What is value for money in higher education?

Published: 19 February 2018 at 13:46

William Hogarth illustration

This year sees the introduction of the new regulator for higher education, The Office for Students (OfS). This change is one of the most significant for our universities in the past three decades.

As the new regulator for English higher education OfS is replacing the Higher Education Funding Council for England (HEFCE) and the Office for Fair Access (OFFA). It seeks to deliver a student-focused, risk-based approach to regulating higher education.

The OfS has four stated primary objectives:

  1. All students, from all backgrounds, are supported to access, succeed in, and progress from, higher education
  2. All students, from all backgrounds, receive a high quality academic experience, and their qualifications hold their value over time in line with sector-recognised standards
  3. All students, from all backgrounds, have their interests as consumers protected while they study, including in the event of provider, campus, or course closure
  4. All students, from all backgrounds, receive value for money.

It is this last point that I want to focus on – what is 'value for money' in higher education in the context of the OfS commissioning a “major piece of research to examine student perceptions of value for money”?

What is value for money in higher education?

It is one of those statements that is really easy to make but very hard to define. The National Audit Office defines good value for money as "the optimal use of resources to achieve the intended outcomes. ‘Optimal’ means ‘the most desirable possible given expressed or implied restrictions or constraints’. Value for money is not about achieving the lowest initial price". What then are the intended outcomes of a good higher education system and who should determine these?

One of the challenges we face is that there is not a singular and simple answer to this question and the answers will vary greatly depending on the perspective from which a stakeholder or stakeholder group considers it.

It is incumbent on us a university community, and as a part of the wider HE system, to consider how we look at value for money and justify the investment that individual students and the wider community make in HE.  I make no attempt to fully answer this question, but want to raise a number of issues that must be considered in a holistic assessment as to whether our HE system and our university is delivering value for money.

Value for individual students

The starting perspective to consider is that of the individual student – much of the debate over the last year has been along the lines of – I am paying £9,250 and I do not believe that I am getting enough teaching/support/tutorials etc. for this amount. This also runs to consideration of the outcomes of their education which increasingly in metrics like TEF is being considered in terms of relatively short-term employment and remuneration outcomes - failure to secure such employment being evidence of not delivering value for money.

Whilst not in any way diminishing the importance of employment outcomes for individual students if that becomes the sole, or totally dominant, metric by which we measure value for money in higher education outcomes then we as a country will be much the poorer.

One of the challenges for the current system in the debate around value for money for the individual student is the structure of our funding system which hides a very significant public contribution to the costs of higher education. Although the exact figures will not be clear for many years most of the current modelling would suggest that, on average, around 40% of the loan value will never be repaid at the end of the 30 year period. This is a significant public contribution and any consideration of value for money for individual students surely has to take this into consideration.

Value for a course cohort

A second perspective to consider is the cohort of students studying on a particular course. Individual students will have differing needs in terms of support and some will draw more on resources than others. The circumstances that create the need for increased support are often unpredictable, and time critical, and to provide these means all students help support these mechanisms even if they themselves do not draw on these services.

Value for a university community

One of the more challenging debates in the value for money discussion is the provision of a wider range of extra-curricular activities that are used by some, but not all, students.

These social, cultural and sporting activities and facilities add greatly to the richness of the university experience and often are a key vehicle for wider community engagement. Despite this they are not used by all students - and with the increase in degree apprenticeship students and other less traditional student cohorts this discussion will become more focussed.

Value for the wider community

There is no doubt that most, if not all, universities contribute significantly to their local and regional communities. This is through a very wide range of activities, many of which do contribute to the value for an individual student - such as an innovation centre offering internships - but some that link is more remote.

Looking to this latter group we can argue these activities which are vital to maintain the relevance and engagement of the university represent some parts of the value for money equation for the public contribution to university funding. However, as discussed earlier, this public contribution is opaque, in our current system, and not easily seen by our students.

The timeline aspect of value for money

For all universities one of the major strategic challenges they face is determining what to spend on immediate needs against the need to invest in infrastructure (buildings and digital) for the future.

