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Is the “major” review of HE Commission:Impossible?

Theresa May has announced a major review of student finance and sector funding. Detail is thin on the ground, but Wonkhe's Mark Leach and David Kernohan analyse what needs to be covered.
This article is more than 6 years old

Mark is founder and Editor in Chief of Wonkhe

David Kernohan is Deputy Editor of Wonkhe

The promise of a review of student finance and university funding – a little over five months after the Higher Education and Research Act (HERA) became law – is perhaps the most interesting of the three higher education policy changes announced over the last week. Alongside the review, a holding pattern policy has been enacted on the current system- freezing the maximum level of tuition fees at £9,250 and raising the graduate repayment threshold from £21,000 to £25,000 – a “big, expensive giveaway to graduates” as described by IFS.

It’s clear that there is not a clear consensus across government about this review. DfE had been downplaying it in recent days, but it’s unclear if that’s because it genuinely understood the review to be a low-key affair, or if ministers were hoping it would just go away. Either way, the announcement today does somewhat undermine the emphatic defence of the system that had been mounted by DfE in recent months. 

The review lands in the middle of an already complex set of analyses, reports and consultations following HERA and the “Summer of Adonis”. As a starting point, already scheduled are:

  • The House of Commons Education Committee enquiry on value for money in higher education, to be led by Robert Halfon this autumn.
  • The House of Lords Economic Affairs Committee inquiry into the economics of higher, further and technical education.
  • A far reaching National Audit Office inquiry in to the higher education market, scheduled for this autumn.
  • A major set of consultations on sector regulation from OfS, expected in the next few weeks.
  • The independent review of TEF, which HERA requires before TEF can be linked to fee levels plus the TEF subject-level trial, and TEF 3 tweaks.

That’s just from the ‘official’ side of things – we’ve already heard from IFS and we suspect we will hear more, the Education Policy Institute has already unleashed an opening salvo, and we can expect many more interventions as the review ramps up. We’re hardly short – after all – of critical thinking, advice and recommendations.

The absence to date has been political will to seriously address issues with the system.

There are major outstanding questions about the shape of the review itself – who will lead it (a Tory Peer, Andrew Adonis, or a vice chancellor?), who it will it report to (Parliament, No.10, HMT, or DfE?) , and what will be its timescale (this year, next, before the next election, or the post-Brexit long grass?)

While that all gets worked out, the big questions that the commission will need to look at are fairly clear.

Student affordability – perception and reality

Loans with earnings linked repayments and a built-in expiry date are a financial product with few parallels. Though the post-Browne settlement is more generous than is generally suggested – it remains entirely plausible that a graduate may never pay back a penny of their loans, after all – it is a difficult concept to sell on the doorstep. Seventy-seven percent of graduates never repaying the full amount is a feature, not a bug – but the nominal average debt of around £58,000, and the 6.1% interest rate are the figures that cut through.

Any review should take on board both the image and actuality of graduate debt. It would look at maintenance (the hugely regressive component of the current offer) – as a far more immediate concern for students from disadvantaged backgrounds, and address the largely unaired issue of the steep rise in dropout rates in inverse proportion to parental wealth. And, stealing yet more clothes from Labour, the issue of funding lifetime learning needs to be addressed.

Demand for the traditional three year course has remained stable even given a worsening financial deal – a serious review would look at the wider societal issues that have driven this demand. Low pay and a sluggish job market have far more to do with rising enrolments than any policy announcements – we need a look at the wider deal for young people.

The institutional offer

Browne was welcomed by the sector almost en masse as a stable settlement that would allow universities and colleges to maintain resource levels. Available funds in future years could be accurately estimated, allowing for longer term plans for investment and borrowing. Tweaks – such as those in HERA, varying the fee cap and conditions – have been tolerated. Even the entry of a widening range of alternative providers has been cautiously welcomed.

But gaming of the system, long a feature of HE funding, remains. Institutions are incentivised to grow courses that recruit well and are cheap to deliver – these subsidise those courses where costs are far higher. These are often not the courses that link directly to the current job market or national priorities. Any attempt to “pick winners” would re-open the autonomy debate, but addressing industrial needs requires central planning – as already happens with medical and nursing places.

Could a greater control over subjects of study be linked to a longer term financial stability? The pre-2012 system offered policy levers along these lines that have been dismantled – maybe it is time to look again.

National and regional impacts

Brexit, and emerging thinking around industrial strategy, has reignited a consideration of the role of large universities as national and regional economic engines. Investment in research and skills will be sorely needed to compete in a global market, other countries already spend more and spend more wisely. Investment in the higher education system produces short and long term benefits, for individuals, society, and the economy.

This is particularly important in disadvantaged areas – in many places a local university acts both as a major employer and source of additional income. Investment in facilities and skills attracts industry, more employment attracts commerce and services, and thus a virtuous circle continues. But recruitment of students can be an issue – the attractiveness or otherwise of a local environment as a place to live and work is a huge factor in prospective student decision making. Allowing sorely needed institutions to fail (as has been suggested in some quarters) is not a realistic solution.

So far these issues have not been reflected in policy making at a national level. To coin a phrase – students are often seen as “citizens of nowhere” who will make applications based on a cold calculation of economic utility. The reality is far more complex.

The market and ideology

Since 1999, governments of all colours have expected that variable pricing will unleash a latent demand for customisation and variety – raising fees to allow for such variability in 2004 and 2012 has done nothing to bring this about. The role of TEF has been just the latest attempt to convince young people to make the “right” choices –  but with an unmoving cap, TEF’s link to fees is all but dead, though many still hope it will play a role in influencing applications. The government is likely to use other means to keep universities in the scheme, if fees are not a long-term factor.

Perhaps it is time to think properly about demand for higher education – ignoring the push-polling used by those flogging MOOCs (remember them?) or compressed courses – and admit that the three year degree is popular for a number of very good reasons.

Ideologically, the market has proven to be an efficient means of allocating resources based on existing demand – but has been poor (by design) at allowing governments to shape the future societal skills mix. The industrial strategy will likely suggest an enhanced skills planning role for government – maybe the higher education funding system needs to provide easier ways of doing this.

Absent too, has been a financial role for employers. The Browne Review offers significant capitulation that the system should address the needs of employers, but dismisses calls for an enhanced employer contribution in a single, short, section (7.4): “Businesses will not be compelled to contribute more – they contribute by rewarding graduates with higher wages”. The second part of this argument is no longer true – graduate earnings have fallen sharply over the past seven years – and employers over a certain size are already compelled to contribute to the apprenticeship system.

If tuition fees and the income contingent loans behind them are to stay following a big review, then it would be a wasted opportunity if thought isn’t given to making the system work smarter. Truly variable fees might not be the ultimate answer, but everything we know about this government tells us that it will be part of the question. Demonstrating “value” will be a big driver of any review, and it’s clear by this they mean economic outcome. Like it or not, the time of LEO and other big data has come.

The sector has been treated by policy as a cost to be met and a market to regulate – this new commission could seize the opportunity by starting on the premise that universities and colleges are a national investment. Reviews have too often been focused on politics rather than policy – even though this review is born out of political necessity it is still possible that some better policy will be the result.

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