If we want to change Coalition policy, we have to understand why Tories are so keen on high variable fees. It isn’t about the deficit. As usual, that is a smokescreen. It’s about the Tory philosophy of creating a marketplace in education. It is very important to the Tories that they should saddle the student with debt, hung around his or her individual neck. A graduate tax, which feels less threatening, is not good enough for just that reason. If it isn’t hurting, it isn’t working.
The market achieves two key Tory goals. It forces weak universities to improve or close, because the student asked to pay big bucks for a poor degree which won’t lead to a job will walk away. It forces weak students to improve or get out, because it is too expensive to be a skiving student whose low grade degree will not gain access to decent jobs.
Now, there are all sorts of valid criticisms we can make about the market approach – the divisiveness, the unfairness, the destructiveness. But let’s be honest. The Tories do have a point. Pure funding from taxation does risk feather-bedding second-rate courses and students. Daily Mail hysteria about David Beckham studies and modular courses in clubbing may be hugely overhyped, but academia isn’t perfect. If our universities are going to help us compete in the global market, they should surely be competitive at home.
So how do we achieve the more rational Tory goals without driving fees sky high? Well, here is a possible solution.
First, we should establish a real Student Premium. Not the sop to the poor just announced, but a premium paid direct to every student, as a partial contribution to tuition fees. The Student Premium could be, say, £4K per year, raised of course from general taxation. We should then accept that fees could rise up to (say) £7K. With a maximum net fee of £3K to be paid by the student, the Lib Dem pledge will have effectively been kept.
However, a weaker university might not attract students without keeping its fees down to (say) £2.5K. In that case, the lucky students would get £1.5K back in their own pockets. But the weak university could be struggling. Government teaching grants could and should be cut back to pay for the Student Premium. The weak university which charges only £2.5K may not raise enough money to be viable. So, this means market pressure on the providers, driven by the power of the consumer to choose.
But we’re only halfway there. We have squeezed the providers, but if we are not careful, we will make things too easy for the student consumers. We might even create a perverse incentive in favour of cheap doss courses and against the expensive and excellent. We should remedy that by making the Student Premium conditional on both performance and course quality.
Since this is an initial back-of-the-envelope exercise, the suggestions put forward here won’t be perfect. Please bear with me. If there’s a germ of a workable idea here, the details could be tweaked as required.
The basic idea is that, if you are working on a high-pressure subject like medicine, or at a top university with high standards and fees, then your student premium is safe unless your end-of-year marks are dreadful. However, if you are doing Mickey Mouse Studies at Muddlesfield, your Student Premium is at greater risk. Get a third in your first-year marks, and that £4K will change from a gift into a loan. Get a 2.2, and you will lose the top £500 of next year’s Premium. So it’s not like a graduate tax or a Browne scheme, both of which encourage you the student to be philosophical about the massive debts and expenses that will hit you some time in the remote future, and slope off down the bar to forget about them. By contrast, the “real” Student Premium will encourage you the student to get down to work right now.
What do the Tories gain from this? A real market in education, with financial discipline to drive up standards and performance.
What do the Lib Dems gain? Much more funding from taxation, and much less as a final burden on the graduate. Oh, and one other little thing – a solemn pledge effectively kept. Could come in handy, that, should we ever want our percentage vote to stay in double figures!
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16 Comments
Well said, David.
Yes, a good idea. Though I would – obviously – be wary of defining it by subject.
Greta article, well written and argued.
But will our MP’s give it (or other excellent alternatives being put forward) the time of day? Or will they just look to make some minor amendments to the Browne report (so they can say they did something) ?
There seems to be a breakneck speed at which all of this ‘has’ to go at – whereas a little more consideration could come up with a better solution – as the above piece illustrates.
Where’s the forum for the debate? and why isn’t it happening in public?
The part of Browne’s proposals that seems to me to make least sense (apart from increasing student numbers by yet another 10%) is that the institutions would be allowed to set their own fees. Any downward market pressure on fees would actually be rather weak, because most graduates’ payments wouldn’t depend on the level of fees. The same is true of the proposed progressive levy on fees over £7k.
I’d have thought the essential mechanism would remain much as it’s always been – students will still want to go to the best universities they can get into, and universities will still want to select the best students who apply. Aren’t those the only “market forces” that are really required in the higher education system? Does allowing variation of fees between universities really add much, given that it will make no difference to most students?
