The real value of abolishing tuition fees in England

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Most politicians and journalists play policy questions at midfield. Usually, they replace questions of principle with budget charges: “Labour will announce a tax raid . . . on Britain’s professional classes by saying the richest must pay up for a spending splurge.” Core principles and wider benefits get lost as the accusations fly.

Labour’s new education policy has the virtue of avoiding the midfield trap. Calling for a National Education Service, shadow chancellor John McDonnell explained, “we’ve always believed, as a movement, that education is a gift from one generation to another. It’s not a commodity to be bought and sold.” This is a crucial distinction, but it will need to be unpacked for voters as it applies to higher education. Labour will have to show how its core feature, scrapping tuition fees, solves root problems without plunging universities into poverty.

I interpret McDonnell to be rejecting the Coalition government’s shift of universities from a public good to a private good footing – particularly in the form of its massive cut to the teaching grant. If Labour terminates tuition charges, they’ll need to replace £10 billion or so with a new central government grant. This means British society will be paying for university instruction again, so something needs to be quite wrong with the private good, tuition-paying, student loan model that has been in place in recent years.

In fact there is. The private good model sets up a doom loop for universities that I’ve just published a whole book about: here I’ll mention four of its elements.

First, pushing universities even half-way out of the public-good frame reduces their benefits to private market gains, calculated in the form of higher personal income, and negates most of the university’s total value to the society. The majority of the university’s benefits are nonmarket, indirect, and social – some mostly for individuals, like better personal health, some mostly social, like the spread of the ability to solve complicated political problems. The economist Walter McMahon called this majority of university benefits ‘dark matter’, and calculated that in the U.S. they are about two-thirds of total university benefits.

UK research budgeting would alter this calculation without changing the point that the public should pay most of the cost of university teaching and research because it gets most of the benefits. The current government policy of near-zero teaching grants unfairly obliges individual students to subsidise the public’s gains.

Second, when universities are treated as private goods, they wreck their claim to public support. The United States has ample experience here: once tuition goes up, taxpayers wonder why they should pay twice for universities, once over the years that they pay their taxes and a second time when their family members enrol. Tuition hikes lead directly to an explosion of student debt, which further damages the university’s popular appeal while putting pressure on politicians to cap or freeze tuition hikes.

In the US, most state legislatures have created a zero-sum game with public funding and tuition: if universities raise tuition, the legislature freezes or cuts public funds. Although UK universities got a short term jolt from their first £9,000-level tuition streams, they also gave up their claim on more sustainable public revenues. While dependent on tuition at levels that create high student debt, universities destabilise their revenues and dampen public interest in supporting them. This helps explain recent closures and strategic redundancies even at Russell group universities, which will continue or even escalate.

Third, inequality grows dramatically in a private-good university system, which lowers private market benefits for students at poorer universities and lowers aggregate benefits for society as a whole. Again the US case is instructive: the small minority of university students who attend private universities now receive on average twice as many resources per student -up from the 30-50 percent more that was typical in the 1980 – and have far better graduation rates.

At the extreme, an elite university like Stanford spends 10-20 times more per student than the 2-year college down the road. This is great for the tiny number of Stanford graduates and a disaster for the overall system, where investment is actually upside down: the low-income students crowded into poorer institutions need more spending per capita than perfectly-groomed Stanford students, and yet they get far less, predictably leading to lower learning gain and graduation rates.

As the UK’s tuition model forces broad-access institutions to educate less prepared students with less money, it will intensify the “separate and unequal” system that unjustly stratifies students while hurting national attainment. This process would be accelerated by for-profit providers, since they are built to minimise spending on their vulnerable students and have, in the US, produced the worst outcomes for the most money in human history. The private good framework induces universities to reinforce social inequality rather than cut it: why would a regular citizen pay for that?

Finally, the private-good model induces nonelite universities to spread commodity skills, thus weakening the business world that private-sector discipline supposedly serves. When universities are funded according to ability to pay, they ration quality of service, reducing high-quality instruction in the broad-access institutions that serve the majority. This, in turn, discourages business from investing in sectors requiring high productivity growth that depends on the generalised creative capabilities of large numbers of employees.

