The market charge

Did necessity or ideology drive thinking behind Browne and the CSR, and will unleashing student/consumer demand improve or imperil the sector? Simon Baker investigates

October 28, 2010

The Chancellor's Comprehensive Spending Review - a masterwork of political spin that would make Alastair Campbell blush - was so lacking in statistical detail that universities are still trying to divine the exact financial impact.

But the structural implications for higher education in England are clear. The sector will now be shaped by thousands of individual consumer choices rather than by direct public subsidies to universities.

The academy is on the brink of an experiment that rivals the privatisation of the nationalised industries in the 1980s and 1990s for scope and ambition.

Together with the reforms of the NHS, this is the major public service restructure being attempted by the coalition government. Ultimately, it may have a greater influence on the government's fate than the billions sliced from departmental budgets.

For many people, the key question is whether this radical conceptual shift is by design or by necessity.

David Willetts and Vince Cable - the ministers in charge of universities - say they could see no viable alternative given the huge savings the Treasury was demanding. The stark choices were cut student numbers, allow quality to decline or charge graduates more.

But a close analysis of the Chancellor's own words makes clear that political beliefs must have been a factor for the government when it weighed up the future of the sector.

"Clearly better-off graduates will have to pay more - and this will enable us to reduce considerably the contribution that general taxpayers have to make to the education of those who will probably end up earning much more them," George Osborne said.

In other words, the economic situation has "enabled" the government to severely curtail - and in many subjects end - the principle that taxpayers should subsidise higher learning. This represents a major ideological shift.

Bahram Bekhradnia, director of the Higher Education Policy Institute, agrees that free-market thinking has had a large role in policy, but only because tough economic times have presented it with a convenient opening.

"It is principle born of necessity," he says, "but it is very bad to make principles on a pragmatic basis."

Compared with other public sector services such as the police, prisons and schools, he points out, higher education had a "ready source of alternative funding" that proved an attractive proposition for a Treasury trying to save billions while minimising political fallout.

Bekhradnia thinks that in fairer economic weather, pro-market arguments would have enjoyed less influence on moderate politicians and the panel convened by Lord Browne of Madingley would not have recommended such wide withdrawal of teaching subsidies.

"In this respect, we have become like Azerbaijan and Kazakhstan, where the state has largely withdrawn from funding teaching and left it to be funded privately. That is the sort of company we're in," he observes.

In comments made since the announcement of the spending review, Willetts, the universities and science minister, has portrayed the planned slashing of the teaching grant as nothing more than allowing funding to "flow in a different way" - through students instead of institutions.

Of course, it will cost the government millions to lend money to students for higher tuition fees, but it will presumably expect a large chunk of the money to be repaid.

The essential fact is that vast amounts of purchasing power are being transferred to private individuals. This opens up the old dividing lines and arguments over the relative benefits of the market and the state, and over which is better at providing goods and services for society as a whole.

Alan Smithers, professor of education and director of the Centre for Education and Employment Research at the University of Buckingham, argues that the reforms will set in motion a reshaping of English higher education as individuals are forced to make considered choices about what and where to study.

"At the moment higher education is, for many, a free good and often regarded as a rite of passage. (After the reforms) I think people will take much tougher decisions about how university is going to enhance their lives," he explains. "That will put a shape on the higher education system, which has really been blown up in size on the simplistic assumption that the more graduates there are, the better it is for the economy, without sufficient regard to the type of graduates."

Smithers does not buy the argument that less state involvement in funding choices will lead to poor outcomes for society - one key argument against marketisation.

"What emerges will be shaped by the interaction of a great variety of wishes, not just by government edict," he says.

Others point out that most economists agree that markets do fail, often because of a lack of quality information, and that it is impossible for students - even with the best improvements in advice and guidance - to always make the choices that will best serve them and society, especially when it is so difficult to measure and compare quality in education.

Roger Brown, professor of higher education policy and co-director for the Centre of Higher Education Research Development at Liverpool Hope University, says the government is "in effect taking the public interest out of higher education".

"It is assuming that the public interest is simply the sum of all the private interests, and that is pure free-market ideology. The whole point is that, in a higher education market, no one is in an ideal position to make those kinds of choices.

"If you have a mixture where some funding comes from students and some comes from block grants for teaching, you have a greater number of different views about what ought to be offered. That's going to lead to a much healthier system than one where all the money comes from the student."

It can be argued that the present system of higher education already allows individuals vast freedom - people can choose what, when, where and how they wish to study - especially in comparison to some public services. However, channelling more buying power through those decisions will inevitably cause changes to provision.

"If a subject goes out of fashion and a university cannot recruit enough students, the course may have to close," notes Claire Callender, professor of higher education policy at the Institute of Education and Birkbeck, both University of London.

As the Browne strategy seems to be to retain public subsidies only for "priority subjects" - deemed mostly to be science, technology, engineering and mathematics - the possibility that unpopular arts, humanities and social science subjects will simply disappear from many universities is intensified.

D. Bruce Johnstone, professor emeritus of higher and comparative education at the State University of New York at Buffalo, who favours tuition fees at a moderate level, thinks the English proposals seems extreme.

