How do we manage and support an expanding sector?

Dearing's calls for expansion need to be seen in context with thinking on quality assurance and funding. David Kernohan joins some of the dots.

David Kernohan is Acting Editor of Wonkhe

It’s often tempting to analyse “major reports” outside of the context that they emerged into.

We cannot see historic calls for the expansion of the higher education sector, for instance, outside of a consideration of the consensus of the strengths and weaknesses of the funding model at the time, of where the sector was at the time, and of what was generally considered to be the purpose of higher education.

The first recommendation of the Dearing review – just over 25 years ago – was:

We recommend to the Government that it should have a long term strategic aim of responding to increased demand for higher education, much of which we expect to be at sub-degree level; and that to this end, the cap on full-time undergraduate places should be lifted over the next two to three years and the cap on full-time sub-degree places should be lifted immediately.

This was a direct response to the terms of reference to the inquiry, which set out the principle that:

there should be maximum participation in initial higher education by young and mature students and in lifetime learning by adults, having regard to the needs of individuals, the nation and the future labour market

A question of capacity

Then, as now, the constraints on the government of the day achieving this goal are financial – a question of investment in the capacity (both in recurrent and capital terms) to teach more students at the required level of quality. Then, as now, sub-degree provision was seen as a part of the key to future expansion at a lower unit cost. But in 1997 there were a lot more controls on expansion than there are now.

It is easy to read the first line of this recommendation directly across to the post-2012 free for all. This ignores the way in which Dearing directly addresses the unit of funding, and the reports recommending that:

We recommend to the Government that, over the long term, public spending on higher education should increase with the growth in Gross Domestic Product. (71, my emphasis)

And:

We recommend to the Government that the public funding for higher education institutions should be determined on a rolling three year basis. (73)

Here, we need to recall Dearing’s recommendation 79 – it was never the intention that graduates in work would cover any more than 25 per cent of the cost of tuition (though an independent view and agreement in both houses could increase this), with the remainder coming direct from the treasury.

On a balance of considerations, we recommend to the Government that it introduces arrangements for graduates in work to make a flat rate contribution of around 25 per cent of the average cost of higher education tuition, through an income contingent mechanism (79)

Does it follow?

The ideas in the report that centre the now ubiquitous plan to see funding following the student need to be seen in the context of a decades long debate about the balance between the block grant (institutional need determined) and tuition fee (based on student numbers) component of state funding. Dearing itself notes that a tip towards the tuition fee end of the balance supported a growth in student numbers in the late 1980s, whereas by the mid 1990s the balance returned toward the block grant – allowing the government of the day to control public expenditure.

The combination of the block grant and tuition fee income, divided by the number of students, constituted the unit of resource – the fluctuation of which (rather than either of the individual components) determined the fortunes of providers and thus the experience of students.

Leading up to recommendation 73, Dearing described need for predictability in income for providers:

In the evidence submitted to us by institutions, an ongoing message was that, almost as difficult as the levels of reduction in funding, was the suddenness with which the changes were introduced and the frequency of changes. While we do not believe that higher education can or should be wholly insulated from the vagaries which affect the economy as a whole, we believe that higher education requires a greater degree of certainty about its levels of funding beyond the year ahead than is provided by the current public expenditure planning process. (19.33)

This is an aspect that has been hugely overlooked since 2012 – higher education providers currently (given the declining value of the tuition fee cap) need to recruit more students (or to grow other income, or to borrow money) each year simply to maintain current resources. It’s a system that pretty much guarantees that the individual student experience will worsen each year.

A plea for tolerance

It’s ground I’ve been over before but the use of a tolerance band for funding that follows the student was a real loss to institutional strategic planning. Nobody benefits from the need for perpetual growth or the scramble for cuts after a poor recruitment year. The tolerance band – which, simply expressed, took previous as well as current student numbers into account when allocating tuition income -basically did the job of the block grant element of university funding as that dwindled as the 2000s progressed (and disappeared entirely around 2010).

