Why British universities need student fees

Following the debate for and against university fees, LSE lecturer Tim Leunig gives his take on that contest.

What are the benefits of going to university?

Going to university is profitable for individuals, on average, and for any given A-level grades. Although a handful of degrees (e.g. medicine) are particularly profitable, once you take into account A-level grades, most subjects are equally valuable (classicists earn more than media studs grads because classicists generally have better A-level grades).

Second, the “profitability” of going to university remains even as graduate numbers have increased. This tells us that demand for graduates is elastic: if you create more of them, employers will hire them on graduate salaries, and the country becomes richer.

Third, post-1945 technology has been “skill-biased”: its use has been greatest in countries with high skill levels and the biggest beneficiaries have been those with highest skills.

This suggests that the optimal number going to university will continue to increase, both at undergraduate and MSc levels. 80% of people whose parents went to university go to university themselves, and it is possible that the optimal proportion of the population for university is as high as 80%. It is certainly much higher than today’s levels, which are low by world standards. We need a policy that stacks up for more people going to university.

Given skill-biased technology change, increasing university education reduces income inequality, since otherwise demand for graduates will outstrip supply, causing pay rates for already well-off graduates to rise. Increasing university numbers will increase national income, and reduce income inequality.

Fees do not deter

As Julian said, entry to university is almost background-blind. Those with good A-level grades from top, middle and bottom are almost equally likely to go to university. The current fee structure is not deterring anyone from going to university, even though lots of people claim it would have deterred them and will deter others.

There are very few kids from poor backgrounds at university because schools are managing to overcome the educational effect of poverty (poverty itself, low aspirations, poorly educated parents, lack of role models).

If we believe that no-one should be enslaved by poverty, ignorance and conformity, it follows that addressing schools’ failures to overcome social background is a or even the pressing concern.

Furthermore, in that fees do not put kids from poor backgrounds off going to univ, and given that those going to univ are disproportionately affluent, moving money from this group to fund the pupil premium is both liberal and progressive.

Finally, the only way we can increase the numbers going to university, is if our schools prepare more university-ready students. That does mean a big step change in school results, which will cost big money, but has the potential to break the intergenerational poverty cycle.

Local universities

As Paul Holmes says, poorer students often choose to stay at home and study locally. The obvious solution to this would be lower accommodation prices (for which house-building is the best solution so that rents fall).

That said, part-time students, those who are married, have kids in school, etc, will want to go to a local university, and we should celebrate “mainstream universities” who cater primarily for such groups. Going to a local university is not necessarily a sign that the system has failed.

Graduate degrees

We need to think seriously about graduate level courses. Many students pay LSE £10-£15k for a one year MSc (plus London living costs) because those courses enhance their earnings. Since we recruit by word of mouth to a large extent, they must be right! Yet the British government funds virtually no MSc students. (Hence LSE has lots of British undergraduates, and few British MScs). Both our party and the government needs to think about how we are going to fund 10%, 20%, 30% of people through a graduate degree.

University funding levels

British universities are dramatically underfunded. It doesn’t affect LSE that much, because we have non-EU undergrads and postgrads to cross-subsidise EU undergrads. Providing one textbook for every nine students (have you seen the price of law textbooks?), videoing lectures, paying copyright fees to scan readings and put them on line, keeping class sizes down, providing specialist software, and yes, paying faculty who are actually good enough at their subjects to teach them at university level is expensive. The debate nationally about raising fees is in the context of that debate. If the govt decides to double fees it will be because they know that universities that don’t have as many foreign students as we do cannot provide a decent university education on their current budgets. What is the Liberal Democrat answer to this? Saying that we can sort-of afford to abolish the current loans for the current students does not mean we can afford to abolish loans to fund universities at sensible levels, for sensible numbers of students.

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This entry was posted in Op-eds and Party policy and internal matters.


  • Andrew Duffield 3rd Dec '08 - 8:52am

    “Going to university is profitable for individuals, on average, and for any given A-level grades.”

    Following this logic Tim, you presumably also favour fees for A-level students.

    In the prevailing state of welfare, the issue of tuition fees surely boils down to a simple question of where we draw the public funding line, rather than the more principled question of whether or not such funding adds value to society – and is thus rightly and fully funded from the public purse.

