How to… reinstate number controls in English HE

Even before Covid-19, discussions about student number controls were returning to the edges of the policy debate.

As yet nobody has examined how such controls could be imposed, and what the impact on the sector would be. But a perfect storm of government priority, provider concerns, and a global pandemic could reshape the sector for a generation.

The cost of making loans

A projected rise in UK-domiciled 18 year olds means that both the capacity of the sector and the largesse of the Treasury was due to be tested in coming years. Couple this with changes to the way student loans are handled in the public accounts, and the existing system was beginning to look eye-wateringly expensive. The government’s own projections tell us that:

Total student loan outlay is forecast to increase from £16.5 billion in 2018-19 to £21 billion in 2023-24, in nominal terms. The largest annual rises in loan outlay are expected to occur in 2019-20 and 2020-21, with increases of 7 per cent and 5 per cent respectively on the previous financial year.

To be clear, though those are big numbers, the expectation is that a little over half that money will be repaid. If you remember the RAB charge, this sat at around 47 per cent for full time undergraduates last year, meaning that a little over half of the outlay to that group will eventually return to the government. Only 30 per cent of full time undergraduate students will repay their loans in full. It is headwinds like this that meant, even before the crisis, that the conversation about limiting expenditure was beginning.

“Poor quality” courses

The Institute for Fiscal Studies recently published a projection of overall exchequer income from graduates, based on the current fee and loan system, over their working lifetime. This matched fee and maintenance loan income with loan repayments and a calculation of the extra tax graduates (likely with higher earning jobs than they would have had otherwise) would pay. It found that on average, over a lifetime, around 50 per cent of graduates (actually those who attended HE at some point, a slightly different and larger cohort) would present a net cost to the exchequer over their lifetime.

Here, coverage focused on differences in earnings between the subject areas studied, differences by sex, and differences by the type of institution attended. This all played neatly into the “poor quality courses” meme propagated by the Conservative manifesto – LEO salary data offers a shorter (and more flawed) look at performance by subject and provider. Ministerial statements, and public releases, have been emollient on the wider benefits of a degree – but there has been a growing suspicion that salary would form a central part in a basket of metrics used to reshape the sector’s offer (and student choices) into more economically valuable courses.

We’ve already seen the start of this – LEO salary data is now emphasised on government-backed applicant advice service Discover Uni, a DfE app competition focused on tools to propagate LEO data amongst applicants, and data releases have made it easier for newspapers and magazines to build “league tables” of subject areas and providers with the best and worst salary outcomes.

The dash for growth

The sector has been set against such restrictions – both for reasons of equality of opportunity (everyone who can benefit from higher education should be able to) and for colder financial reasons. Universities and other higher education providers have based their future financial projections on student number growth – and these numbers are, to say the least, optimistic. Most are expecting, on average, at least a 5 per cent growth in home students each year, and a 15 per cent growth in international students each year.

Following Covid-19, international recruitment for 2020-21 is, to put it mildly, in meltdown. Due to travel restrictions and the cancellation of English language examinations around the world through to – most worryingly of all – some suggestions that the appetite for study in a new country has fallen off among potential applicants, the recruitment of international students is projected to dip sharply. As international undergraduate students pay significantly higher fees, which are reportedly used to subsidise other activity.

There is reckoned to be a £5,100 average profit on international student fees. Despite Philip Augar’s juggling of figures there is no evidence that there is anything other than a small loss – on average – from UK domiciled students. It is likely that some provision does make a small profit, but nothing on the scale of what would be lost.

Here I’ve plotted the numbers of non-UK applicants accepted to each provider in the 2019 cycle, split into other EU numbers – which would be included in any number controls but could reasonably expected to shrink in number next year, and other international student numbers which would not be included and will almost certainly drop substantially.

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Never waste a crisis?

Along comes a major global pandemic, and the first long-term financial thought of many providers was to shore up domestic recruitment. The short-lived boom in unconditional offers this year also continued a trend towards locking applicants in early. This trend has been roundly criticised by regulators and ministers, despite there being limited evidence of impact on student satisfaction and attainment.

