Money talks: higher education financing

At a critical moment in HE financing history, Steve Wright asks four experts for their views on the sector’s current and future needs

Our four wise heads are:

Professor Kathryn Mitchell Vice-Chancellor, University of Derby

Professor Mark Simpson Pro Vice-Chancellor (Learning and Teaching), Teesside University

Gin Bhandal HE specialist at Berwick Partners

Maddalaine Ansell Chief Executive, University Alliance

The fees and funding system in England is “bust”, said University College London’s Peter Scott in a recent article. Do you agree? 

KM: I would not go that far. As it stands the current system could be considered a socially progressive model: by removing the upfront costs of studying at university, student loans have helped to widen participation in higher education. According to Universities UK, 20.4% of English-domiciled 18-year-olds from low-participation neighbourhoods entered higher education in 2017, compared to 11.2% in 2006. 

I believe the current fees and funding system has played a significant part in growing the number of students from disadvantaged backgrounds entering higher education, thus enhancing social mobility and delivering a more sustainable economic base for UK PLC. 

However, reforms could make it fairer and more transparent, and the language used to explain the current funding system needs to be addressed to remove any confusion. It may be more accurate to refer to the system as ‘graduate contributions’ rather than ‘loans’ and ‘debt’. 

Moreover, there is a clear need to reintroduce maintenance grants to support disadvantaged students through their studies.

GB: ‘Bust’ suggests that the system is not working outright – and this is not the case. Every year, thousands of graduates go through the higher education system, while thousands of loans are paid back. However, Peter’s overall point about it not being the best system is valid. The higher education sector’s move towards an open market continues apace but, with ‘flat’ charges of £9,250 per year, there is little distinction between quality of teaching and subsequent graduate outcomes. 

An alternative system would use income gained via new sources (Corporation Tax, proposed graduate tax, etc) in order to provide universities with the missing tuition fee revenue. 

MS: In many ways, as David Willetts has argued, the system is working as it was designed to – those that can afford to pay back their loans do, those earning less pay back a proportion. 

The bigger picture, though, is one of perception and ideology. The whole of society benefits from a more educated population, yet in recent times this has been lost with a focus purely on the individual benefit. Worse still, the value of education is being assessed in relation to value for money: the pervasive narrative goes that there is only a societal value in education if it pays back a graduate premium. This naturally leads to devaluing of certain subject areas. 

Do we really want to devalue nursing over, say, city banking? Do we really think that having educated parents who in turn educate their children has no value? 

One of the most significant problems with the current system is that it has had a devastating impact on part-time study. Furthermore, the shifting of maintenance grant to loan may well have the same impact on learners from disadvantaged backgrounds. These areas need urgent attention.

MA: No, the system is not bust. In fact, it has increased investment in our world-class universities (more important than ever with Brexit looming) while enabling unprecedented numbers of young people, including those from disadvantaged backgrounds, to benefit from higher education.

That said, it has its flaws. The sharp decline in the number of mature learners indicates that a loans-based funding model does not work for them: and there are also questions about the adequacy of maintenance support.

The forthcoming post-18 fees and funding review is an opportunity to tackle both of these – and to recognise that there is no longer a clear divide between academic and vocational education, and to explore how to join up the university, college and apprenticeship systems to support student choice and progression.

Professor Kathryn Mitchell

Do you see a viable alternative to tuition fees and maintenance loans?

MS: In relation to fees, without a significant shift in attitude towards the value of higher education, no. The question here is what proportion should be student fees, and what proportion government grant? 

As for maintenance loans, they should be abolished and maintenance grants re-established.

KM: The current system has led to increased participation, but reforms are required to address its fairness and transparency. Reducing fees will not impact upon lower-earning graduates: it will only benefit wealthier graduates, as the value of their contributions would fall. Better access to a university education needs to be at the heart of any fees system, so any reforms must reduce barriers to higher education. 

Modern universities, like Derby, are much more dependent than more research-intensive universities on income from tuition fees. In 2016, 73% of our income came from fees, compared to 40% for the Russell Group average. Therefore, if tuition fees were lowered, without compensation, universities like Derby would suffer the most. This would have a negative impact on social mobility, given that we recruit a much higher proportion of students from disadvantaged backgrounds.

The funding model has led to significant improvements in student learning and facilities. At Derby we have been able to invest £120m in facilities in the last five years, enabling us to support students and industry in relation to research and innovation. 

Research  by the Student Funding Panel found that 57% of students are worried about living costs; maintenance grants for students from low-income families would alleviate their anxiety and reduce their overall debt burden.

GB: As the higher education sector has seen first-hand over the years, there are always viable alternatives – be they online learning, two-year degree programmes or overseas campuses. Yet, due to the complex stakeholder groups that they have to consider, proposed changes often have to make it through via consultation and discussions, deterring many from trying.

The cost of tuition has been the biggest source of controversy in the sector since the introduction of £9,000 fees in 2012. Alternatives should always be explored. If Labour wins the 2022 election, it aims to pay for tuition fees through increasing Corporation Tax – music to the ears of future students. At a cost of circa £8bn for the Government, whether this is viable is another question entirely.

MA: Higher education benefits the individual, employers and wider society – funding should spread the costs in a way which reflects this. Essentially, the current debate is about how to spread the costs fairly between students, employers and the taxpayer. Exactly how that is done is a political decision.

In relation to maintenance, both the mode of support (grants versus loans) and the amount needs to be looked at again. Adequate maintenance support is crucial to students from disadvantaged backgrounds succeeding in higher education.