  • Daniel Bowen 3rd Dec '08 - 10:27am

    A typical pointy-headed article totally detached from the real world. The claim that:

    “The current fee structure is not deterring anyone from going to university”

    is simply gibberish.

    I thought this man was supposed to be intelligent, even if we accept his lack of political sense?

  • Clegg's Candid Fan 3rd Dec '08 - 10:37am

    “This suggests that the optimal number going to university will continue to increase, both at undergraduate and MSc levels. 80% of people whose parents went to university go to university themselves, and it is possible that the optimal proportion of the population for university is as high as 80%. It is certainly much higher than today’s levels, which are low by world standards.”

    Is it possible to offer any evidence for any of these assertions?

    It’s a huge leap from the rather self-evident proposition that it’s beneficial to have a skilled workforce to the conclusion that it would be “optimal” for up to 80% of the population to attend university.

  • Jennie: The figs for Scotland can be found here: http://www.scotland.gov.uk/Publications/2006/11/28151648/50 – scroll down to the very end, it is the last line.

    The govt thinks that there has been a slight fall in the GWP: http://www.theyworkforyou.com/wrans/?id=2006-01-09d.38167.h

    It may strike you as “complete bollocks”, but that is what the data say. I am simply reporting the evidence!

  • Clegg's Candid Fan 3rd Dec '08 - 11:00am

    Liberal Neil

    Sorry, but I don’t understand your first paragraph. What is “a consistent trend of 80% of graduates also going on to HE”?

    Obviously, the fact that graduates on average earn more than non-graduates tells us absolutely nothing about whether the number of graduates is “optimal”. Assuming there is still an element of academic selection in university admissions policies, that’s almost bound to be the case provided there’s a positive correlation between income and academic ability.

  • Hywel Morgan 3rd Dec '08 - 1:53pm

    “Providing one textbook for every nine students (have you seen the price of law textbooks?)”

    Straw man stuff this.

    Legal textbooks aren’t more expensive than for any other subject. Even highly regarded adademic textbooks cited in court (Treitel, Smith & Hogan etc) are around the £35 mark.

    What are expensive are practitioner texts – however I doubt anywhere provides those at the ratio of 1 for 9 students. My university Library had one copy of such books for the whole department and didn’t seem to be criticised for this.

    I very much doubt that any student uses Chitty on Contract as their starting point for learning contract law.

    There may be more of a point with on-line databases – but I suspect those operate at a considerable discount to the commercial rates

  • David Morton 3rd Dec '08 - 2:37pm

    Just to look at the politics of this for a moment.

    1. The current fees policy is a signature policy.

    2. We ahve recently ditched other signature policy’s like the 50p top rate. Iraq is of faded relevance.

    3. Other signature policy areas like the enviroment and civil liberties have tory tanks on our lawns.

    4. new signature policies like the green switch 16p rate and £20bn of savings have yet to bed in.

    None of thee points is an objection to droping the fees pledge per se but they are an arguement for caution. We aren’t a think tank we are a political party. Droping one signature policy should only be done in conjunction with a review of everything else.

  • Different Duncan 3rd Dec '08 - 5:28pm

    Your argument on local universities is completely illiberal. Universities offer different courses, and if a poorer student’s local university does not do the course they wish to study, they have less opportunity to success than their richer peers.

    For instance, a budding physicist from a poor background in Reading. Is the Lib Dem message to be “tough, you aint rich enough”?

  • Richard Huzzey 3rd Dec '08 - 5:44pm

    I think Neil hits the nail on the head… Analysis of the statistics only works in the way Tim proposes if the idea that ‘university isn’t for me’ doesn’t deter people from getting as far as A-Levels. I’m not sure the cold, rational analysis of cost-benefit of a university degree and a university debt is typical in all 17-to-18-year-olds.

    The entire concept of getting in debt was something I was taught to avoid growing up – “neither a debtor nor a borrower be”. That cultural resistance to a “borrow now, profit later” market-style education is anecdotal but, I believe, real.

    Another wholly appalling part of the current regime is that it judges 18-year-olds (i.e. adults) on the basis of their parents’ wealth. In my case, my LEA paid fees because my parents’ income was low, but how is it fair that peers with richer parents are assumed (by the state) to have free access to their parents bank accounts?

