The issue of higher education funding has proved to be a difficult one for successive governments. In 2004 Tony Blair’s huge majority came to within just 5 votes of being defeated as he sought to increase fees to £3,000. Similarly, the Coalition government came under intense scrutiny over their proposals to treble fees to £9,000, which only passed with a majority of 21.
The Prime Minister’s announcement at the 2017 Conservative Party conference, that there will be a major review of higher education funding and finance, should be welcomed. In keeping with the speech that she made outside Downing Street when taking office in July 2016, the PM rightly prioritised delivering a fairer society where social mobility would be an important tenet of the government’s approach.
Higher education plays a critical role in delivering social mobility, and while it is not a silver bullet, it makes sense to independently evaluate the contribution the sector is making toward social mobility and a fairer society: what it is achieving and what more it can do. Equally, the government should evaluate whether students are receiving value for money under the current funding system, does the state make an appropriate contribution? Do other beneficiaries of our world-class HE system contribute adequately as well?
Impact of the 2012 reforms
More than seven years have now passed since the Coalition government won parliamentary approval for the significant changes to the way in which higher education is funded (an 80% cut to the teaching grant, coupled with the opportunity for institutions to increase their full-time undergraduate fees from £3,000 to £9,000 per year). During the Parliamentary passage which led to the vote to increase tuition fees in December 2010, you will note there was concern that this would lead to a drop in participation, particularly amongst students from disadvantaged backgrounds.
For full-time undergraduate students, this appears not to have materialised. However, the government made a number of other assumptions about what the impact of the new system would be. The then Business Secretary, Vince Cable stated in the House that £9,000 fees would only be charged in “exceptional circumstances”.
He was wrong. The combination of a large cut to the university teaching budget, alongside no real disincentive to charge the maximum has, of course, meant that £9,000 fees have proved to be the norm rather than the exception. This should have been predicted, not least because when tuition fees were previously trebled (from £1,000 to £3,000) the behaviour of universities mirrored almost exactly what happened after the Coalition government reforms.
A much more unintended consequence has been the impact on part-time students. There was widespread acclaim when the Coalition government committed to extending loans to part-time students (studying to at least 25% intensity), previously only available to full-time undergraduate students. There was a hope that the extension of loans to part-time undergraduate study would help to reverse the decline in PT students which had already started to set in.
Sadly hopes that demand for PT study would recover have fallen flat. Indeed figures published by the Higher Education Statistics Agency (HESA) would suggest that part-time study has fallen 56% since 2010 (from 243,355 in 2010/11 to 107,325 in 2015/16).
Other changes since 2012
There have also been a number of other significant changes to the higher education sector since 2012, all of which add to the case for a major review. In the 2013 Autumn budget, the then Chancellor George Osborne announced the abolition of student number controls which has brought a new and largely welcome competitive dynamic to student recruitment.
It allows successful and popular universities to expand, and more students will, therefore, be able to choose their first choice university. It has however led to greater turbulence in the distribution of where students study, and therefore greater volatility and less predictability for university income year to year.
In 2016, the decision to abolish student maintenance grants – replaced with loans – is also a significant change which has come into effect recently. This means that students from the poorest backgrounds will now graduate with the largest debts. The reforms to nursing bursaries have also had a major impact on participation in this vital profession.
More positively, the introduction of a postgraduate loan has been welcomed and helped to stimulate demand and access at PG level and the decision to raise the threshold for repayment to £25,000 deserves praise. It will ensure that low paid graduates are relieved of making a contribution, and will make a material difference to their available disposable income.
Lessons from Browne and other reviews
The 2012 reforms were taken forward following an independent review under the chairship of Lord Browne of Madingley. Lord Browne was well served by the civil servants who supported his review, and the process for consultation and engagement with the sector was extensive. However, although it was an independent review, he appeared too concerned with meeting the political priorities of the day (namely deficit reduction) and structured his model to meet Treasury demands rather than evaluating the evidence about where the consensus lay for who should contribute. The work of his review also focussed far too heavily on full-time undergraduate provision and was largely silent on postgraduate funding.
The absence of a legitimate student representative on the review panel was also a missed opportunity and helped to stoke student opposition to the final proposals. The upcoming review should ensure that there is student representation on the review itself, ideally coming via the nomination of the National Union of Students.
The final report did, however, construct a coherent system, and it was subsequent political changes which made it a less sustainable model for the long term.
The government may wish to consider the experience of Ian Diamond’s review of higher education funding in Wales as a source of inspiration for the review it will commission. In Sir Ian, the review was led by someone who had a thorough understanding of higher education and benefitted hugely from sophisticated financial modelling as well as clarity about the biggest issues it wanted to resolve or improve. The result was a proposal which was largely supported by the Welsh government, university leaders and student representatives.
Areas of focus for the upcoming review
Leading a major review in any area is not easy, particularly when the sector is complex and operates within a funding environment which continues to be challenging. It is vital that the review has the requisite blend of skills with a thorough understanding of higher education being central, high-quality civil service support, and genuine political independence to undertake their work. The review would also benefit from being supported on a cross-party basis.
Based on the lessons of previous reviews, and other changes which have come to the fore since 2012, the themes below would be important considerations for the review to address in order to deliver a sustainable, robust and ultimately fair system:
- Take a holistic view of higher education funding at both undergraduate and postgraduate level
- What can be done to reverse the decline in part-time study
- Understand the value for money which students receive from their education
- A clear understanding of the cost to an institution of undergraduate and postgraduate provision
- The role and function of cross-subsidy to ensure the viability of multi-discipline institutions
- Takes into account the diversity of institution types in England, and ensures the continued viability of small, specialist institutions
- The current value for money from for-profit institutions, and whether taxpayer funds/student contributions should be used to build assets for institution owners or dividends for shareholders
- Seek to make a judgement about the appropriate balance of contributions between the state and the individual
- Consider how business can make a structured contribution to higher education, as major beneficiaries
- Consider the effectiveness of the Student Loans Company
- The potential implications of Brexit on funding and support for EU students, and what can be done to ensure England remains an attractive destination for EU students
- Whether there is a case for students who make a significant financial benefit from higher education over-contributing, to lessen the burden for less wealthy graduates
- Seek to understand the impact of the graduate repayment on the lifestyle of low earning graduates (including the ability for low earning graduates to gain access to the property ladder and how else the 9% repayment impacts graduate expenditure)
- Understand the wider costs of higher education to students beyond tuition fees and maintenance loans, including the appropriateness and transparency of hidden course costs
- Whether government should further incentivise strategically important subjects beyond the remaining teaching grant
- How excellent teaching can be financially rewarded in the context of the Teaching Excellence Framework (TEF)
- Consider the impact of the removal of student maintenance grants, and the appropriateness of students from the poorest households graduating with the largest debt
- The feasibility of a credit-based funding system (rather than the existing course-based system)
- The merits and drawbacks of other major national higher education funding systems (including but not limited to the systems in Wales, Scotland and Northern Ireland), and how they may apply in an English context
The promise to undertake a major review of higher education funding is important for so many reasons; not just to ensure that England can maintain a world-class and competitive system, but also to strike a fair deal for students, taxpayers and government. Given the complexity, it will not be easy, but it can be achieved.
Given the time it will take to get the findings right and the time needed for parliament to scrutinise any proposals, it will likely be many years before a system can be fully implemented. So my message to Theresa May is: act swiftly with your new ministerial team, think carefully about who you appoint to lead the review, how they will are supported, and the terms of reference they are able to operate within. There’s an opportunity to get this really right. Please don’t squander it.
This article is based on the author’s recent open letter to the PM on the promised major review.