With the unheard-of decision to pause offermaking for two weeks, allowing time for alternatives to A level grades to be developed, it is clear that government are wise to this idea – putting the brakes on a 2020 UCAS cycle that could have ended up finishing (to all intents and purposes) a lot earlier this year. It is fair to argue that offering security and stability in a time of crisis may have helped some students – it is also sensible to argue that under current and likely future conditions any suggestion of a “return to a normal recruitment cycle” is nonsense.

Whatever university application market place does come to pass will be more intense and scarier than anything we have thus far seen. The collapse in international recruitment means that nearly every provider will have a surplus of available space, with traditionally selective providers who recruit strongly overseas leading the way. Unchecked, every applicant will have a broader choice of destination than ever before – and why shouldn’t they follow the advice of those LEO-driven league tables?

It has emerged that universities have backed away from the cold logic of market forces, though with some dissenting voices in the Russell Group. The likely outcome of a free-for-all is that some providers will substantially under recruit – and with the Office for Students ideologically unwilling to support struggling providers we could lose a lot of universities and colleges from the system. University leaders can see this, and – collectively at least – the drawbacks are clear. A collapse in capacity would also have a disastrous impact on the 2022 cycle – with fewer places available at a time we need more than ever.

What is to be done?

I want to put a few propositions forward – as there are drawbacks and advantages to each. And many could be combined. In no particular order, I want to consider:

• A fully-planned system
• The return of core and margin
• Freezing current numbers
• Selective freezing
• Throw money at the problem

Or… do nothing

Until very recently, this appeared to be our chosen policy. Following the two week pause there was a general expectation that recruitment would continue as normal. The ridiculousness of this suggestion is slowly becoming more apparent. The fears of the sector coupled with a rising awareness of the chaos that a near UK-only recruitment cycle that was also a battle for survival would mean is now beginning to outweigh any lingering idea that being bombarded with increasingly ridiculous offers and incentives would be good for the interests of applicants.

A fully planned system

In this scenario the government would decide how many students it required in each course at each university, and provide funding for places based on this. To say this is a radical departure from recent policy-making is perhaps an understatement – but Covid-19 has proven that in a genuine crisis all possible tools are in play.

The government would need detailed data both on provider capacity and likely future economic demand. It’s very much the approach that would be required for economic rebuilding, and should Covid-19 turn out to be substantially worse than current projections we do need to be considering how to rebuild society and what skills will be needed. And for 2020 starts, we have six months to work out exactly what we need.

But things don’t look that bleak, yet – so the principal drawback comes in to play: the sheer number of people this would annoy. Universities asked to close or shrink “world-leading” departments, industry and subject lobby groups calling out unfairness, applicants and parents decrying a lack of choice. Unless society has clear and obvious needs and radically limited opportunity to meet them, this button remains under the glass in case of emergencies.

Core and margin

A little-missed policy from the “Students at the Heart of the System” White Paper nearly a decade ago, core and margin eased the transition from a managed historic model of recruitment to a market where funding followed the applicant. Those considering university with higher projected A level grades (initially ABB or above) were put in a special pool of applicants (the margin) that providers could recruit as many of as they wanted, with the remainder of student places (the core) available based on historic patterns. In 2011, this was only for providers with an average tuition fee of £7,500 a year.

The high performing applicants were removed from the historic student number caps, so those who tended to recruit from this part of the market were more exposed to competition than those who did not. For a provider that did not recruit any students with AAB or above, or that had an average fee above the limit, maximum recruitment would be the same as the previous year. In practice, this didn’t make much difference. Few selective providers charged any less than the £9,000 cap, few candidates with strong A levels wanted to apply elsewhere.

But the idea warrants further consideration this time round. For a start, the banter heuristic is massive. The sector is split on the need for Covid-19 number controls – this approach would largely let those against the idea (much of the Russell Group) compete for the majority of their students, and lessen the impact on other providers. However it would increase the impact on pockets of excellent (and likely regionally or nationally important) provision in other providers.

The likely scale of the loss of international students means that many providers would have both excess capacity and the incentive to increase student numbers and thus income. So the core would have to be carefully calibrated to ensure that the limited competition was beneficial rather than brutal.