    We shouldn’t, of course, throw the baby out with the bathwater: Tim and Julian both make good points on the need for stronger intervention in schools that are failing the most deprived communities, and imbedding cycles of deprivation. I just don’t accept that this is an alternative, rather than an addition, to funding HE places from taxation.

  • David Allen 3rd Dec '08 - 6:08pm

    “British universities are dramatically underfunded. … If the govt decides to double fees it will be because they know that universities … cannot provide a decent university education on their current budgets. What is the Liberal Democrat answer to this? Saying that we can sort-of afford to abolish the current loans for the current students does not mean we can afford to abolish loans to fund universities at sensible levels, for sensible numbers of students.”

    Tim, I’m sure you have identified a real problem there. But must we assume there is no good solution? What would we be recommending if we found out that British state primary schools were dramatically underfunded? Would we say that there was no alternative but to bring in massive fees?

    Why don’t you tell us what you think the true costs are, and what assumptions you are making? Then we can decide what is practicable.

    And if you are assuming we should be pushing 80% of the population through three years of graduate studies at your establishment, might we perhaps suggest that this is where money could be saved? Do you really want to teach Baby P’s guardians about the finer points of quantum theory, and do you think it will serve any useful purpose?

    We don’t, after all, make anything very much in this country any more. We rely on invisible financial earnings, and those have just become a whole lot more invisible! We could be in danger of producing vast numbers of over-educated people with no ability, no motivation, and nothing at all productive to do!

  • Clegg's Candid Fan 3rd Dec '08 - 9:25pm

    Liberal Neil

    Thanks. I probably should have been able to work that out, with the help of Tim’s article.

    But I’m really not convinced that any of this demonstrates that it’s a good investment from the country’s point of view to put such a high proportion of its population through a university degree course.

    (Given that it is doing that, and that consequently employers view a degree as a prerequisite for nearly half the jobs going, it may be a worthwhile investment from the student’s point of view. But is it really desirable that so many should be constrained to make that investment of time and money?)

    How many jobs really require the worker to have studied in higher education for three years? 50% of the jobs in the market? 80%???

    I reckon it’s a much smaller proportion – essentially those involving teaching and research. And I reckon that if we’re really talking about people acquiring the skills that are needed in the workplace, it could be done far more efficiently – in terms of time and money, for all concerned – by providing directly relevant training, rather than putting people through a three-year academic course right at the start of their working life, that may have virtually no direct relevance to their future employment.

    That’s not to say that I don’t think university courses aren’t both enjoyable and beneficial. They would probably be both enjoyable and beneficial for anyone who wanted to take one, and in my ideal world everyone would be given the opportunity to do so. But I think that for most people they have only an incidental connection with acquiring skills that are actually useful in the workplace.

  • Matthew Huntbach 3rd Dec '08 - 10:09pm

    Tim, I don’t think you’re being entirely honest here. Part of the reason you want that money is to fund your writing of research papers. The general public don’t seem aware that university staff spend half their time doing that (I’m sure you, like I, spend a lot of time in September trying and failing to explain to acquaintances that, no, we’re not “going back to work soon”, actually we’ve been working hard all summer).

    I’m sure you can put up a good argument as to why you should be funded to spend half your time not doing the job most people think you do. But I think you ought to admit to it.

  • Tim and Matthew,

    My father was a university lecturer, from 1948 up until his forced retirement in 1980. He was more conscientious than all of his colleagues, but even he stopped going in over the summer. On the occasions that he did, my mother would say something along the lines of “I bet you’ll be the only one in today”.

  • Matthew Huntbach 4th Dec '08 - 8:59am


    I don’t want to say too much as I am posting under my real name, this is a public website, I am employed as a university lecturer, and I don’t want to damage my relationhsip with my employer.

    However, things have changed very much in the university sector since 1980 when your father retired, and I can assure you the days when being a university lecturer was a stress-free job where you could work short hours have gone. I came in just at the tail end of those days, so I have seen the changes.

    I know from Tim’s record that he is an excellent university teacher as well as a respected researcher, so if what I said came across as any sort of criticism of him, it wasn’t meant to be.