The running complaint of a skills gap is actually a symptom of a political system that likes high-skills in small numbers, but that refuses to fund immersive learning at scale. Its de facto solution – importing much of the middle-skill and high-skill workforce from other countries – helped generate the Brexit backlash.

These are four stages of the decline cycle that McDonnell’s public good definition of education wants to stop.

A gift is a good or service that passes among people without being run through the system of market price. Givers decide who receives without checking to see whether the recipients can pay; in a democracy, givers and receivers make the rules together. They also decide the desired quality of service through various kinds of democratic deliberation that considers cost but also social needs, goals, and ethical principles.

Casting universities as public goods helps fix the four problems I’ve described. The public good frame puts increases in future salary in their proper place as a one among many, large nonmarket, indirect, and social gains for which society as a whole should pay.

When the public pays for universities, it has a direct stake in their quality and effectiveness. People can feel that universities, rather than trying to make money from a core social need, are directly helping them and are on their side.

General funding enables a rough equality of service. A National Education Service can decide to send more money to universities that serve disadvantaged students with greater educational needs. We could learn to see less prepared students as a major social asset and pay to give them Oxbridge tutorials. Why not ‘tutorials for all’, with an understanding of the jump in well-being and capabilities that would result?

Finally, mass quality – high educational quality for every student – is Britain’s best shot at addressing its ongoing productivity problems. The country needs deep personal ingenuity on a vast scale and can draw on the institutions, its universities, along with further education providers and other levels of schooling, that make creativity exciting and meaningful. The public-good frame puts the university at the heart of personal and social development, enables universities to work across society, shows universities to be a means by which we help each other understand the world better, address impossible technical issues, solve the hardest social problems across all cultural divides, and involve the non-university parts of the population that have been left out.

There are no guarantees that business or society will know what to do with the new legions of highly skilled graduates, but the legions will know and will tell them.

The UK can always continue to muddle through with growing student debt, ongoing university squeezes and cuts, and lukewarm public support for the university system. But Labour’s concept of education as a public good offers a real alternative, and the higher education sector should help it work out the kinks.

9 thoughts on “The real value of abolishing tuition fees in England”

  1. Matt Robb says:

    This is almost completely wrong in every respect, confusing the idiosyncrasies of the US system for structural problems with private pay

    The author identifies 4 problems: ‘negation of public good’, loss of public support, increased inequality and a fourth that reads something like ‘cheap universities teach cheap skills, which undermines the economy’

    The negation of public good argument is nonsense, just as it’s nonsense to argue that a publicly funded system ‘negates’ the private good to the student. ‘Negation’ isn’t even a meaningful term here: both public and private goods exist under both funding systems and neither are ‘negated’. Each system simply chooses a payer (essentially for political reasons in both cases) and that group takes the burden. You can either choose the taxpayers, or th individuals, or some combination of both (as we do in the UK through very heavy write-offs of unpaid loans)

    The ‘loss of public support’ is also nonsense, as the ongoing investment in research shows. Indeed, there are loads of examples of a privately paid-for good that attracts ongoing public investment as well such as roads (fuel tax and general taxation investment). There is no political movement here in the UK to cut university funding on the back of fees.

    There is of course this pressure in the US – and it’s not hard to see why. Universities, especially elite universities, are gateways into the elite end of the labour market. Many universities in the US have turned this gateway into a tollgate. As elite incomes have risen, US HEIs have raised the toll. This is a good argument for price controls, but that’s not a private-pay problem. It’s a monopoly problem. (There is a wider question here, which is, where should the increasing value associated with elite incomes go? The US system directs a huge chunk of it to elite universities, but I can’t really see the argument for this. Surely it should be captured through the tax system for the benefit of wider society?)

    The third argument is about increased inequality: with more resources going to elite students and fewer to less elite students. Again, this is a feature of the US system and the tollgates problem above. Because graduates from Stanford earn lots more, Stanford can charge them a shedload. In return for these prices, elite students expect more resources to be spent on them. In the UK, there’s very little price discrimination and elite universities don’t extract the money from their grads at the same level

    Maybe I don’t understand the final argument, but it seems totally unfounded. Lower-ranked universities teach commodity skills instead of high-end creative skills? Firstly, there has been a move to more ‘job-related’ courses post-loans, which is what both employers and student want. What is the evidence that as the tertiary enrolment ratio rises, the level of creativity or productivity per student falls, even accounting for the lower average quality of student? It’s an entirely theoretical argument

    The US has messed up funding, but most of this is about the failure to price cap properly and not to do with sources of funding.