Personally I am instinctively drawn to voucher solutions, David, but the deadly devil might be in the detail.
Firstly, the average subsidy is currently £4,000. On Wednesday that will be cut severely to meet the government’s targets on deficit reduction. Clearly a political decision could be made for Vince’s Department not to contribute to spending cuts but then they would have to come from elsewhere; or for income tax to rise (but this would blow a hole in the 80:20 split between cuts and tax increases that MPs have also signed up to); or for there to be a massive reduction in the number of students but that would be a tricky sell to all those young people (and their parents) who are expecting to go to university.
Secondly, the ‘average’ grant doesnt exist in reality. In England the HE Funding Council provides the grant split into four bands ranging from under £3,000 for ‘classroom based’ subjects through to almost £14,500 for clinical subjects. That is relatively easily managed if you are dividing the grants between 100-odd higher education institutions but it might be a lot harder to do if the grants are divided up among the cohort of applicants.
Another problem might be the introduction of ‘perverse incentives’. You point to one: the danger that students will go to a cheap (possibly even fictitious) institution and pocket the difference. But by linking the funding (even to the extent of 2nd and 3rd year funding) so directly to the student’s performance might you not risk artificial grade inflation? The solution might end up being a massively more burdensome (and expensive) state-run standards regime. That’s assuming you could persuade the UCU that their members should be put under that much pressure.
Browne makes clear that his objective is to introduce more market drivers into the system and it does this in a number of ways (lifting the cap off the fee level is one but also extending student support to part timers for example). Whatever system we end up with the killer questions boil down to how many students is the state prepared to fund and what share of their tuition costs are they prepared to cover.
I think the key sentence in the entire piece is this – ” If our universities are going to help us compete in the global market, they should surely be competitive at home.”
This encapsulates the pseudo-elitist, free-market-pixie-dust creed which social democrats find themselves fighting on all fronts, including within the party. We need only state this fundamental principle – that universities exist to produce people who can think, not to create profits. The writer, Mr Allen, is clearly spellbound by the notion of shoehorning market mechanisms into university education. The inevitable consequence of this would be universities as semi-owned subsidiaries of transnational corporations – ah, the American experience, so instructive in so many ways.
@ Anthony Aloysius:
Well, I sincerely hope your statement “most graduates’ payments wouldn’t depend on the level of fees” is wrong. If it is right, what is to stop an ambitious university from hiking its fees to ginormous levels, inveigling students to sign up on the premise that it won’t affect their payments and that most of their debts will just end up getting written off, and then lobbying for retrospective changes to the rules for debt repayment?
Yes, “students will still want to go to the best universities they can get into”, and that market mechanism works well in allocating good students to top universities. The problem comes in allocating less good students and poorer universities, and in particular deciding how many there should be. Tony Blair decided that national economic survival required us to hike the percentage of graduates to 50% and to hell with the cost to the taxpayer. Some of our new Tory friends would like to go to the opposite extreme by using mammoth variable fees to frighten away all but the ablest and most confident (or most rich) students. We need a middle way between these extremes, and that is what I have tried to put forward.
@ Mike Cobley:
No, I am not spellbound by the market, rather the reverse. But I know our Tory colleagues are great market zealots. Sometimes the best way to deal with zealots is to rubbish everything they say. But sometimes, especially when you’re in a weak position, it is better to seek out that part of their case which makes some sense, find a way to support it, and then press for your own goals (like no increase in net fees!) as a quid-pro-quo.
It’s the same with the Daily Mail stuff about doss courses. If you just say that you don’t accept a word of it and that most students work damn hard, it may be that all you will achieve is to lose votes and public support. If on the other hand you race around showing visible proof that you won’t tolerate dossers, it may be that you will get more support from the public for properly funded universities.
@ Ed Maxfield:
Thanks for your thoughtful comments. Yes, I think tax rises should meet a greater proportion of the deficit than 20%. Those who intend to maintain the Lib Dem pledge by voting for the status quo presumably also approve of higher tax rises. I am suggesting that we should try to find a smarter way of fighting our corner, one that does not simply defend the status quo, indeed one that can be defended as a compromise which gives the Tories a good deal of what they want.