    What has happened is that university funding works on the basis of flat level of fees per home student and a fixed allocation of home student places, plus top-up funding based on the research record of each department in the university, plus whatever you can get overseas students to pay and you can have as many of those as you can recruit.

    One of the consequences of this is that in some institutions (not naming any names) there can be a bit of a gung-ho attitude to recruiting overseas students i.e. don’t ask too much about whether they are suitable for the degree, just ask if they are willing to pay.

    The other is that there’s a perverse incentive to put all effort into improving the research rating and none into doing good teaching, because research rating brings in extra money and good teaching doesn’t. University lecturers can no longer take long summer holidays, because if they aren’t churning out research papers and grant applications, or supervising full-fee paying MSc students who do dissertations over summer, management has ways of making their lives unpleasant.

    Tim is hinting at chopping contact hours because, by and large, spending more time with your students is less profitable to the university than spending more time writing research papers. I agree with Tim that it’s good that university teachers are proven experts in their field shown by active research in it, but I feel quite strongly that the perverse incentive has now way overbalanced things, and the public ought to know that and ought to be angry about it.

    Part of the reaspn why good teaching counts for so little is that students tend NOT to make their decisions on university places after careful consideration of the particular degree programme they’re interested in. Rather, they will make their decision on the basis “University X is better than University Y, so I’ll go to University X if I can get the grades they require”. They might look at the university league tables, but the ranking on these and university reputation in general is based largely on research profile rather than quality of teaching.

    I think this applies most strongly in the middle ranking institutions where the students are weaker than at the top-ranking, so require more teaching support, but the pressure on academics to pull the ranking up to the top level by churning out high quality research – too specialised to be of much benefit to the weakish students – is particularly intense.

    Naming no names of institutions, of course.

  • Clegg's Candid Fan 4th Dec '08 - 9:21am


    “Do you prefer this one? (p. 13 is the most appropriate)


    But, as I said, the fact that graduate salaries are higher on average proves absolutely nothing about how many people should be taking a degree course.

    If the state selected the 40% most academically able students and sent them on a 3-year skiing holiday, no doubt it would later be observed that the skiers’ salaries were, on average, higher than those of the non-skiers …

  • David Morton 4th Dec '08 - 11:55am

    Just to take the first paragraph of this article : “What are the benefits of going to University ? ” It argues that they are consideable for the individual but almost more so for the wider society and economy. It suggests that the optimal figure might be as high as 80% A staggering figure. This begs a serious of questions.

    1. If there is huge societal gain why are we so keen on individualising the cost? You are in effect arguing for Private Squalor , Public Affluence in this policy area.

    2. If we currently sending c45% of people to University and think the potential optimum might be as high as 80% what about basic behavioural psychology ? Is charging inividuals more or making it cheaper/free more likely to encourage such a huge sift ?

    3. finally I don’t much like the implied non sequitar in all of this. thats because a service will be used by 80% of a society it is therefore unaffordable. thats an arguement against any kind of universal provision. the NHS, the military, roads, street lighting.

  • Clegg's Candid Fan 4th Dec '08 - 2:14pm

    Liberal Neil

    “I do think it is likely that steady growth in the proportion that go to University is sensible, and that this will effectively pay for itself in the long run.”

    It will only pay for itself if three years of academic study improves people’s abilities to do their jobs to such an extent that it makes the huge investment of time and money worthwhile.

    Just think how much directly relevant training – throughout people’s careers – could be provided for the cost of a three-year university course.

    Surely we should be looking at the evidence in a hard-headed way, not just going along with the trend?

  • Clegg's Candid Fan 4th Dec '08 - 3:21pm

    “The point is that you compare people with qualifications X and a degree, with people with qualifications X, to try to overcome this.”

    But that too is a meaningless comparison. Applicants without a degree won’t even be considered for many jobs, in the current set-up. And of course people who choose not to go to university have very different career aspirations from those who do.

    It may be the best comparison you can do, but it’s so deeply flawed that you’d be better not bothering. It certainly doesn’t prove anything.

    But I think the perception that “the more people who go to university the better” is so ingrained now, that it’s pointless trying to question it.

  • Hywel Morgan 4th Dec '08 - 3:52pm

    I’ve had a look at LSE’s library catalogue. It reports they only have one copy of the latest edition of Smith & Hogan (Crim law textbook c.£35) so hardly a 1:9 provision.

