Alan Ryan

February 23, 2007

It was William Bowen, the president of the Mellon Foundation, who passed on to my wife the aphorism: "If you want a job doing properly, give it to a busy woman." But it's nice to see the Corporation of Harvard University getting it right by appointing Drew Faust to manage that unwieldy institution. Now that Cambridge, Massachusetts, and Cambridge, Cambridgeshire, have got there, how long before Oxford University, the home of lost causes, gets there too?

That, however, is only indirectly the text for this week. Put together three things: the oddity of Harvard, Tony Blair's wish to give the well-off some further incentives to give to the better sort of university and the discovery that higher education has become even more of a bargain after the institution of top-up fees - more accurately, "deferred payment beginning at £15,000 rather than £10,000". What are we to conclude?

First, that taking Harvard as a model for the rest of us to emulate is dotty. It is an outlier in the US system, let alone globally. Depending on how you do the calculations, it has about 60,000 students - including extension students - although only 6,500 or so are undergraduates and about 3,500 graduates doing research degrees. It really is a semi-industrial conglomerate, embracing hospitals, nursing schools, business schools, training schools for the ministry and so on. A capital base of $29 billion (£15 billion) isn't so absurd for an enterprise like that, but it's not a plausible target for the rest of us.

Second, that there are lots of US universities that have built their endowments over the past 15 to 20 years to a level that most of us would envy. The University of Notre Dame, for instance, now has more than $4 billion in its endowment; 20 years ago, that was about $500 million. Run your ruler over the Dow Jones, and you discover that a tracker fund of $500 million invested in 1986 would have gone up eightfold in the interim. But, university costs have rocketed, and you wouldn't have wanted to stick your endowment in a tracker; you'd have been out fund-raising like mad, as well.

And you'd have raised your tuition fees at about twice the rate of inflation until recently, when guilt, anxiety - Congress was getting irritable - and parental resistance began to check you. Endowments are swell; tuition fees that you can control for yourself are swell as well.

Third, it is the UK versions of Notre Dame that should find Blair's bright wheezes useful. If it turns out to be possible to attach Blair's bright wheeze to one of Mr Brown's tax breaks for charitable giving, you get some spectacular gearing: suppose you have shares bought at £10,000 that are now worth £78,000; you give the £78,000 in shares to your alma mater. It is first treated as a charitable deduction against income, so as long as you have a taxable income above £100,000 they will get tax relief worth Pounds 22,000, bringing your gift up to £100,000; if you have £100,000 taxable at 40 per cent, you get £18,000 back, which lowers your cost to £60,000; but you also save the capital gains tax on the £68,000 gain you would have made if you had sold the shares and not given them away - another £,200. (Sell the shares and you're in trouble; this works only for gifts of appreciated shares, and sadly it was a tax break introduced just as the dotcom bubble burst, when the very mention of appreciated shares brought tears to potential donors'

eyes.) When nice Mr Blair turns your £100,000 into £150,000, you find that for £33,800 net out of your own pocket you've put Pounds 150,000 into theirs. No wonder Gordon Brown dislikes the whole idea.

But all this is fun and games for the well-off. What about the other end of the spectrum? It seems to me we have to keep plugging away - however forlornly - at the old argument: we need the Californian three-layer system, with further education colleges or their near neighbours in higher education providing really cheap foundation-degree style courses for people who are either uncertain of their interests, uncertain of their capacities, returning after a break, looking for middle-level vocational qualifications, or whatever. A year or so of that is a small enough investment to walk away from without undue anxiety if it turns out to be a mistake. And if it's a success, it should be possible to stick the next two years of superstructure on the foundation, just as Berkeley and UCLA and the like have twice as many students in their final two years as in their first two years because of such transfers. The moral seems obvious: put most of the state funding for teaching - not research - into low-cost, high value-added provision, and send the rest of us out with our begging bowls to spread Mr Blair's message to our alumni: do good things for those who taught you; and do it cheaply.

Alan Ryan is warden of New College, Oxford University.

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