There is a lot of devil in the detail, and I suspect you have hardly even started into it! Whether it sinks the idea, or whether there are ways of adapting, I do not know. As Richard Morris says, let’s see people have a better try at adapting and coping. But yes, there would have to be a standards regime. However, since we already have teaching and research quality assessments, much of it is surely in place now. As for the requirement to prevent grade inflation, that is in any case overdue, I suggest!
How about creating a charitable institution which would be a Higher Education Access Foundation. The Government pays a one-off contribution into it and then looks to industry and benefactors to make a one-off contribution as well. From industry you would pick major corporate institutions and the larger professional organisations. You offer the carrot of saying if you make a free will contribution from your taxable profits you can set that contribution off against your current year liability. You give them the alternative of the stick in saying that if you don’t contribute to the Foundation we will levy a one-off tax on you and you will not get the benefit. The aim would be to raise around £10bn for the Foundation and only the income from it would be used to support Higher Education Access. To make it work financially you would have to stretch the deficit reduction programme into a fifth year but that is a price worth paying. It would mean having a guaranteed income that would sit alongside government funding and funding from students/parents. Properly managed it should generate a return of around 6% per annum providing funding of £600m. The fund could bne used in two ways: support direct to individual students or to institutions that bid for funding for particular access funds. It would be a way of targetting access to higher education and should be seen as a boost to social mobility and helping those from disadvantaged backgrounds and middle income groups.
Payback under the current loan basis should start at £25k.
Another thing the government needs to do is to work with higher education institutions and make the more productive. Where practicable students should be able to do a degree in 2 years instead of 3 and they should be able to spread their last year over 2 years (so that they can work part time whilst they graduate.
I think just looking at the cost of education in a linear “lets hike the fees for students and make them pay approach” shows very limited vision. Graduates may on average earn more than non graduates BUT they are not the only ones to gain from their studies. Employers gain and communities as a whole. Higher education is an investment in human capital from which we all benefit and I find placing more and more of the burden on the student instinctively unfair.
@David Allen “I am suggesting that we should try to find a smarter way of fighting our corner, one that does not simply defend the status quo, indeed one that can be defended as a compromise which gives the Tories a good deal of what they want.”
I applaud what you say. If we want to improve things, that’s exactly the right attitude.
While I tend to agree with Ed Maxfield, that there are a lot of issues with what you are proposing, it’s very welcome to see a critic who has the courage to put forward positive suggestions, knowing that exposes them to criticism. I’d like to see a lot more articles like yours raising such issues on LDV.
I wish it were not so, but I’m pessimistic about our chances of finding a satisfactory resolution to university funding, because the fundamental root cause is not the funding model, but the deficit. (You and I have different opinions on that, and I don’t want to derail your thread, so I’ll leave further discussion on that to other threads)
But, if you can prove me wrong, and can come up a solution that we can sell to the Tories, you’ll deserve a peerage … which, hopefully will then be abolished in four years time 😉
If you are trying to find a fix in the short term then you are stuck with the envelope that the deficit reduction strategy offers. A whole new system of university funding would take two or three years to implement and George Osborne is demanding that the slices of flesh start to be delivered immediately.
If you are looking at something more long term then I think the key issue is how you allocate the cake in practice. I dont see why, in theory, you shouldnt create a body that roles up the funding councils and UCAS into one body with the government saying ‘we will fund x thousand doctors this year and 17 history students’. The new funding body would allocate the vouchers based on tarrif points (you would need to make some provision for students who come into the system without A levels or similar) and then the student would take their voucher to their university of choice which would be free to charge an additional fee. The nub of the question would probably be how much would it cost to administer.
Robert E: what is the aim of your scheme, what is it replacing? Widening participation funding in England currently runs to about £150m a year (at least until the CSR announcement tomorrow) but the total cost of student support (grants, the loan interest subsidy etc) is almost £3bn in England.
“If you are trying to find a fix in the short term then you are stuck with the envelope that the deficit reduction strategy offers.”
I take it you are presuming that our MPs do not vote against Browne, at least in sufficient numbers to defeat the proposals? Because of course, if they did, then the deficit reduction strategy would just have to be altered to adapt to the defeat. Presumably on fees, either the status quo would prevail, or, perhaps a voucher / Student Premium scheme could be brought in, carefully over 2-3 years, and/or in a rough-and-ready interim manner asap.
