Higher education amounts to more than a heap of beans

The Augar report recommends per student funding should be more highly differentiated by subject type. By cutting fees to £7,500 and providing additional teaching grant to compensate, the argument is that this will enable the government to exercise a much greater degree of control over funding for different kinds of degree courses and therefore improve “value for money” for students and taxpayers.

The report dodges the question of how such a system might work. Rather, it points to a number of measures the government could use to allocate funding to different subjects including cost, economic value and social value.

Triangulating these differing and, potentially, contradictory priorities will be a tough job. Deciding which subjects are “high value” for students and taxpayers and which are not will lead civil servants into tricky territory. It is difficult to see how this could be resolved without resorting to a political fudge.

High-cost, low-cost

The report makes the case that the current university funding system under-invests in some high-cost subjects to the detriment of the economy and argues they should be better supported. This is certainly true.

The recently published KPMG analysis of the cost of undergraduate provision finds there was an average deficit of £650 per student per year for engineering courses in 2016/17. With rising inflation and cost pressures, this deficit is likely to be substantially higher for the current academic year. This is not surprising given the nature of provision in this area which requires expensive kit and expert technical support.

But it is not only STEM subjects which are expensive to provide. Creative arts degrees also require industry-standard equipment and are costly to teach to a high quality.

Additional funding for science and engineering subjects would be welcome to address existing deficits and it would be absolutely essential in the event of a fee cut. But the government should avoid actively deprioritising other academic disciplines. Over half of students currently choose arts, humanities and social sciences degrees and these subjects are highly valued by business and public sector employers.

The Augar panel’s report suggests cutting fees to £7,500 per year represents a “reasonable base cost” for students to pay for lower cost degree courses. It is unclear how this figure has been arrived at.

The KPMG work found that average spend on the lowest-cost subject group (including English, Law and Modern Languages) is £8,800. So, if funding for these subjects was cut to £7,500, institutions would be operating these courses at a deficit of £1,300 on average.

It is concerning this base level “reasonable” cost of provision does not appear to relate to existing spending by subject and seems to have been arbitrarily set.

Defining value

Alongside a consideration of cost, the panel’s report argues that funding should be rebalanced towards strategically important subjects which are of economic and social value. The analysis underpinning this recommendation draws very heavily from the series of reports the Institute for Fiscal Studies has published in recent months on graduate earnings by subject and institution.

The arguments against using graduate earnings in isolation as a measure of the value of a degree are well-rehearsed. There are many reasons why a graduate may have relatively low earnings yet be generating significant economic and social value for the UK. Those entering public services such as nursing, teaching and social work will have their earnings constrained by the public sector pay cap. Whilst graduates starting their own businesses may have patchy earnings early on in their careers but may go on to create jobs and wealth for the UK economy.

The panel’s report picks out subjects such as creative arts with high student numbers but low proportions of graduates going on to fully repay their loans and questions whether they provide good value for money. But what of the cultural value of degrees in these subjects? The creative industries – like universities – make a huge contribution to the UK economy, supporting job creation and prosperity. In a post-Brexit world, the UK will need to capitalise even further on its cultural products in order to shore up soft power and influence with our allies overseas. Our language and culture are also key factors in attracting foreign direct investment.

Any new funding settlement for universities should reflect the wide-ranging economic, social and cultural value which degrees provide.

However the government chooses to respond to the recommendations of the Augar report, ensuring universities are supported to continue offering a full range of academic disciplines will be vitally important. This would respect institutional autonomy – a concept which is referenced in the principles underpinning the panel’s work – and avoid university funding becoming a vehicle for Whitehall-directed workforce planning.

Join us on 2 July in London for a one day conference to analyse and digest the Augar review and begin to build the response.

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