On capital funding – investment, basically, in capacity – Dearing wanted to make the Higher Education Funding Council for England (HEFCE) into a bank to lend funds to providers. Instead, the funding council gained controls over private borrowing of sufficient gearing to attract their attention. As unquestionably state supported entities universities could borrow money very cheaply, so requiring HEFCE’s say-so for riskier punts provided the cover that was needed to attract funders. Capital grants (both for teaching and research) continued as well – both by formula and as a part of a bidding process aimed at addressing specific needs and ambitions.

In the days of full number controls, capital bids often included bids for additional student numbers (ASNs) – institutions would demonstrate demand and expertise, so the funding council might offer capacity (via capital) and permission (via the ASNs). This links capacity to student numbers in a hugely helpful way.

A thought experiment

If I was to set up a new English higher education provider in 2023 with the intention of recruiting 100 students, the regulator would rightly want to check whether I was able to offer these 100 students a good experience before I was allowed to charge fees and access government support.

The quality of what I was proposing to offer would be checked by an independent agency, I’d need to prove what I was offering met recognised industry and sector standards, and that I had the capacity and resources to deliver it. This would be the case even if I had previously delivered an excellent course validated by somebody else.

Conversely, if I was an established English provider looking to run a new course in 2023 with the intention of recruiting 100 new students, none of these checks and balances would apply. Nobody external to my provider would know if I had the capacity to deliver the course well or offer a good student experience. It is true that if the outcomes students experienced were not up to scratch the regulator would investigate and potentially act – but this would only happen after the first cohort had completed the course.

The regulatory justification here is that an established provider would also have established processes to assure the quality of what it offers. We used to regularly assess the quality of these processes, using a respected and independent body – another Dearing recommendation. We no longer do so – in England it is assumed that if output metrics (many of which refer to students who completed the course more than three years ago) look right then the quality assurance processes must be working, and if there have been no notifications then there are no problems.

There’s been enough recent press about the dangers of recruiting beyond your capacity to provide a quality student experience (declines in staff-student ratios, campus estate shortages, learning resource shortages, accommodation shortages) to suggest that the return of some form of pre-expansion scrutiny may be helpful.

Unplanned restrictions

The much discussed decline in the entry rate for 2022 (down, to be fair, from a wildly anomalous year in 2021) suggests that some informal capping of expansion is taking place at a provider level. The issue here is that this is happening only on (some) popular courses at (some) popular providers, and it takes no account of the skills needs locally or nationally. Other providers do not have the financial luxury of being able to cap recruitment on the grounds of quality, others listened to ministerial pleas and recruited above capacity two years in a row – and we saw weak signals of the quality implications of this in the 2022 National Student Survey.

An alternative situation – where providers would need to demonstrate capacity to expand significantly (with the potential of capital grants to enable expansion), robust quality assurance, evidence for applicant demand, and evidence for national or local skills needs before being permitted to recruit outside of a tolerance band – would address many of these problems. This would not be a cap on student numbers at a sector level, neither would it be a regulatory overreach – it would be the Office for Students acting in the interests of students. Interests that are not well served by over-capacity under-resourced courses that offer a poor experience.

A limited return of the block grant (based on previous student numbers) would provide the longer term financial horizon that Dearing demonstrated – as well as the many public benefits that Simon Marginson argues for on the site today. Not all higher education funding should follow individual students if we believe that the capacity of the sector, and indeed strategically important subjects, as things we should care about.

Indeed, the current funding for strategically important subjects acts as a further incentive to increase recruitment by any possible means, and does not provide sustained investment in specific subjects as a public good. This complicates any national consideration of skills needs – for instance we have a huge national shortage of chartered surveyors, but should applicants choose not to study qualifying courses in great numbers we lose the established resource we need to train more, making demand-side interventions (incentives, marketing) less effective.

Report authors often plead with ministers that their reports should be considered as a totality – a hedge against seeing politically popular ideas implanted without the hard work needed to make them work. Certainly, there was disquiet in the Commons when Dearing was presented by David Blunkett in a short statement that focused almost entirely on tuition fees.

Dearing got a lot right and much of what was proposed was eventually implemented – and there’s a lot we can still take from the conclusions of a superb report. But, as Dearing cautioned, robust quality assurance, capital investment, funding stability, and regulatory oversight are the other side of the expansionary coin – we are overdue a fresh look at all these areas if expansion is to continue.

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