We should note that independent commentators with no particular love for the Lib Dems have been generally quite incredulous that we have seemingly rolled over so abjectly on this issue:
http://www.guardian.co.uk/commentisfree/2010/oct/17/coalition-tuition-fees-manifesto-promises-lib-dem-tories
http://www.guardian.co.uk/politics/2010/oct/17/diary-of-a-civil-servant
http://www.independent.co.uk/opinion/commentators/john-rentoul/john-rentoul-clegg-drives-his-voters-away-2108775.html
Those who realise that our credibility depends on us putting up a proper fight on this – having, whether rightly or wrongly, signed a public pledge to do so – might like to have something better than “Keep the Status Quo!” as their slogan. Seeking a smarter solution – whether or not it can be done overnight – woudl seem worth a try!
No it’s not quite that, David. The Spending Review is done and dusted (negotiated between the Treasury and the individual Departments). Osborne will announce it tomorrow and MPs wont have an opportunity to unpick it through votes in parliament.
It will include a £3bn cut in the annual university teaching budget. See:
http://www.independent.co.uk/news/uk/politics/universities-face-42bn-cut-leak-suggests-2107774.html
and
http://www.guardian.co.uk/politics/2010/oct/19/spending-cuts-swaths-universities-close
Browne offers a solution because its calculations are based on the assumption that there will be a £3bn cut in teaching funding (you would almost think they and the Treasury had talked to each other).
So, Lib Dem MPs are indeed free to vote against Browne but without putting some form of replacement funding in place they will effectively be voting for an 80% cut in university teaching funding.
The difficulty is that doing anything other than raising the fee level will take too long: the cuts will affect universities from October 2011 (most likely they will even start this year) but the application process for 2011 has already begun and developing a radical new system of funding will take some time to develop (Browne took a year) and a further period to implement. It will then, of course, take at least three years for the new funding to feed fully through into universities.
Nick and Vince could hold a gun to Osborne’s head and force him to raise an additional £3bn in income tax as a short term measure but I wouldnt bet the house on that happening. Or you could massively reduce the number of students recruited for the next couple of years but imagine how popular that would be among the families of those hoping to apply (and the thousands of university staff who would have to be laid off). Or you could force BIS to find the savings elsewhere from its budget but since HE is 75% of the departmental budget there isnt much else to target (it would probably mean no funding for research, say).
It is a desperately unpatable choice but unfortunately the Browne Review was a carefully placed time-bomb set up by the last government. Once the party signed up to the deficit reduction strategy that will be set out tomorrow in the Spending Review, Browne effectively became the only game in town. Both Phil Willis (on here today) and Gareth Epps (elsewhere) have made the point that they tried to make this clear to the party months ago but no one was prepared to listen.
There is, of course, another election due in 2015 and coalition policy is not the same as Lib Dem policy so there is nothing to stop the party developing an alternative set of proposals for the future.
Ed,
Well, how convenient for the Browne-ites, to have everything sewn up so neatly that democracy is irrelevant, and Browne is “the only game in town”! I do have to say that your explanation of this state of affairs carries rather more conviction than Phil Willis’s piece. That article was overlarded with the usual hagiography about the superb achievements of the ThirdReichsKoalition that will last a thousand years – and so, as you will see from the comments, a great many people did not trust it an inch!
No, I wouldn’t bet the house on Nick and Vince holding a gun to Osborne’s head. However, if the Browne report were to be defeated, all bets would be off. It is not reasonable to assume that the answer would inevitably be cuts in student numbers, or in research, any more than it is reasonable to assume that the answer would be a tax rise. We would be living in interesting times!
Box 2.3 of the Spending Review docs (page 53) sums it up.
Ed,
My proposal is a way of fixing the problem of going back on a pledge not to increase fees. It creates an arms length charitable foundation which is clearly seen as a one off fix to ensure that students from less advantaged backgrounds or who are going into underpaid occupations get support. It targets payments at those most in need without it having the hand of government all over it. It also means that the fund is untouchable by a future governments. It can operate in one of two way: students make applications for support based on a mix of financial need and social imperative (for example: how do we get better representation in the professions?) or institutions can apply for block funding to support social mobility – e.g getting more students from poorer backgrounds into the law and medicine; specific grants to support training of engineers. The problem we face as a party is that we made this assive pledge on tuition fees and we need to find a way of softening the blow in a way that stacks up socially.