In the current model universities are responsible for self-funding almost all such investments either off balance sheet or through borrowing. Such investments will benefit future students but will, at least for most projects, not benefit current students. Clearly, existing students are benefitting from past investment but that will not remove the need for us to be very clear about why we are investing.

The philosophical approach to value for money

There are a philosophical considerations to take into account as well when we consider what represents value for money in HE. On one level you could take a very utilitarian approach which looks to maximise benefit for the greatest number of students, and at the other extreme take a different approach that ensures that the most vulnerable and disadvantaged are the priority, even if that means that fewer students overall benefit from those services. There is no absolute in trying to answer this but, increasingly, I think we are going to have to address this challenge in our decision making.

Value for money and added value

One perspective on value for money that needs to be considered is the issue of how we add real value to our students. If we simply look at short-term employment outcomes then it would appear that the best value for money is returned from a group of already high achieving students who enter high profile professional roles but what then of those students whose educational achievements to date do not represent their inherent ability?

These short-term outcomes may not look quite as impressive but the absolute difference in outcomes and opportunity could be very much greater. Any consideration of value for money must consider this perspective and, in my view, weight it heavily in the algorithm.

Will the focus on value for money lead to a push to disaggregate aspects of educational provision?

If we look beyond higher education to other areas where value for money discussions have taken place then one of the outcomes has been a push to disaggregate offerings with those using the service only paying for the aspects they want. Could we see a world of differential invoicing for our students - they opt out of paying for services they do not perceive they want or will need? I am not interested in sport so why should I contribute. I only want to come to study and pass and have no interest in the SU, clubs or societies – why should I pay? I am confident that I will not need counselling or study skills support – I am happy to opt out. The Ryanair model?

Whilst you can see why some could develop these arguments it would immediately make the provision of these services for those who want or need them very much more expensive. This in itself will not stop those who advocate this path pushing – we need to be very clear as to why this is the wrong approach and that we can absolutely justify why we act in the way we do.

Value for money alongside the price and cost of higher education

In this discussion we also ignore the differences between price and cost. Within the context of higher education, price equates with tuition fees and cost is what the university spends overall per student. With current average surpluses running at less than 2%, total cost for most UK universities is nearly the same as income per student. How does price and cost in the UK with other countries? It is difficult to make precise comparisons and any figures must be related to overall GDP.

Looking at total spend on tertiary education as a percentage of GDP, the latest OECD figures indicate the UK spends 1.8% of GDP, against an OECD average of 1.5%. Australia and New Zealand are similar to the UK at around 1.8%, with the US and Canada spending 2.7% and 2.6% respectively. Translating this into total annual spend per student (US$ using purchasing parity) the OECD estimates this being $24500 for the UK, higher than Australia, New Zealand and Canada, lower than the US at $29300 and roughly the same as Sweden.

To put numbers on this, Australian student fees vary from $AU 6300 to $AU 10600 per year of full time study. In addition the university is supplemented by the Commonwealth by between $AU 2000 and $AU 23000, both amounts depending on the area of study. Total income per domestic student varies from $AU 12100 to $AU 33405 (£6,700 to £18,600).

In the US it is difficult to draw exact comparisons but the average out of state (non subsidised domestic student fee) would be around $US 24000 or £17,800.

The conclusion from this is that whilst the UK system is relatively well funded it is not grossly out of line with our international peers. We have a high performing HE system and it would be very unwise for a short term focus on simplistic outcomes to undermine that.

For our university to thrive it is critical we are seen to deliver value for money for our students but how we define value for money must include a very wide range of perspectives, be discussed in partnership with students – current, past and future and be very well articulated. Sitting at the heart of our consideration of what is value for money must be how we add value to individual students, the whole university community and the wider region.

We must lead and not follow in this debate, and not let those who look to simplistic and short-term measures drive the discussion.

Illustration: Satire on False Perspective: Whoever makes a design without the Knowledge of perspective will be liable to such Absurdities as are shewn in this Frontispiece. William Hogarth, 1754.