"One disadvantage is simply the shock to the system, which seems extraordinary, and I fail to see even an economic reason for shedding that much government expenditure in the realm of public higher education," says Johnstone, author of Financing Higher Education Worldwide: Who Pays? Who Should Pay?

"Second, universities require some balance. I fear that England, as I understand the proposal, may be rushing to walk away from all the arts, humanities and social sciences rather than shift in a more measured way. I would not like to see a university with no English or history or economics courses unless it is a very specialised technical university."

Carl Lygo, chief executive of the for-profit provider BPP, which was awarded university college status earlier this year, says some institutions will still see it as their "mission" to provide less popular traditional subjects. Others, however, will inevitably stop trying to cover all areas of study. To his mind, student choice will push institutions to play to their strengths and provide fewer, but higher quality, subjects.

"The market is not going to be perfect, but it ought to be better than (the situation is) at the moment," Lygo says.

He also insists - as Browne envisages - that many universities can cut costs, and this will be a key benefit of moving towards a market. "What displeases me is that the talk is about putting fees up when you will not necessarily have to if you address your cost base."

Bekhradnia warns, however, that by charging less, some universities will instigate a "spiral of decline" where demand falls further. "They will be cheap and cheerful, there will be worse staff-to-student ratios, fewer books in the library and generally less provision. So their quality will suffer, the way they're regarded will suffer, and students will probably see them as a second-class experience."

It is also wrong, he feels, to suggest that the plan to remove subsidies for teaching is akin to the system in the US because investment in public universities across the Atlantic is still high and the tuition fees they charge relatively low.

But for many advocates of a market in higher education, America - especially in the guise of the Ivy League universities - is the beacon that England should be following in shifting funding emphasis.

"Our top universities are hamstrung because they are not receiving enough income for teaching," Smithers says. "Although the period of adjustment will be painful, it will leave us with a much better education system and in a much better position to rival the US."

The danger is that applying a single policy principle - that of opening up the academy to competition and consumer choice - to a whole sector may have unintended consequences.

Like nimble boxers circling a gigantic opponent, Browne and Osborne have delivered their punches to the English system. Now we wait to see if it will stay upright.


What will the UK higher education sector look like in 10 years?

The sector will have changed radically. Undergraduate courses will probably run for no more than two years in most universities.

Many of the former polytechnics will have closed or become a cross between colleges of further education and technical colleges - not universities even in name.

The Russell Group (more or less) will have become more like top US universities, the emphasis being on research, with fewer undergraduates, who will be taught, at least in their first year (of three), by graduate students.

The target of 50 per cent of school-leavers going to university will look utterly of Blair's era, and as utterly ridiculous as it always was. Meanwhile, feeder schools will have become more selective or will at least have pre-university "grammar" streams.

All this depends on research funding being somehow maintained. It is not by any means all bad news.

Baroness Warnock is a philosopher and ethicist

The real change is in research funding. UK policy has always protected government funding for research, especially in leading institutions, even while weakening public support for teaching. That has been the most distinctive feature of the UK's approach to higher education.

Unlike teaching, research can only function as a predominantly public good. UK university research is relatively efficient and achieves brilliant returns from modest outlays. It has sustained a position as the clear number two in the world. There can be no doubt that long-term research performance will be undermined by cuts of this magnitude.

Simon Marginson is professor of higher education, University of Melbourne

In 2020, the sector will look much as it does today - in the same way as today it looks much as it did in 1990. The main difference will be the presence of a number of private providers, mainly in technical and vocational subjects not requiring large investments, attracted by the high fees that students will by then be used to paying to attend even quite modest universities.

There will be more part-time students and more students living at home, but that will not be the step change that some imagined.

The going annual rate for tuition fees will be £6,000 or more, with the majority of universities charging about that. Students will have swallowed hard and concluded that even at such prices, the downside to not having a degree outweighs the cost.

We will still be talking about changing the paradigms of higher education to just-in-time learning, bite-size learning and so on, as we have been for the past 20 years.

Bahram Bekhradnia is director, Higher Education Policy Institute

It is difficult to make such long-term predictions. However, as the majority of developed nations look to invest in higher education, the cutting and freezing of budgets in this country seems short-sighted, risking our position on the world stage.

There is also the risk of a knock-on effect on postgraduate education. It remains to be seen if fees for taught postgraduate courses will also rise, but it's clear that significantly higher levels of graduate debt can act only to deter students from further study.

Given that post-graduate education is the gateway to academia, increasing the cost of it may starve the academy of new blood.

As a sector that has prided itself on achieving more with less, the worry is that this time, less may actually mean less.

Matthew Gamble is a PhD candidate at the School of Computer Science, University of Manchester

Even to an optimist, the move towards a privatised sector set in train by the Browne Review and the Comprehensive Spending Review suggests a bleak future.

Such radical changes would profoundly alter the relationship between students and institutions, with courses seen as commodities and decisions to study based increasingly on finance. Expect more litigious students, who will expect more bang for their buck but will be unlikely to get it. Institutions are not ready to deal with consumer-students and will struggle to meet expectations or uphold quality.

