'Postcode' premium is not enough

Much of the government's effort to expand higher education will focus on demand - increasing the number of people with the qualifications and aspirations to progress beyond school. It recently ordered the Higher Education Funding Council for England to lift the cap on student numbers in anticipation of a surge in qualified people.

Universities UK has estimated that, over the period of the next funding review 2003-04 to 2005-06, higher education will need an additional 30,000 places a year at a cost of £485 million a year over the three years.

But the supply side - the universities and colleges that will educate the extra people, while dependent on additional student demand and the additional funding that this entails - cannot be ignored.

They are autonomous and the government cannot force them to recruit more students, crucially those from the lower socioeconomic groups, where much of the expansion will focus.

The most potent mechanism available, Hefce's "postcode" premium, encourages rather than forces universities to recruit more people from disadvantaged backgrounds.

The premium, a 5 per cent funding top-up, is given for each student recruited from postcodes deemed to be less affluent. But it is a crude way to assess and reward widening participation.

The institutions recruiting the poorer students and which benefit the most from the postcode premium are the former polytechnics. New universities are less concerned about the traditional three A-level academic entry standard and focus their energies on teaching and producing people of graduate standard. Since under-performance at school is linked closely with lower socioeconomic status, this means they naturally recruit more students from poorer homes.

Older universities remain highly selective, insisting entrants are, by and large, people holding a clutch of high-grade A levels.

Many old universities see precious little financial incentive in the postcode premium. Their big rewards come in the form of research funding. But they are making serious efforts to recruit more students from poorer backgrounds because it makes sense to select from the widest possible pool of able people.

Moreover, no institution is immune from potential recruitment problems in specific subject areas. A fall in recruitment to a particular subject can force the closure of a department, leading to the loss of research revenue and institutional prestige.