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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Today, The Guardian reported the publication of a report out today from the Higher Education Policy Institute (HEPI) with the headline ‘“Less than half’ of tuition fees spent on teaching at English universities‘. 

The headline here is more than a little misleading as the article goes on to report how HEPI’s paper shows how almost all of the tuition fees charged to students at English universities are spent on student-facing costs.

However, to understand this issue, we also need to remember some other stuff about fees.

When fees were tripled to £9k, the intention was that 1/3 of the income over £6k would be spent on access measures (bursaries, outreach, etc). This was never made a specific requirement, but it would amount to 11.7% of what is now a £9,250 fee.

It seems that, while universities do spend a lot on access, there’s a significant underspend compared to this intended level. That’s bad news for access but good news for current students who get more of the the direct value of the fee that is paid on their behalf.

‘Paid on their behalf’ is important here. In the debate about whether students get value for money, we should remember that whatever graduates end up paying, it’s very unlikely to be £9,250.

For some it will be far more. For most it will be far less. The Government reckons about 45% will never be paid by the graduate: the amount they will at some point pay equates to around £5,087 per year of study.

In other words, students pay barely anything more than the direct spend on their teaching and definitely far less than the amount that is spent on things that directly benefit them. That’s good value for money in anyone’s book.

I am not saying that the system of tuition fees is right or fair. Others – taxpayers, employers – get value for money from higher education and the balance of contributions they make may not reflect that equitably.

We should also note that the split of how fees are spent will vary hugely between courses. For an engineering student, the direct cost of teaching will be far higher than for a philosopher. Indeed, some data suggests costs would exceed the whole £9,250 for the engineering course.

That doesn’t mean the philosophy student gets ‘bad’ value though. On average they earn less than engineers, so – if they do – they end up paying less.

It also needs to be pointed out that not all value is measured in money. In fact, what matters most is not.

Two final reflections: I wholeheartedly support the report’s recommendation that ‘student fee’ is more appropriate terminology than ‘tuition fee’ and this paper slam dunks the proof of this.

This level of transparency about how funds are spent is really important. Some of the truths may be awkward, but it’s more awkward to avoid them. The truth here actually turns out to be universities’ friend.

Nick Hillman, Director of HEPI, has argued this last point well in this blog, quoting medieval canon Henry Knighton committing one of history’s worst mixed metaphors when he objected to the translation of the Bible from Latin into English saying, ‘The jewel of the church is turned into the common sport of the people’.

By the way, congratulations on a great piece of work to its authors: Nick Hillman, Jim Dickinson, Alice Rubbra and Zach Klamann.

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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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Over several months in 2012, I was fortunate enough to be invited to participate in The 1994 Group’s annual Policy Forum discussing some of the most pressing issues in higher education. At the end, they invited me to write a blog outlining the conclusions I had reached from the discussions. This was orginally published on the 1994 Group website.

The right tools for the job

Last year, Stefan Collini, the great Cambridge academic, published a much-publicised book titled What are universities for? On the first page – the first paragraph even – he abdicated from answering the question. Without setting out to do so, the 1994 Group Policy Forum, of which I was proud to play a part, found itself needing to rise more adequately to the challenge.

    Do universities exist for the intellectual enrichment of our nation, of our culture, rising through teaching into research, always unencumbered by quotidian concerns?

    Do they exist as labour market factories, churning out graduates pumped full of transferrable skills and marked ‘approved’ by qualifications?

    Are they partners with industry, the powerhouses of innovation that stoke the economy?

    Or perhaps universities are engineers of social change, meeting the promise of youth with opportunity?

    The answer – or my answer, at any rate – is that universities are all of these things and no doubt much else besides. (We should be grateful that have the simple word ‘university’ as shorthand.) And, given that we’re trying to wield a Swiss Army Knife, how do we design it to do all its jobs effectively.

    For starters, we need to create tools that are fit for purpose.

    The diversity of our sector – of the institutions, the courses, the students, the academics – instantly equips us with an armoury of tools. We need to protect that diversity from forces that seek to erode the richness and creative approaches that fill niches and answer needs.

    Marketisation, a term that strikes terror into many an academic’s heart, can enhance this. Look at the innovative approaches of BPP and Pearson who have been forced to seek out market gaps and cater for non-traditional needs.

    But before anyone mistakes me for a rabid free marketeer, I should point out that, as often as not, the market in HE is a blunt instrument driving conformity. University league tables, for example, are an insidious but addictive mirage enticing institutions to ape the trappings of our most revered universities. Those universities deserve reverence, but we shouldn’t build a sector encouraged to palely imitate a single blade, when what we need is a whole pocket-knife.

    These issues are set in high relief within The 1994 Group itself, which faces a real challenge to demonstrate its distinctiveness, to stand up for excellence in more than just research, but also in the wider student experience – the teaching and learning experience in particular.

