Trading Places reminds us about the excesses of Theresa May’s Home Office

Last week, the think tank Onward published a new report, titled “Trading Places: How universities have become too reliant on overseas students and how to fix it”. It was written by Will Tanner, a former adviser to Theresa May in both the Home Office and 10 Downing Street.

May’s damaging approach to higher education will not have been forgotten by Wonkhe readers. May has departed the scene, but Tanner has taken up the mantle to make bureaucratic, impractical and damaging proposals for the sector.

An overview

Here is a summary of Tanner’s analysis and recommendations. Overseas fees have gone from being a niche source of income to a major revenue stream for UK HE. This reliance has created financial fragility in the sector as surpluses from overseas fees supporting research funding are “opaque cross-subsidies”. Tanner recommends the Government spending an additional £1bn on universities to protect the sector’s research. A major worry is the level of dependence on China, with Tanner specifically arguing for fewer Chinese students on Twitter. The final concern is that overseas students have displaced UK students, as universities have taken on international students instead, incentivised by their higher fees.

The proposals to address these include: grants for UK students studying high value-added courses; capping the income universities can generate from any single country and only allowing increases in international students if universities increase their UK student numbers; and a healthy dose of additional bureaucracy, requiring universities to declare all research funding from non-UK sources above a threshold.

Finance and fees

Let us take these in turn. The financial fragility point is less straightforward than Tanner suggests. As the sector has mostly been criticised for being awash with cash and having excessive reserves, Tanner’s concern that some universities entered the crisis with weak underlying reserves is at least novel criticism. While universities’ finances would be hit hard if international student numbers plummet in the new academic year, our universities have undoubtedly been better placed to weather the Covid-19 storm because of their historic income from international students and the reserves they have. Tanner argues that “opaque cross-subsidies… undermine our research efforts at a time when they are dearly needed”. These cross-subsidies have underpinned, not undermined, research in UK universities. It is not clear why they are opaque: TRAC may not be perfect but has existed for years, revealing the longstanding underfunding of research and cross-subsidies.

The extra £1bn for university research proposed would be welcome, but it is optimistic to hope for such funding to materialise and remain for the long-term. While the Treasury will surely, if the worst transpires, consider additional short-term support for the sector’s research through Covid-19, a permanent increase to research funding seems unlikely when the deficit is increasing rapidly with the unprecedented drops in GPD. If the Treasury can let overseas fees subsidise university research, they will likely focus taxpayer funds elsewhere, as they have for decades.

For someone concerned about a lack of diversification in overseas students for universities’ finances, Tanner advocates increasing universities’ reliance on Government funding. This fails to recognise that Government funding can be a very volatile source of funding which can result in fragility, rather than resilience. The major drop in public funding per student in the early 1990s, for example, weakened universities’ finances and was only reversed in England with the introduction of £3k fees.

A hostile environment

The high number of Chinese students is not news and is undoubtedly a risk for the sector, but it takes some nerve for an ex-Theresa May advisor to lecture about it. Universities do not get to choose who applies and have not set out to be so reliant on just one country. The demand is shaped by Government policy beyond their control: it was May’s Home Office’s hostile environment policies and removal of the post-study work visa changes that drove the significant drops from certain countries. For example, as the APPG for International Students pointed out in 2018, the number of HE students from India more than halved between 2010-11 and 2016-17. Chinese students, less concerned about post-study opportunities in the UK, were not deterred. In recent years, numbers have ticked up, with one factor being the plight of the pound post the 2016 referendum. Chinese numbers have likely received a specific boost from Chinese-US trade fights and China’s tensions with Australia.

The proposal to boost funding for UK students studying high-cost subjects would be welcome and help keep expensive courses viable – though at a cost to the public purse. Tanner fails to recognise that at present, far more than displacing UK students, overseas students have kept expensive courses viable which are not covered by current UK fees. It would have been better if we had had more international students back the sector was less well funded: Exeter University would surely have preferred to have had more international students on its courses  in 2004, rather than closing its chemistry department. While the proposed extra funding would be positive, Tanner wants to fund that by cutting fees for other subjects, in line with the Augar review. It seems Tanner has not noticed that Phillip Augar himself no longer believes that cutting the cost of tuition fees for humanities degrees to £7,500 a year would be sensible, instead recognising that “such a fee cap would be too destabilising”. It is hard to believe that Tanner’s priority is the stability of the sector.

Another cap

The caps on income universities can generate from any one country is classic, May-era Home Office policy: arbitrary, impractical and mean. There’s no consideration of any policies to help universities diversify international student numbers by supporting recruitment efforts beyond China. An arbitrary 30 per cent cap is suggested, with no analysis of how it would work in practice and how that would affect universities with an intake higher than that. The logic seems to be: China could cut student numbers, which could damage universities’ finances. Instead, the Government should cap student numbers, making the damage certain – levelling down rather than up. Similarly, the requirement to disclose all non-UK research funding and contracts over £250k is yet more bureaucracy.

The standard blurb in the report on the purpose of Onward states that the think tank will develop “practical policies that work”. This report does not offer those for UK higher education. Stian Westlake has written on “the strange death of Tory economic thinking”, arguing that the “demise of Tory economic thinking… comes from the culture of one institution, the Home Office”. Tanner’s report is a perfect exhibition of what Westlake meant.

To misquote Ronald Reagan, the twelve most terrifying words in the English language for the UK higher education sector are: “I used to work for Theresa May, and I’m here to help.”