Gin Bhandal

In its 2017 election manifesto, Labour pledged to abolish tuition fees. Is this achievable? 

KM: It is highly unlikely that such a change to policy would be beneficial without a large additional cost to the public purse and the risk of damaging our world-class higher education sector. London Economics recently calculated that if higher education providers are fully compensated for the loss in income, the policy would cost the exchequer an additional £4.58bn per cohort.

If universities are not fully compensated, this would risk impacting on the student experience and widening participation activities. Whilst the sector overall is in reasonable financial health, there is wide variation in financial performance between providers. Those universities most reliant on tuition fee income – generally modern providers with a higher proportion of students from disadvantaged backgrounds – would be most at risk from this policy change. A reduction in tuition fee income could therefore hinder social mobility. 

MA: If Labour were in a position to deliver their manifesto commitment, I hope they would seek to do so without reintroducing student number controls as these tend to exclude young people from disadvantaged backgrounds. Equally, they need to ensure that higher education is funded sustainably – in spending reviews, higher education is likely to lose out to the NHS and schools. If it is not funded sustainably, the UK risks damaging not only one of its most successful sectors but one that underpins the success of the country as a whole.

Maddalaine Ansell

What do you expect from the Government’s impending review of post-18 fees and funding?

KM: Some reflection on what currently works and what could be improved. I would not anticipate radical reform, especially when post-18 education provides opportunity and the educational areas for concern are much more challenging at post-16. There is always a need to improve and assess a system’s effectiveness: but it is important to remember that the current system has enabled significantly more students to go to university.

Currently, we have a keen focus on social mobility, so measures that raise aspirations, create opportunities and deliver fairer access to education are desirable. 

GB: A review that highlights poor performance and holds universities to account is a must-have. For too long, there have been cases where substandard teaching has been delivered at a premium price.

Although the sector is already plagued by a plethora of metrics and reporting, any measure that can help people to differentiate between hundreds of providers should be welcomed. This clarity could (perhaps controversially) allow institutions to charge more for their highest-performing courses and less for their poorer-performing ones – a commercial incentive for the universities to improve their services, and a way to give future students a fairer picture of their options. That said, I hope a less contentious solution can be reached. 

MS: The Government seems committed to education for all and, therefore, to not reintroducing a student number control – which is good news. It does, however, mean that a unit-cost reduction is likely. I expect that the system will be tweaked with a reduction in fees and an introduction of government grant against priority subject areas. I cannot see differential subject-based fees being introduced, as this would potentially steer young people away from more expensive STEM areas – exactly the opposite to what the Government is trying to achieve. And I hope there will be a significant rethink in relation to part-time funding.

Do you think that many courses in arts and social sciences – those less directly relatable to future vocations, and thus arguably less ‘monetisable’ – may be at risk from this review?

KM: There is ongoing discussion of the value of degrees, in particular those in arts, humanities and social sciences (AHSS), in our rapidly-evolving labour market. 

The British Academy’s 2017 flagship report articulated the value of the skills gained through studying AHSS subjects. For example, the services sector represents 80% of the UK’s economy. It has a crucial role to play in the UK’s current and future economic growth – and is dependent upon the skills of many AHSS graduates. Moreover, the report also states that in these sectors (financial, legal, professional services; creative industries) the UK has a strong competitive advantage.

I hope that the review recognises the significant impact that AHSS graduates bring to our society.

MS: There will be significant scrutiny of these courses, however, their value should not be boiled down to repaying loans. Perhaps if more of the populace had a higher level of art and social science-based education, some of the current global challenges would look very different.

MA: We just don’t know enough about the future labour market to conclude that arts and social sciences will be less valuable in the future than more obviously vocational courses. Nor is it clear that because a skill is more ‘monetisable’ it is more valuable to society – there are all kinds of reasons why wages don’t reflect the actual value of an occupation.

We can, though, state that graduate attributes – personal resilience, critical thinking, communication, working well with people from different backgrounds – will remain important bases for individual success and for a strong society. 

Professor Mark Simpson

Is part of the solution incentivising universities to provide the diverse courses that students and the economy need – perhaps restricting open-ended provision for 18-year-olds, and increasing provision for older students and work-based learners?

KM: The role of universities is to educate, and as part of that education we need to give our graduates the knowledge and skills to support the economy – but we must also deliver innovators for our future success. I cannot envisage that restricting places for 18-year-olds is of value. 

Moreover, the expansion of higher education has enabled more people from disadvantaged backgrounds to access education, which is good for social mobility but also for the needs of a changing and diverse economy. Imposing a cap on numbers would undermine that progress. 

However, action is needed to reverse the decline in mature and part-time students. At Derby we have stemmed this decline through working with industry and delivering a high-quality online course provision.

GB: It would take a significant amount of persuasion to see universities shift from such a large and captive 18-year-old audience to one where they would be competing to recruit individuals in a more transient market. 

Restricting provision for 18-year-olds would create new challenges including significant skills gaps and a potential “knowledge leak” into overseas countries – and risks pushing learners towards the private sector market. This would also lead to a further increase in focus on realising greater revenue as opposed to higher-quality teaching and learning. 

MS: Despite the rhetoric, universities provide diverse courses. In fact, courses are often pulled due to low student uptake, whilst more traditional courses survive the test of time. Perhaps we need to look elsewhere in the education system to ask if students’ choices are narrowed too early. The answer to all of these issues should not be to restrict education – we should instead be proud of what we have achieved in relation to greater numbers in higher education. 





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