  2. Ideas that fall outside the marketization framework are less familiar and comfortable these days than they should be, and often inspire instant resistance. Labour will face full-tilt opposition to any wholesale resituating of the lucrative higher ed market in a public-good framework. Mr Robb offers one example of how that will sound. I appreciate the energy that went into the comments, and have a few comments in return:

    1. I seem to have caused some trouble with the sentence, “pushing universities even half-way out of the public-good frame reduces their benefits to private market gains, calculated in the form of higher personal income, and negates most of the university’s total value to the society.” This sole use of the term “negates” might have been replaced with “veils” or “obscures.” The point is this: policy that ignores that private market benefits are only 1/3rd of total university benefits underinvests in public universities, forces student tuition to subsidize public benefits, and usually does both at the same time. It doesn’t matter what the country is, but in any case arguments for university degrees have been as narrowly focused on individual salary benefit in the UK as they have been in the US. This creates widespread misunderstanding of the total benefits of university among the public and policymakers alike.

    2. The post was about instruction not research (though UK R&D investment levels are mediocre http://www.oecd.org/innovation/inno/researchanddevelopmentstatisticsrds.htm). On instruction, I see no public support in the UK for more tax revenues for universities at current fee levels. That is, UK taypayers show no sign of wanting to rebuild the teaching grant when tuition fees are at £9000. Instead, the current government has invented a whole new mechanism for micro increases in tuition (the TEF) as an alternative to increased public funding. Obviously cost-sharing arrangements are common, and Labour might have said, ‘if we need £8.5 billion a year to cover instruction (Andrew McGettigan’s calculation at https://andrewmcgettigan.org/2017/05/12/the-cost-of-abolishing-tuition-fees/), government will cover £8 billion and we’ll charge an “administration fee” to cover the rest.’ Labour didn’t say that, and thus established a public-good framework on which further details (including maintenance grants and the like) would be negotiated. The change in principle is fundamentally important.

    Agreeing on the need for US tax reform, I come to point 3. In fact, the UK system does show the symptom of unequal per student resources, which is lower retention rates and the less prestigious / selective end of the HE sector that I called “broad access” (https://www.timeshighereducation.com/news/rise-uk-university-dropout-rate-disappointing). Public funding can be allocated according to social goals, such as an equalization of retention rates across all types of provider. That would likely mean that a teaching grant would be given to University Campus Suffolk of a size that would allow it to bring retention rates up to the level of Cambridge’s, probably by spending more money per student than Cambridge. Markets don’t do this, and we can’t make good policy by idealizing their social effects.

    4.Yes the argument is that “job related” courses teach commodity skills that in general lower learning gain compared to expensive liberal arts and sciences courses. It turns out that a good way to reduce learning is vocationalize it. I explain why here https://lareviewofbooks.org/article/college-still-worth/#!, where I reinterpret the data on “limited learning” in the influential book “Academically Adrift” (yes, Not Invented Here in the UK- sorry!) Elite universities still have large liberal arts and sciences enrollments where learning gain is much higher. Far too many less-qualified and/or lower-income students are being encouraged to take practical courses where they learn less and where the learning they do get expires more quickly once they are out. It isn’t the rise of tertiary attendance that encourages commodity skills: it’s private-good funding that does it by allocating fewer learning resources to those who can pay less. Lower public payments to those broad-access schools reinforces this. Realizing that there is no ethical justification for this inequality of outcome, public good models cut against it by spending to obtain equal educational outcomes across all economic and social groups–including groups of students that are less well prepared.

    If you send an address to my UCSB email account I will send you a copy of The Great Mistake. It has the data and detail that can’t be included in a post.

  3. Akomaning Kingsford Agyapong says:

    A publicly funded university education is a huge benefit for all in society, the problem is the well-off do not want to bridge the gap in social classes and do not want people from poorer to get education so that we can keep on serving them for generations.
    And we keep on getting lied to that Britain is a fair society.

