Power games over HE regulation and funding will have lasting consequences

It was interesting to read earlier this week that cabinet ministers are still split on fundamental questions about the size, shape, purpose, and funding of the university system.

There is no consensus in the Conservative Party on the issue. One suspects, were they in government, there’d be similar challenges for Labour. As it goes for funding, so it goes for regulation. State regulation of a market necessarily follows from that market’s funding arrangements. If there is confusion about funding, there are probably contradictions in regulation.

Browne in the bin

To understand how far we’ve come in such a short space of time, it’s worth reading the newly proposed regulatory framework alongside the 2010 Browne Review. Browne had unabashed faith in the capacity of a self-regulated market to change university behaviours, to improve quality and efficiency, and to deliver the best outcomes for students and taxpayers.

“Rather than create a bureaucratic and imperfect measure for quality, our proposals rely on student choice to drive up the quality of higher education. Students need access to high quality information, advice and guidance in order to make the best choices. Improvements are needed. Providing students with clearer information about employment outcomes will close the gap between the skills taught by the higher education system and what employers need.”

Fast forward to 2015, and Jo Johnson felt impelled to introduce such a “bureaucratic and imperfect measure for quality” in the form of TEF. Fees had been trebled, student number controls abolished, and more information made available for prospective students than ever before - yet still there was political dissatisfaction about quality, efficiency, and relevance to labour market needs.

MarketNotMarket

Our recent summer of discontent has only further underlined this, and the government’s answer, as revealed in the consultation on a new regulatory framework, is in many ways a response. Universities will be treated like formerly public services, which now operate in regulated markets that few are satisfied with, such as the railways and utilities.

The big difference is that, while these markets are paid for by the private incomes of consumers, higher education is still by and large paid for by taxpayer pounds leant to (and barely repaid by) students. I have no doubt that Sir Michael Barber and Nicola Dandridge are sincere in their stated wishes to regulate in the ‘student interest’, but we must not forget that much of the impetus behind this new era of regulation has come from the Treasury’s desire to account for its money.   

There are a couple of revealing paragraphs to this end, for instance:

“Providers should design this [value for money] statement to allow students to see how their money is spent, following examples from other sectors, such as Local Authorities publishing breakdowns of how Council Tax is spent. This will facilitate provider accountability, enable public scrutiny and allow students to make sure they are getting what they pay for.”

The thrust is once again towards information and transparency. But in a normal market, one doesn’t tend to demand accountability for how service providers spend their money. We don’t expect a cost breakdown when we pay for a car or a haircut – instead, everything is worth what its purchaser will pay for it.

Power shift

This uncertain boundary between regulation and market incentive is further underlined in this paragraph, concerning the limits of regulatory action:

For instance, the OfS is likely to use certain aspects of the National Student Survey as a lead indicator on quality. If a provider near the baseline on quality saw significant or repeated deterioration on this indicator this would probably trigger the OfS to investigate further. If, on the other hand, a Gold rated TEF provider saw a dip in this indicator, the OfS would be less likely to investigate. In this case, even if a falling indicator represented a real reduction in teaching quality, it’s likely that the provider would remain above the baseline quality expected by the OfS, and therefore the OfS would not want to act. Instead, the OfS would rely on the market incentives to improve teaching quality; the provider’s TEF rating might be affected in its next assessment, and in any case the provider would likely seek to remain competitive by improving their offer to students.

How on earth will this work in practice? Far from reaffirming the role of the market in improving performance, this passage merely acknowledges its limitations. So much will depend on the working culture of the new OfS and its actual willingness to see through the threats of investigation and intervention. If faith in the real power of the market continues to fade, and political trust in universities continues to be tested, this could lead in unforeseen directions. The special attention given to flavour-of-the-month topics including senior staff pay and ‘free speech’ merely reveals the new regulatory framework’s sensitivity to political influence. This is concerning given how much more powerful OfS will be than its predecessor.

All this is not to say that the market has not had, and will not continue to have, profound effects on how universities operate. The tightening competition for full-time 18 year old entrants is forcing cutbacks, innovative marketing and hard choices about some universities’ size and shape. But this does not appear to have given commensurate political assurances to students, taxpayers, MPs, broadsheet columnists, and life-peers with an axe to grind. Nor does it seem to have had the same level of influence on all institutions.

If we continue to lack clarity about universities’ fundamental purpose, size, shape, and relationship to the state – a question intrinsically linked to that of how universities are funded – then the regulatory framework will remain messy and ambiguous.

Find the full Wonkhe index of all documents published by DfE here and all of Wonkhe's coverage of the new framework at #Regulation.