The market is up and running – now where will it take us?

Arguing the case for market forces in higher education will become harder if a university looks likely to fail, warns Emran Mian

January 24, 2014

The figures released this week by Ucas on 2013 student acceptances clearly show that demand has recovered following the introduction of higher tuition fees.

As Mary Curnock Cook, the Ucas chief executive, put it, “more of those who were 18 in 2012 have now started university than those who were 18 in either 2010 or 2011”.

The 22 per cent increase in entrants to selective universities who had been on free school meals is particularly strong.

The government has been betting on demand returning, not only because it means that the difficult political choices made in the early days of the coalition have had no lasting ill effects, but also because the chancellor George Osborne has announced an additional 30,000 places in higher education for 2014.

This was one of the few measures in the Autumn Statement aimed at improving the UK’s poor performance on productivity, so this week’s Ucas figures are an important bellwether for an economic as well as a political gamble.

While critics of the funding reforms will argue that demand would be even greater without higher fees (and that anyway the funding system is unsustainable due to high loan costs), the key questions for the next few years are likely to be about the pattern of demand across the sector.

Which universities will see demand grow strongly, and which – in the new competitive environment – will come under pressure from new universities, online courses and the expansion of their competitors?

Students are becoming more demanding now that they are paying higher fees and it’s likely that not all universities are responding equally well.

What the latest figures show in fact is a very wide range of performance.

Institutions such as Aston University, University College London, the University of Bristol and University of Exeter have each increased full-time undergraduate numbers by upwards of 35 per cent over the last two years.

London Metropolitan University, by contrast, has seen its numbers decline by 38 per cent over the same period, and looking outside the South East, the University of Bolton has lost 25 per cent its full-time undergraduate numbers.

These shifts will require decisions about the departments and courses those universities under pressure should be focusing on, and those judgments will become particularly important when the remaining student numbers controls are lifted in 2015.

At the moment popular universities cannot recruit all of the people that they want. This protects potentially weaker universities because the unfulfilled demand filters through to them. When the recruitment caps vanish, though, popular universities are likely to grow and applicants will no longer be funneled away to their competitors.

The benefit may be that all universities are forced to concentrate on their strengths, which will typically be the areas in which they can recruit strongly. In turn, they may give up on lower quality courses that have fewer applications.

If that happens, the odds on the chancellor’s economic gamble paying off - more higher education turning into higher productivity - will be strengthened. But the political gamble will become more complicated.

While the economic case might be supported by fierce competition, the politics are simpler if the rising tide of student numbers prevents any ships from sinking.

In total some 90,000 extra students are expected to come into the system in the next two years; that might help everyone’s bottom line.

However, if student demand remains is as varied as the latest figures suggest, then we will no doubt hear the argument that universities grabbing a larger share have done so through slick marketing rather than by improving quality - more wi-fi rather than more contact hours. Equally, some local universities created in the 1990s and 2000s that have a weaker brand than the more established institutions might also come under pressure, raising questions about the equity of outcomes in the market for students.

The big question for government will be what to do when it looks like a university is going to fail. The question will be even bigger if that failure threatens at the same time as new providers, some of whom will be vulnerable to criticism from established interests in the higher education sector, and whose names and courses won’t be familiar to most politicians, journalists or commentators, are growing strongly.

David Willetts, the universities minister, has defended the concept of a market in higher education robustly to date, but that is a harder position to take when there is a specific university at threat - perhaps one in an area of the country that has particular economic challenges too - and there’s a general election campaign going on.

The politics of rebalancing the economy across the regions may translate into the politics of rebalancing higher education too. After all there will be an estimated 60,000 new places to go around when the caps come off; a little bit of intervention to hold off significant failures or closures may be irresistible.

The question for schools, careers advisers and consumer organisations such as Which? is how they support young people in making the right choices at a time when their choices will matter more than ever. Already in the 2013 figures we see that more applicants are winning entry to their first choice institution.

I’m sceptical about the suggestion that students are being seduced by wi-fi rather than by contact hours, but anyone who does believe that this is happening should be the firmest advocate for more information being available during the application process.

The funding arrangements for higher education may now be locked-in until after the 2015 election, but there is still plenty to do to continue the task of reform.

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Reader's comments (1)

the faster we get to a free market the better. The governments focus should be on forcing transparency and comparability in the information being provided. So what if the weak universities fail.

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