Here’s a look at last year’s first years, by tariff, to put this in perspective.

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I’ve coloured the students with the equivalent of ABB or below in gradated green on this visualisation, and those who did better than that (that could be in the competitive part of the sector) in various shades of purple. The second tab lets you look more easily at tariff bands in individual providers.

Freezing current numbers

In reality likely to be averaged numbers over three years with some kind of tolerance band, this option removes competition almost entirely, but negates the need to undertake detailed economic and skills planning. It’s a lazy way to fix the immediate problem, but like all lazy ways the number and level of caveats and exceptions will cause many other problems later.

It builds in the assumption that the current (2019-2020) intake is the correct size for each provider going forward. If you think about it for a second you’ll realise that:

• Some providers will be offering new courses for 2020-21
• Some providers will be discontinuing old courses after 2019-20
• Providers may have closed or been de-registered in 2019-20
• Providers have almost certainly committed to access and participation plans that require expansion/reconfiguration
• Demographic changes will increase the demand for places overall
• A failure in the international student market means that some providers will need to grow home recruitment substantially just in order to survive.

In a way, we are moving the market pressures from being based on student choices to being based on the effectiveness of lobbying operations. Even if you stuck, remorselessly, to a straight de-facto freeze on numbers would this be constrained by subject or course level? How would you manage the incentive this offers to pile student numbers into the cheapest to run courses?

Here’s some data to help you see which subject areas in your institution (or any institution) recruit heavily from outside the UK. Again I’ve split other EU students and other international students.

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Even a loss of 10 international undergraduate students could have a serious impact on a medium-sized department. There are a lot of examples where far more than that is on the cards. And keeping home student numbers almost the same does nothing to address the issue.

Selective freezing

Looking at that graph might make you think that a more nuanced approach might help, with numbers frozen only in certain subjects that have expanded over previous years. Or indeed, in the creative arts – given that number controls in those subjects was the direction we were headed anyway, and there is a clear economic need for healthcare and related skills (the other growth area).

Again this takes us back to the central planning problem. It could be done, but it would take time and a lot of interests would need to be balanced. Selective freezing by subject would also have a disproportionate effect on individual providers. How would a generalised frees on creative arts recruitment help specialist arts providers – the whole point of number controls here is to preserve capacity (and thus providers) in the system.

Selective freezing could, of course, be accompanied by selective bailouts.

Throw money at the problem

This has been the approach for the rest of the (now-furloughed) economy, so why not for higher education? A few more billion from the Covid-19 magic money tree could buy as a January 2021 start to the next academic year. Instant post-qualification admissions – perhaps even the chance for applicants to sit actual exams, or at very least for robust assessment to take place. All we’d need to do is keep provider capacity by continuing to pay staff, and something approaching normality could ensure. We could even maybe have open days.

It’s not a proposal that should be taken lightly – reorganising the academic year would have significant knock-on effects for many aspects of provision, with September 2021 being a particular crunch point between cycles. But it may be the best idea on offer. International recruitment would still be low, but a further injection of funding could soften the blow.

The commitment not to bail out providers is just one of those “business as usual” ideas that might need to shift. Direct emergency payments would be a bitter anti-competitive pill for the Office for Students to swallow, but it has the power and the mechanisms – if the government has the cash then perhaps we can furlough departments and providers too.

No easy answers, some next steps

There’s no good way to reimpose number controls. Any attempt – and for me it would encompass more than one of the options above – would need to be shored up with extra funding pouring in to the sector. It is clear that we do need to take action to support the future capacity of the sector and the lives of the next generation of applicants.

Controlling numbers would not be a matter for primary legislation, a simple instruction (perhaps backed by a statutory instrument under the Coronavirus Act 2020) to the Student Loans Company to limit or focus finance eligibility would suffice. As a temporary expediency this would at least get us through the 2020 cycle.

But would we return to normal? Political and financial pressures on the sector suggest perhaps not – there will need to be some control over student numbers in the not-to-distant future, and for a government firefighting on every area of policy and trying to pay back debt it may be simpler to stick with what we have, whatever that ends up being.