    One example of just a bold and admirable demonstration would be for the 1994 Group – or any other mission group for that matter – to be the first to embrace the call of the Higher Education Academy and NUS to say that every teacher – or even every new teacher – we employ shall be qualified to teach (which may involve recognising and celebrating existing skills as much as demanding new qualifications).

    The University of Huddersfield made just such a commitment in 2011 by announcing its aim to ensure all its academic staff should achieve HEA Fellowship before the end of this year. They have made good progress towards this target and if one university can do it, why not a group of leading institutions?

    As well as tools that are fit, we need tools that work together. It’s no good if the corkscrew gets in the way whenever you want to remove a stone from a hoof.

    So it is with finance, for example. The funding changes of 2011 claimed to set the needs of students at ‘the heart of the system’, empowering them to decide what they want to study, elevating them to infallible customers. Meanwhile, their interests have been pitted against those of other those other HE consumers, employers, hungry for certain skills, but facing a menu offering only those they don’t need. [See note 1]

    One answer to this is better information, advice and guidance (IAG) for prospective students – and for the big recruiters (who, all too often, use the combination of Russell Group, 2:1 and STEM as the only markers of a good candidate. No wonder they struggle so hard on diversity issues). Perfect knowledge makes for a better market.

    Unfortunately, the Government has driven a wrecking ball through our IAG services. It is not necessary after the age of 16 for a school or college even to mention the word ‘careers’, let alone provide expert, independent and impartial guidance. Michael Gove in particular claims to be eager to educate students for careers, but has done almost everything in his power to avoid educating students about them.

    The Government has axed AimHigher, axed Connexions and axed Next Steps. In their place is the National Careers Service – a non-specialist website and helpline that most young people don’t even know about, let alone are they motivated to use it. Whenever IAG requires young people to be proactive, it will always favour those who would not get left behind in any system and it will abandon those who need help most: the ones who don’t know that questions need to be asked, let alone what those questions are and, still less, the answers.

    The responsibility of IAG has instead fallen on the universities as a by-product of their access arrangements. After forking out for tuition fee waivers (which reek of red herring) and for bursaries, many universities have spent their remaining funds for fair access on outreach activities in local schools. This is good news. As Les Ebdon of OFFA has said,

“Let there be no doubt – sustained, well-targeted outreach can be very effective and we want to see more of it.”

How to produce an access agreement for 2014-15, Office of Fair Access, January 2013

    Sadly, in areas of the country without such universities, we see forgotten pockets of young people. Also, with the best will in the world, universities are hardly impartial, nor even necessarily expert about the right options for a school-leaver. For some universities, outreach has been little more than an excuse to channel marketing costs through their fair access budget. [See note 2]

    Similarly the Key Information Sets and the whole of David Willetts’ data transparency agenda are not the right tools. Make no mistake, these are welcome initiatives. They will provide more indicators for universities to continue to drive up their standards, but they will not transform the landscape. A cynic might argue that they are ideological cover for charging students more – so long as you make sure students can know what they’re getting for their money, it’s justified. Or justifiable. Never mind that all this data is meaningless in a guidance vacuum, especially to the most disenfranchised in society.

    This is not the personalised support our young people need. If the Government won’t acknowledge that careers education is one of the best investments it can make on behalf of taxpayers, then everyone else who stands to lose out from poorly informed students needs to step up to the plate. Universities and employers need to collaborate to invest in a national initiative to take IAG into our schools and colleges. I run one such scheme, but it is far from the only one, nor sufficient on its own. [See note 3]

    Nevertheless, however right we get our IAG, we will always be King Canutes wailing at the tide if we do not go with the flow of demand and supply, which means channelling them, using the tidal force to drive change. We need to tie what universities can offer students to the needs of the labour market.

    One way to do that would be to fund student places through linking students’ ability to work and earn to the funding of the university that prepared them to do so (such as a tax charged directly to employers and hypothecated back to the graduate’s place of study, instead of doing the same indirectly in the form of student loan repayments). This would encourage universities to draw out (an expression from which we derive the word ‘educate’, by the way) employability skills as the natural product of what they do. It would work in the interests of students, of industry, of the economy and of all universities that genuinely foster and develop talent.

    This is what the marketisation of HE really should mean: getting our ducks in a row, aligning interests towards common goals. We need to agree on what universities are for, ensure that the market forces are there to sharpen and shape the right tools and ensure alignment so that tools don’t work against each other.

    The market is not immoral in itself, but neither is it a force for good. It is amoral. We need to decide what we think ‘good’ is and then deploy market forces to do the heavy lifting, because it’s a big and important job and we need all the help we can get.

[1] A leading finance sector recruiter boasted to me recently that they had managed to reduce the time it took for a new graduate employee to add value from a year to nine months. I could not help but wonder why it should be more than nine hours?

[2] See ‘Universities are misspending money that should be spent on access’, The Guardian, Mike Baker, 16/7/2012

[3] Push – see www.push.co.uk

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