Read Fairer funding: the case for a graduate levy (HEPI Policy Note) and, exclusively on this site, Fairer funding: the case for a graduate levy (full proposal).

What I’d like for Christmas:

1. We should abolish tuition fees.
2. We should fund English universities well enough that they can continue to be among the best in the world.
3. We should match graduates and jobs so that they have the right skills to get jobs they want and succeed in them.
4. We should ensure that the nation’s skills gaps are plugged. 
5. We shouldn’t ask the taxpayer to pay for more than the public benefit of higher education. 

Is that really such a big ask? Over decades of fiddling with the funding system for higher education in England, apparently so. That’s because some of my wishes are seen as mutually exclusive.  

The funding of higher education England has been played like a game in which if one player wins, another must lose. For example, if students win and don’t have to pay so much, then the taxpayer loses and has to fork out more.

More usually over the past 30 years, it’s the student who’s lost: the burden of cost has shifted consistently to the student, first through student loans in 1991, then top-up loans, then fees of £1,000, then top-up fees of £3,000 and then, in 2012, a trebling of fees to £9,000. 

The funding system is under review at the moment by Philip Augar at the behest of the Prime Minister (as she is at the time of writing). Leaks suggest the balance may swing back away from the student, but the cost will fall instead on either the taxpayer or on universities in the form of slashed  funding. 

However, there is another player in the game, keeping his gambit very quiet in the hope of not being noticed: the employers. 

For too long employers have escaped making a fair contribution. They would, of course, argue that they do contribute through corporate tax and through salaries (which, on average, are higher for graduates). 

That’s true, but this approach leaves them without any skin in the game. They’re not making their investment work for them. 

I have written a paper for the HE sector’s think tank, the Higher Education Policy Institute on how employers could and should pay a ‘graduate levy’ instead of graduates paying fees. This needn’t cost the employers more and, critically, it would mean they get what they need from higher education far better than at present. 

In the process, it would also eliminate tuition fee debt. It would improve courses and graduate employability. And sure enough, it would fund universities well while costing the taxpayer less.

It sounds too good to be true, so please make up your own mind by reading the HEPI paper or I have also produced, exclusively for this website, an expanded version of the full proposal which also includes fuller explanations and counter-arguments to some objections that have been raised with me in discussion.   

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BBC Radio 4 reported this morning a leak from the current Augar Review of Post-18 Education Funding. They claimed that a ‘source’ had supported a report in The Times last week that the review would propose that tuition fees should be capped at £6,500 and the “shortfall would be made up by capping student numbers”. 

For starters, the way this is worded makes no sense as capping numbers would only make funding shortfall worse, not better because of loss of economies of scale. I put this down to the BBC’s over-simplified description.

More worryingly, this would be a disaster for any course costing more to run. That’s any STEM courses, specialist courses with a small intake, high-quality courses where the teaching is especially engaged and with low staff-student ratios, courses with lots of students from non-traditional backgrounds, and so on. In order words, it would undermine a damaging proportion of what is best about English higher education. 

Even for arts courses it would place greater pressure on unis to pass course costs to students for materials. The National Union of Students did excellent research in 2012 showing huge hidden costs across many courses, such as thousands of pounds for artists materials, for example.

A £6,500 cap would be a way of incentivising unis only to offer badly taught courses in subjects where the skills shortage is lowest.

To solve the shortfall for STEM subjects, the Government would be forced to top up funding through a teaching grant for particular prescribed subjects. Unless this extra funding is sufficiently generous – i.e. it allows universities to subsidise their overheads – they will still have an incentive not to offer as many of those courses. And even if the top-up were enough, it would still be subject to political control and adequate funding would be impossible to sustain.

These proposals would be a triple whammy for disadvantaged students:

1. The student number cap (which BBC couldn’t confirm with their source) would hit them by limiting places. That means sharp-elbowed, richer or otherwise privileged students get to front of queue.
2. Universities would have no money to support their access activities like outreach, bursaries and other support intended to help non-traditional students into and through higher education.
3. This proposal does nothing to address the main problem of debt for students (as opposed to the Governments financial problems or universities’), which is to do with living costs while studying. This, of course, isn’t just a problem for disadvantaged students, but for almost all students and the reason why student disquiet prompted Theresa May to set up this review in the first place.

I could have said it’s a quadruple whammy for disadvantaged students, because it does nothing to address the collapse of part-time and mature study, which are an especially effective way of opening access to higher education to non-traditional students. However, like student living costs, that’s a wider problem too – one that desperately needs to be solved for sake of students and UK’s skills shortages.

Ultimately, a £6,500 cap doesn’t even help the Government financially anyway. The way student loans are accounted, this would just dump more cost in the deficit, although the imminent (or should I say ‘impending’)  review of accounting arrangements by the Office for National Statistics may change this.

These proposals wouldn’t even be a win politically. The only graduates who would benefit would be those who end up earning most, who might end up paying back less. Most graduates wouldn’t see their repayments change – not the amount, nor how long they make them. This would be a thoroughly anti-progressive approach to the problem.

Even in terms of the political optics, this proposals isn’t sufficiently helpful to students to seem good enough. Indeed, it would just draw attention to how much better Labour’s offer to stop tuition fees altogether appears to be.

Fortunately, this proposal is just a leak and it is unlikely to be much like what finally appears. (The interim report is due in January.) There are too many clever heads on Augar’s team to let this be the true shape of their report (I hope).

