Reason not the means

November 1, 2002

If we are to have differential fees, means-testing is not the best way to ensure that poorer students apply, says Abigail McKnight.

The government is soon to publish a higher education white paper that will review funding options. It is believed that increasing the £1,100 cap on annual undergraduate tuition fees and the possibility of differentiated fees, by institution and subject, will be two of the options under consideration.

In last week's THES , Sir Richard Sykes argued that Imperial College students should pay tuition fees of anything up to £10,500 a year. These would be means-tested and only about 30 to 40 per cent of students would be required to pay. This is based on the premise that introducing higher fees will not harm the government's widening-access agenda provided only students capable of paying are required to do so. A number of England's most prestigious universities are said to be considering similar plans - not because they are trying to increase profits, but because there is a funding crisis in higher education.

On the one hand, we should be glad that some of the most prestigious UK universities are prepared to act rather than to see their standards slip. But should a few universities be allowed to shape policy in this way, particularly as their objectives are not necessarily consistent with wider social-policy objectives?

The problem with increasing fees is that, even with means-testing, the rules are not well understood in practice and are likely to have a deterrent effect. If universities were allowed to set their own rules for means-testing and access to bursaries as well as the level of fees, then confusion would be even greater. Although institutions can put measures in place to ensure that students are offered places based on academic ability rather than ability to pay, if students are deterred from applying in the first place these measures will be ineffective. Any deterrent effect is also likely to be exacerbated by allowing fees to be differentiated by subject and institution because students will be deterred from enrolling in the most prestigious universities and subjects that lead to the highest paying jobs.

Research has shown that students from less advantaged backgrounds face greater risk of not reaping the rewards when embarking on a degree and "high-premium" degrees are riskier than "low-premium" ones.

But there is a way to introduce differentiated fees without damaging participation. Rather than means-test everyone, only students who attended independent schools should be required to pay. There are reasons why this scheme is preferable to a means-tested scheme: efficiency, incentives and affect on participation.

In terms of efficiency, it is much cheaper to identify students who attended an independent school than identify a minority above an income threshold. And unlike the means-test, which provides an incentive to keep incomes low, this test has only positive incentives. Some parents may be deterred from sending their children to independent schools, but on balance this has to be a good thing, particularly for social inclusion.

On participation, students from less-advantaged backgrounds will be clear about their exemption from fees and, in exceptional cases, bursaries can be made to students from independent schools.

Not only have parents of students from independent schools signalled their ability to pay for education, but research shows that these students earn significantly more in the labour market. This premium is not associated with better pre-university qualifications or degree class, degree subject or the higher education institution they attend, but quite possibly represents social connectivity ("the old school tie").

Total exemption for state school students would be contentious and the politics of such a theme would be difficult, but introducing differentiated fees will always be controversial and a system of means-testing would be much, much worse.

Abigail McKnight is a research fellow at the Economic and Social Research Council's Centre for Analysis of Social Exclusion at the London School of Economics.

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