What went wrong with funding HE in the UK? A case of what might have been

The government belief that the university system would benefit from the competition  resulting from the introduction of a market economy was a matter of ideology rather than serious analysis. It was made worse by the failure to implement the recommendations of the Browne Report of the committee chaired by someone who knew more about how markets work than anyone in government at the time. Not least of these was the decision to let fees rise to £9000 on the assumption that only the top- ranking universities would charge this and some would advertise themselves as not so good by charging less, ignoring Browne’s suggested safeguards. Combined with an ill- thought-out loan repayment system, these decisions laid the ground for the current crisis. The consequences were analysed in ‘English Universities in Crisis’ (Frank, Gowar, Naef,  2019).

But blame lies also with the universities. At the time fees were £3000 and government grants to HEIs averaging the same amount. Money was tight but just about manageable on £6000 per student. With the grant removed and fees allowed to rise to £9000 suddenly each student was bringing in an extra £3000. This was largely profit. What was the reaction? Well let’s take more students and pocket the cash. The problem was that like lemmings everybody adopted the same policy and so there was a rush to recruit. More students would mean more space and competition meant providing more attractive facilities. More students meant more administration. Regulating the pseudo market incurred further non- academic costs.

 In a true market the focus would be on the customer – the student – by providing a better academic experience. We are now in a position of universities overloaded with huge debt and maintenance costs for ambitious building programmes and the balance of decision-making shifting from the academic community to enlarged administrations. It now looks likely that the punitive loan system will point school leavers away from university with consequent recruitment crises and we see departments closing.  This is exaggerated by the fact that changes in the repayment regime create gross unfairness between graduate cohorts. This was entirely predictable when the scheme was first devised.

So we have serious financial difficulties, unhappy staff and discontented students. Universities are about academic staff and students and they are the ones suffering.

But there was an alternative to this race to the cliff edge. Think about a department with 300 students and 20 staff – an SSR of 15. A £3000 increase per student  brought in an extra £900,000. This would have funded, at the time, about 15 staff, reducing the SSR to just under 9. There may have been a need for some estate improvement – more academic office space for more academic staff and some maintenance – but you can see the point. A concentration on spending the bulk of the windfall on academic staff and not increasing student numbers would not only have resulted in giving students more for their money of what really counts, it would also have had a strategic and financial payoff. Knowledge of this sort of policy would soon get out and have been attractive to academics and made for a fertile field for recruitment, attracting top academics and the brightest of the next generation. Research output would have increased as would research income. Not having to increase student numbers would have meant that entry tariffs could have been maintained whilst at the same time extra academic time could have been spent searching out the brightest of disadvantaged students with attractive scholarships. So all of the parameters that count in league tables would have led to a major climb up the tables, making the university yet more attractive to students and staff. A virtuous circle.

Of course, if the £9000 cap (now £9250) was not improved financial pressure would still apply but a university following such a policy would have been left  more resilient. Not tied into high debt (sometimes on disadvantageous terms) and high fixed costs for maintenance of enlarged estates, not stuck with high administrative and management costs, a more content academic staff (and lower HR costs!). A wise management following such a policy would have sensibly built up a modest reserve and a more resilient financial position. And it would have given students value for money. 

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Norman Gowar is Emeritus Professor, University of London, Founder member of the CDBU, former Deputy-Vice Chancellor, Open University and Principal, Royal Holloway, University of London, 1990 – 2000. 

References:

Frank, J, Gowar, N & Naef, M 2019, English Universities in Crisis: Markets without Competition. paper edn, Bristol University Press, Bristol.