Response to Funding Review

Published: 22 February 2018 at 08:48

This week’s announcement of the long heralded review of tertiary funding adds to the sense of continual change in our higher education system.

There is no doubt whatsoever that there is a real public concern about the cost and sustainability of the current HE funding model, and this needs to be addressed. However this must be carried out within a holistic assessment of what is working well and what needs changing.

In Monday’s announcement the Prime Minster stated that the English system is one of the most expensive in the world. Whilst she did reference tuition fees the implication was very clear that our higher education is more expensive overall than our peers. This is simply not the case, as the evidence does not support it.   

We have a total level of funding that is not misaligned with our funding and where the system as a whole performs very well for the country – indeed UK Higher education system performs very well when compared to international peers.

Why then the public concern?

The fact is that the fees charged to our students, for a public university system, are among the highest in the world and this has driven the view that we are not delivering “Value for money” for our students and the country.

Despite these public concerns there are many aspects of the current system that are working well:

  • It is progressive - those who earn more pay more
  • It has increased participation and the demand driven system enables all those who can benefit to do so
  • Although largely hidden there is, at steady state, a real and significant public contribution
  • A flat fee structure has avoided all of the challenges with how you set differential fees, and
  • It has allowed our university system to remain internationally competitive.

However there are some aspects that are really challenging:

  • The very widespread public perception that it is not offering value for money
  • A largely hidden public subsidy
  • The loss of income contingent maintenance grants
  • The excessive interest rates, and
  • The very rigid structure of the loan which stifles innovation in delivery.

If we accept that moving to a free at the point of delivery model is not on the agenda and I cannot see how, in the current fiscal position of the UK, we could maintain a well funded system with 45% plus rates of participation, then what should any changes to the system consider?

The model should explicitly state there are private benefits and public good from having a vibrant and quality university system. A split of around 60:40 private / public split seems broadly appropriate and is in line with the OECD's estimate of the balance of benefits. In an ideal world the public component would be paid at the time of study, by government, and be clear and transparent. This would contribute to all of the activities required in a university that do not speak explicitly to an individual student’s direct education, such as the costs of widening participation, mental health support and the unfunded current costs of public good research.

Benefits to individual student:

  • Any revised model must recognise the current system is not really a tuition fee model but an income contingent deferred payment to support the university system that a student will benefit from.
  • It must be flexible. I would like to see a system that allowed modular delivery so that students could study at their own pace and accelerate or slow-up according to their personal life. We should consider ‘Lifetime Learner Accounts’ as part of the model as this would allow individuals to return to study later in their careers.
  • There should be a zero interest period whilst a student is studying.  We must regulate interest charges to CPI indexation only, so the debt does not grow in real terms.
  • If the public contribution is made up front then mechanisms to recover a greater proportion of the student benefit component will need to be made, and we may have to consider extending the write-off period to 40 years.

Benefits to the UK:

  • The model should not charge students studying high cost subjects more, as this would be counterproductive at a time when the country needs more STEM graduates.
  • It should not penalise courses that do not have a clear vocational link - many of these are in the arts and creative industries areas which have great cultural and social significance as well as providing for an industry that is of great importance to the UK.
  • Progressive tax based repayments - consideration should be given to favouring those in public service, for example NHS employed health care professionals.
  • It should not stop the demand driven model which has delivered for many communities. Consideration could be given to moderating this through, perhaps, limiting shifts in institutional student numbers to 1-2% per year.

The outcomes of this review will shape UK higher education and ARU for years to come and it is vital that we feed into the debate. As this develops I will be commenting further and I would invite colleagues from across the university to contribute – we cannot be silent on this.

Iain Martin

Graph 1 details - Graph 1 is based on the  latest OECD figures of spending on tertiary education, which gives an indication of the proportion of Gross Domestic Product spent in this area, and linked this to GDP per capita for the countries in the OECD 2017 Education at a Glance Report. As is very evident from the following chart the UK as a whole is not an outlier, although acknowledging that this is for the entire UK and not just England. However, it must be noted that England accounts for about 82% of the total students numbers in the UK, and even acknowledging the lower levels of funding per student in the other countries we would still not be an outlier.

Graph 2 details - Whilst university rankings are fraught with difficulties in understanding what they tell us, they do give some indication as to an overall assessment of standing. If we take the latest Times Higher 2018 rankings and look at the countries with more than 1 university per million population in the top 400 then when compared to spend (Relative spend based on PPP adjusted GDP), our system performs very well and we sit above the regression line.