may have positive consequences for the economy. On the downside, as I keep repeating, the state risks losing its leverage over university strategy since government is no longer decisively involved in financing the activities of higher education institutions (again, except for viewers in Scotland).

So the government isn’t really involved in university teaching in England any more (and less so than before in Wales and Northern Ireland), but the state definitely still is. After all, students aren’t actually paying for their tuition upfront. Students apply to the Student Loans Company for financing to cover the cost of their fees. The SLC is owned by the Department of Business, Innovation & Skills (with a bit of help from devolved administrations) and it pays out an absolute fortune each year. Fig. 8 below (based on figures from page 6 of this report) outlines the scale of these payments.

Fig. 8 – overall value of student loans in England, 0607 to 1415

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In England alone, as you can see, the total value of tuition fee loans awarded each year has risen from £3bn prior to the lifting of the tuition fee cap, to nearly £8bn just three years later. It is anticipated that this figure will rise again in 15/16 before plateauing – unless fees rise again. So the best case scenario in England is that the state sets aside about £8bn per year to fund tuition fee loans, a significant chunk of which it is unlikely ever to see again due to inflation over the repayment period.

So who gains? The individual English student certainly doesn’t. Just look at the average size of the loans awarded to each student:

Fig. 9 – average value of loans awarded in England, 0607 to 1415

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Students were applying for about £3000 each per year back in 11/12, but it’s nearly £8000 each now. And if you restrict the analysis to students who began their courses in 12/13 or later, the average loan is now well above £8000. So the average student will be liable to pay back about £24,000 of debt to the Student Loans Company, and that will take a very long time.

English and Welsh universities certainly do gain, on the other hand, since they get their fee income upfront from the state via Student Loans Company.

And as for the government? Well, I assumed student loans would appear on the national accounts as government assets (since loans offered by banks are accounted as assets on their balance sheets) but that doesn’t seem to be the case. Indeed, the government has gradually been selling off older parts of its loan book to the private sector to reduce public sector net debt. So these are state liabilities (the loans I mean). For an exhaustive analysis of the total value of the loan book (soon to be £100bn!) I encourage you to read this.

I genuinely thought tuition fees and the loans to cover them must be a clever accounting trick, taking teaching expenditure off the books and recasting it as valuable state assets, but that’s not the case at all. And old loan books are being sold off because it’s so annoying to chase up outstanding debt. Is it worth the hassle for the government?

In Scotland the cost of teaching is met by the tax-payer, so there’s no prospect of the fees coming back into the public coffers, but at least things are simpler. And some people my age have even managed to pay off the student loans they took out to feed themselves!

But there’s another angle on all of this, and a crucial one. From the perspective of government (apart from in Scotland), what might the consequences be of loading up a generation on massive debt? On current levels, you repay £94 per month to the SLC if you’re on an annual salary of £30,000 per year, which is above the average UK salary but in the rough ballpark for the average graduate salary. Even if no interest was charged on your debt it would take you more than 20 years to pay back a £24,000 loan.

What will this do to people’s attitudes to debt, or to saving, or to their credit viability in the future?

People will live with the legacy of these loans until middle age. Is that a sensible basis for funding higher education?

An alternative approach to injecting additional money into the higher education system was trialed disastrously in Scotland between 2004 and 2007. The Labour government (remember them?) introduced a Graduate Endowment system, which required graduates to pay £2000 upon completion of their degree as a sort of thank-you for the opportunities they’d enjoyed. To give the system its due, the idea was that students shouldn’t have to pay fees upfront, but should make some sort of contribution after they finish studying since they’ll probably benefit financially from their graduate status.

The trouble was, students had to pay this money immediately after graduating. How many graduates do you know who march straight into a job and have £2000 lying around to donate to the government? I certainly didn’t. The same students were already skint from (a) studying full-time for four years, and (b) existing off a student loan. So it was a ludicrous scheme and highly likely to dissuade people from studying.

But perhaps the principle of a post-qualification contribution is not such an insane one. I don’t float this as a proposal I necessarily support myself, but there may be something that could be done in terms of graduates paying a marginally higher rate of income tax above a certain threshold, and the revenue being ringfenced to support widening particpation in higher education. Maybe. Graduates might end up contributing a similar amount of money to the Exchequer over their life course as they are currently projected to repay to the Student Loans Company, but it wouldn’t actually sit on their record as personal debt, and it could be presented as genuinely giving something back. Maybe.

Now, that idea isn’t going to pay £9000 per year per student to English universities, but it might be a more ethical means of topping up the return of state funding for higher education. After all, the state is pretty much bankrolling teaching as it is, since it won’t see much of its tuition fee loan money back, so it might actually be cheaper to bite the bullet and fund universities in partnership with graduates. Maybe.

Conclusion and a whimsical thought

Each of the four Home Nations has a distinctive approach to funding university teaching, with differing consequences for universities, students and government. So what can we say for sure about tuition fees?

Well, students pay them, no matter how expensive they are. Why? Well, maybe because they don’t have much choice. Where else can they go to get a degree?

What else? Well, they are certainly too expensive in England (and Wales, albeit mitigated by government subsidy), because many students will almost certainly never be able to repay the loans they are required to take out to pay them.

And the government is coughing up the money to fund the loans that pay the fees that go to the universities. Despite this, government has surrendered some of the influence it once had over universities as their paymasters (in terms of teaching at least).

And in Scotland we don’t have fees, but that hasn’t really made a huge difference in terms of social mobility relative to the rest of the UK.

So what would I do? Well, as you’ll have guessed, I’d like to see the following:

1. state funding of university teaching reintroduced across the UK at equal levels in each Home Nation.

2. a modest graduate contribution introduced to augment university teaching income, ringfenced to support widening participation work.

3. a student loan jubilee.

I’ll finish by offering the following positive suggestion, which emerged from many afternoon office conversations with my former colleague and eternal friend Brook Yu, to whom 50% of the blame can be attributed.

If you want to promote social mobility, the information above suggests tuition fees don’t seem to make much difference either way. Instead, the way to promote social mobility is to think seriously about the structure of our society.

Allow yourself to conceive of the higher education system as an actual system, in which the government (as a major funder) has a legitimate interest. Why don’t we stop pretending to be interested in widening participation, and use government policy to compel universities to take it seriously?

A radical but pleasingly simple approach would be to guarantee a set number of university places to the twenty (or however many) most able pupils from each school in the UK each year, which they can use at any time in their lives. So, if the best twenty pupils in one school average three Bs between them, and the best twenty in another average three As, they all get a university place – and it’s up to them where they study.

The immediate consequence of such a shift would be to reveal to universities the genuine ability and potential of school-leavers from disadvantaged backgrounds, as well as the urgent need to take those students seriously. This would have a transformative effect on how universities operate, and (more importantly) on the life chances of working class young people. And in the medium and long term you might see the parents of less gifted but exam-savvy middle-class children relocate to less affluent areas in the hope of sneaking one of the university places from a less successful school. And there you have it – genuine social mobility in one fell swoop.

Such a scheme would have to run alongside a fair (and potentially centralised) admissions process, which would govern the allocation of the remaining student places each year. However beneficiaries of the twenty-places-per-school scheme would be indistinguishable from other students, and therefore not stigmatised.

And all universities would have to accept any applicant they got in the twenty-places category. Imagine the conversations at Oxbridge!

I daresay there are all sorts of holes in this theory, but if you’re serious about social mobility then such an approach will have a much greater progressive effect than you’ll get from merely tweaking the tuition fee system.

Across most of the UK, the higher education cartel currently works for the universities alone. Let’s make it work for society.

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