  • David Allen 4th Dec '08 - 5:00pm


    “You double the numbers and treble the fees, and you are talking big money for tax payers to find.”

    First of all – yes but, most of us don’t believe you should double the numbers. So that’s a bit of a straw man argument.

    As to raising or trebling the fees so as to fund unis properly – well maybe. How big is big money? Are you able to produce some sort of costing or is that too much to ask?

  • Clegg's Candid Fan 4th Dec '08 - 7:50pm

    “CCF: You say that there are lots of jobs for which you now need a degree. I would argue that this is because a degree helps you do the job! Otherwise why wouldn’t those firms offer the jobs to anyone who had an offer from LSE? They don’t, so unless you think every graduate employer is stupid, it seems to me that your argument is logically flawed.”

    Of course I _didn’t_ say that there were lots of jobs for which you “now need” a degree. I said there were many jobs which wouldn’t be offered to anyone without a degree.

    Surely it’s not that hard to work out. If 40% of the population have degrees, 40% of jobs will be viewed as jobs suitable for those with degrees. If it did ever happen that 80% of the population had degrees, then inevitably something like that proportion of jobs would be viewed as degree-level jobs.

    None of that has anything at all to do with how much three years’ academic education actually helps people do their jobs.

    The unsurprising facts that graduates earn more than non-graduates, and that for many positions employers prefer graduates to non-graduates, tell us nothing about how useful degree courses are, let alone what proportion of graduates is “optimal” .

  • Clegg's Candid Fan 4th Dec '08 - 7:52pm

    Liberal Neil:
    “But all the evidence that I am aware of so far, from here and abroad, suggests that the steady expansion of HE seems to help long term economic development.”

    By all means post some of this evidence.

  • Clegg's Candid Fan 4th Dec '08 - 11:57pm


    It’s sounds as though you’re talking about people who are employing economists. Well, obviously they are going to want their employees to have degrees in economics!

    What I’m questioning is whether half the jobs in the country – or even perhaps, heaven help us, four fifths of the jobs, as you suggest in your article – really require a university degree.

    To be concrete, for which of the following groups in the standard classification of occupations do you think education to degree level is necessary?

    4 Administrative and Secretarial Occupations
    5 Skilled Trades Occupations
    6 Personal Service Occupations
    7 Sales and Customer Service Occupations
    8 Process, Plant and Machine Operatives
    9 Elementary Occupations

    If your “optimal” percentage of the population going to university were really 80%, it would have to take in most of those.

  • Clegg's Candid Fan 5th Dec '08 - 10:10am


    I don’t think your answer is a very sensible one to the question of “which jobs is a degree necessary for?”, but let’s go along with it for the sake of argument.

    You didn’t say which of the occupational groups I mentioned satisfied your criterion. Do you know which? Are there any data on how the “graduate premium” varies between the groups? Obviously an average figure over all graduates doesn’t give you the answer.

  • David Allen 6th Dec '08 - 8:13pm


    What do you think the typical employer would say if the Government offered to provide all its bright young staff with three years academic training in analytical skills, technical writing, etc etc, absolutely free of charge?

    That’s why taking on graduates makes business sense!

    Of course, the employer might very much prefer to just take the money that graduate education would have cost, and then do his own training. We don’t offer him that choice, so, we don’t find out if we have wasted our money.

  • My father is a University professor who I know for a fact would not possibly have been able to attend university himself if it was not for the student grant he got, nevermind having to pay fees.

    Most interestingly to me the university he works for has not increased the amount spent on teaching students by any significant amount since fees were introduced. The money seems to being spent on hiring additional administrotors to do tasks which used to be done by academics (meaning the tail is definitely wagging the dog) and on building superflous buildings.

    The university are also concentrating on improving research as they are assessed on the quality of their research and paid for it based on the outcome of the assessment but there is no real assessment of the university’s teaching quality.

    To me the fatal argument for tuiton fees is that the government’s own figures suggest that graduates would pay far more in additional tax due to the supposed ‘salary boost’ given by a degree than the cost to the government of paying for the degree. It is of benefit to the economy and society to have graduates and IMHO this is something which is best paid for by the government not the individual if we are to have true equality of oppertunity for all.

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