    Tuition fee is a failed experiment. Denmark which is usually known to be the happiest country has free higher education and the entire society is benefitting as a whole.
    There are really bright people who are put off by higher education just because they simply can’t afford it , but if the had gone on to study and become a doctor, s/he would be beneficial to society , and nobody will be losing out since s/he will be rendering services to the people who invested in his education /training.

    But like I said earlier, the rich do not want equality in society and that’s the sad reality

  4. that would explain why the US and UK aren’t very good at educational equality! I’ve had many debates with colleagues about whether at least some elites have decided that contemporary Western economies may once have needed medium- or high-skills on a mass scale but now do not. I lean towards thinking they have changed their mind, seeing wealth growing more quickly in “post-middle class” societies with a low risk of major downsides (that is, social unrest, “deaths of despair,” addiction rates, criminality, etc can all be held to tolerable limits). But even if this noir scenario is true, such folks can still be outvoted by a majority with a decent alternative plan to turn out for.

  5. Jamie Stewart says:

    Whilst I empathise with the OP, I do think that the argument is over-complicated and hence the cross-purposes with the first commenter. UK universities are generally, at the moment, not privately-owned, but the point regarding the rich wanting to maintain social inequality does in part hold true. More importantly is that the UK, and Russell Group Universities in particular, wanted the tuition fees in order to maintain the UK’s international research standing despite a reduction in research funding.

    Some universities are experimenting with complicated corporate structures, but at the end they are nearly all still public-good at their base level (even if they don’t fully realise it!), although some may be being taken advantage of, but that is pure speculation.

    The main arguments against tuition fees are basic cost-benefit sustainability analyses from individual student perspectives, and from a national perspective. From a student perspective, I find it ridiculous to believe that the value of a degree increased from £3/4k in 2005 to 30-40k in 2015, except for a small minority of super-earners. That is basically a re-hash of the “unfair debt burden” argument. From a national perspective, there is the medium-term likelihood that students will start to realise this, and that student numbers will fall. In this scenario, it is highly likely that even publically-owned universities will shift to becoming private-good focussed, as private corporations outsource their training to accredited universities!

    So, I think that a NES is a brilliant idea. I just fear that it needs to be planned properly at the beginning so that it is not set up to fail for higher education. The biggest risk of higher education failing in that system is that it could bring down secondary and primary education if the NES is set up poorly… Desperate times call for desperate measures though…

  6. very good points. I wish it weren’t so complicated. What I study is the way well-intentioned individual decisions have a whole series of negative knock-on effects. I share your interest in an NES, and yet if it takes a kind of A&E approach to university (urgent learning for immediate employment) it will either lose financial / political support or lower the quality of university education or both. An NES would have to unwind “the great mistake” in which universities remain publicly-owned while making private-good arguments for themselves, so that they then omit most of their total value (nonmarket, indirect, and social properly included), encourage public underinvestment, submit to standards of success they don’t control (future market rates for various job categories), narrow higher learning to practical training, and incur a lot of hidden costs (like the need to use tuition the subsidize research that you mention in your first paragraph). The UK could actually reverse this, but it’s going to take a systemic approach.

  7. Pat says:

    Would you support free for all students regardless of residency? Interested in fee variations for international students and how far a public is once taxes are used

  8. I would not unless they have paid into the UK through some other kind of taxes. I support (higher) fees for people who are paying in for the first time (meaning their families didn’t pay in either).

  9. On this question of tax funding, I should add that were I a VC I would be worried that a zero tuition UK system will be done on the cheap, making universities poorer than they are now. That would obviously be the wrong direction: universities need to be able to put more rather than less money into instruction, since that needs to be made better (more intensive, immersive, feedback-based) to help students face the current economy and society. Instructor pay and working conditions also need to be improved. In general, broader student access costs more money per student (to bring less prepared students up to the general level). Labour would need to push for higher tax funding than what was available in 2010 and explain clearly to the public why universities need to spend more money, not less. Periods of real progress have always involved leaps in the level of investment, and we have in the past had party leaders who understood this. A famous US case was Gov. Pat Brown in California in the 1950s. He faced a 20% state budget deficit when he took office in January 1959, and instructed his budget director to keep that from interfering with his massive, multiple infrastructure projects. They raised some taxes and Brown became wildly popular for the simple reason that voters could see what they were getting back for their tax money. Higher ed needs exactly that kind of ambitious boost.

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