With access routes to the arts, humanities and social sciences severed for those who will no longer be able to afford to value education for education's sake, utilitarianism will be the only game in town. Many courses, faculties and institutions are likely to go to the wall in that climate.

My 2020 vision for higher education is a murky one in which the goose that laid the golden egg has been slain.

A higher education sector where the state has abdicated its responsibility in funding the majority of subjects is a dark day for the government, universities, students, the economy and society.

Aaron Porter is president, National Union of Students

What will be the most unexpected result of the Browne Review?

There might be two unexpected outcomes.

The first, which we can see already, is that the review did not divide the higher education sector along the predicted lines. Many institutions that might have been predicted to oppose it in fact supported it. At Universities UK, we have had a surprising set of very supportive comments about the proposals from across the sector.

Second, if implemented in full, I think the recommendations would lead to a more differentiated but, crucially, more sustainable sector than at present. This is because institutions would find a niche that matched the demands and needs of their students and thus improved their financial sustainability while giving genuinely more choice to students.

Steve Smith is vice-chancellor, University of Exeter and president, UUK

The most shocking surprises in the review are the proposal to control student numbers by centralised admissions standards (which, as it stands, is thankfully so impractical that it can't possibly happen) and the proposed interventions in course content. Let's hope that they both vanish.

Sir Drummond Bone is a higher education consultant

The review's proposals will fundamentally change the relationship between students and their institutions.

Universities will need to present courses that combine intellectual rigour at the highest level together with the skills students will need to compete in a challenging employment market.

Given employers' oft-stated desire for, among other things, quantitative skills and teamwork skills, Browne may result in a welcome increase in the importance given to quantitative skills and also in some exciting innovations in assessment.

Ian Diamond is principal and vice-chancellor, University of Aberdeen

Given the financial climate, was there any alternative to Browne?

We have forgotten the value of higher education as a social good because we are too busy measuring it as a route to employment or as a contributor to gross domestic product.

The Browne report is the culmination of a philistine trend initiated by James Callaghan in the speech he delivered at Ruskin College, Oxford, 34 years ago this month, which invited business to tell the government what its education policies should be.

Producing such reports avoids the philosophical and moral need for government to think for itself and argue for its vision, which would mean that the coalition would have to explain why it is abandoning the role of government in any civilised country - funding and providing a higher education for those who can benefit from it, even if it is expensive.

Universities can no longer argue this case because they sold out to the skills approach to higher education during New Labour's lucrative expansion period.

If academics are not to become trainers, they must use their academic freedom to argue against philistine austerity. What we need now is a debate about what universities are for. We can point out the hidden irony in the report, which is that what the economy needs today is young people with a good higher education.

Dennis Hayes is professor of education, University of Derby

How will Browne's proposals influence the debate in other countries?

The cuts mean that Anglo-American global leadership will be diminished, even as higher education in China, Korea, Taiwan and Singapore is on the rise. How changes in the UK and the US play out in Western Europe - where universities have also been strengthening - is an open question.

Many governments around the world, for example in Australia, are now more likely to follow a similar policy path - running down public budgets and bumping up tuition payments. In essence, the UK government and the US state governments are saving money by trading off public benefits. It is done not simply by switching from public to private funding sources; it involves a change in the character of higher education so that its private-good functions are boosted by partly evacuating the public-good functions.

In this policy mindset, public and private benefits are treated as zero-sum.

So increasingly the attitude will be to focus on the short-term fiscal savings and never mind the long-term effects on social equity and research capacity.

Not all governments will follow this path, however, and certainly not those in East Asia. There, public and private funding will both continue to increase, in a division-of-labour approach to the expansion of national capacity. In China, Korea and elsewhere in the region, the public and private benefits are treated as positive-sum, not zero-sum.

We now have two different models for higher education development in emerging nations: the Western model, which increasingly is based on the privatisation of costs and benefits, with variable approaches to building research capacity; and the Confucian model. Some emerging nations will imitate the Chinese approach, others will follow the Anglo-American route.

Simon Marginson is professor of higher education, University of Melbourne

The expenditure cuts have stirred interest in the US for two reasons: first, as evidence that Europe is turning away from Keynes, and second because the US and the UK will provide an interesting experiment in the relative merits of "cut now and spend later" versus "spend now and cut later" as ways out of the recession.

It has been noticed that cuts to higher education seem particularly severe. But thus far there has been no deep analysis of how UK higher education will or will not look more like higher education in the US.

Americans may not feel very sympathetic to their colleagues in the UK because they have seen all this at home. The combination of George Osborne's cuts, Lord Browne's fees with a "soft cap" and Vince Cable's threats of a "hard cap" is very like what has happened to the largest public higher education systems in the US.

The State University of New York has suffered steadily diminishing state funding, alongside nit-picking, line-item financial control by an inefficient state government, and the unwillingness of a corrupt and ineffective legislature to allow individual institutions to charge higher fees and manage their own budgets.

The Californian system, once the envy of the world, suffers in much the same way: inadequate governmental support combined with minute state supervision and strict limits on raising fees.

Alan Ryan is a visiting Fellow in politics, Princeton University.

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