I suspect this may be a DfE leak either (a) to prepare the ground for something bad, but less bad, (b) to run ideas up the flagpole, or (c) to create reasons to chuck the Augar Report altogether if they don’t like it.

When I say DfE leak, we may be seeing an internecine battle between HE and FE in the Department. The HE officials may be leaking the worst excesses of mooted proposals in order to goad the HE sector into putting up an opposition, which they’ve been pretty poor at over the last few months. HE officials, right up the the Universities Minister, might well be trying to regain ground versus the effective and worthy campaign that FE sector has waged in support of a better deal for them.

We all (universities, government, students, employers, and the whole of the UK) need much better ideas than this.

With that in mind, I have written a paper with a quite different approach to HE funding that will be published by the Higher Education Policy Institute later this month – watch this space.

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If you want to cut fees to win back the youth vote, you start with the courses that give the lowest financial returns, right? At first glance, this looks like a good idea to a new Secretary of State. So we can forgive Damian Hinds for flying the policy kite of differential fees for STEM and arts degrees amid the announcement of the HE and Post-18 Review.

However, after even a moment’s thought, the idea collapses. It is a policy that is misisng a clearly defined intended consequence and yet would undam a flood of unintended ones. 

The problem is that all too often kite-flying ministers get distracted by the pretty ribbons floating in the breeze and they start trying to keep the mess of string and tissue paper aloft. Before they realise what they’re doing, their blue-sky thinking has turned into a bold idea of which they are the champion, a legacy-defining paradigm shift from which any retreat would be a U-turn.

For Damian’s sake – but, more importantly, for the sake of students, of universities, of taxpayers and of the economy – we need to nip this idea in the bud. Cutting fees for arts and social science degrees, but not for STEM, would be bad for all courses across the sector. It’s a direly dumb idea and here are just ten reasons why.

(1) Courses that are cheaper to run, such as arts, but which attract the same fees as more expensive courses make a greater contribution to the infrastructure and the cross-discipline services of unis, such as libraries, students unions, IT facilities, welfare, careers services, and so on. If you take away that contribution, those services would be cut, damaging the experience and outcomes for all students.

(2) Many STEM courses cost far more than £9,250 a year to run. Some receive some extra funding as a result, but often even that comes nowhere covering the marginal cost let alone the real cost. By cutting the funding from other courses that tops up the cost of those courses, ironically, it may well be those most expensive courses that get axed first. 

(3) Even if they weren’t actually axed, the cost of running STEM courses would need to be slashed to eliminate the cross-subsidy. Imagine doing mechanical engineering without ever getting your hands on any machinery or doing chemistry without access to chemicals. 

(4) If graduates from certain courses do genuinely earn less, charging them less does make sense. But, hang on, that’s exactly how the current loan repayment system works already. In fact, it’s designed to ensure you pay back more if earn more and pay back less if you earn less, regardless of what you studied. It seems fairer that a rich politician who studied history should pay more than a physics graduate who went into teaching. (And, by the way, the country is very short of properly qualified physics teachers.)

(5) If you make some disciplines more expensive, there are likely to be students who decide to opt for cheaper courses, looking at the ticket price in front of them rather than the potential financial return, which is far from guaranteed and is at best no more than hypothetical.

(6) The very students most likely to think like that are those for whom the cost is most important, ie. those from the poorest backgrounds. Disadvantaged students may well avoid STEM subjects in order to get a degree on the cheap denying them the supposed higher salaries and social mobility that wider access should be promoting. 

(7) A lack of diversity in the student intake would be bad for those courses and even worse for the career sectors they feed into. Drawing from a narrower pool of applicants is hardly likely to maximise the quality of those applicants. 

(8) Of course, I’m specualting about future applicant behaviours here. It may go the other way and, in practice, rather than courses becoming socially divided, instead the cheaper courses would simply become tarnished, second-class qualifications. (Indeed, ‘Veblen Good’ mentality is exactly why so few institutions price their course under £9k now.) Having an arts degree might single you out for derision – the butt of jokes about ‘only an arts degree, not a proper one’ – or at least for lower employment opportunities. It would exacerbate earning differentials in a spiral that would undermine some of our leading university depts & cutting off talent from creative industries, which just happen to be one of the UK’s most lucrative exports. 

Or maybe I’m wrong: we would get neither the social division across disciplines nor the demonisation of all cheap subjects. We might get lucky. On the other hand, we might get both. The avenue for avoiding disaster is dangerously, evidence-lackingly slim and doesn’t actually to lead to anywhere better than now.

(9) In order to decide which courses should be cheaper, the Government would have to use somewhat patchy data based on past graduates’ earnings. There would be a built-in assumption that employment and pay patterns from past, say, 30 years are a good predictor of the future. When you look at the 30 years before that, they weren’t.

(10) There is a radical shift going on in industry – big enough to be described as the Fourth Industrial Revolution – as automation, artificial intelligence and custom servicing become mainstream. Many in industry are predicting that the skill we’ll need most in future is creativity, at which humans – especially arts graduates – outperform machines and are likely to continue to do so for quite a while. 

It’d be an ironic shame if, in an attempt to turn students into salary-chasing units of supply, the Government ended up undermining our future labour market needs and damaging the lives of the very graduates whose votes they’re trying to win.

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