The real value of abolishing tuition fees in England

Most politicians and journalists play policy questions at midfield. Usually, they replace questions of principle with budget charges: “Labour will announce a tax raid . . . on Britain’s professional classes by saying the richest must pay up for a spending splurge.” Core principles and wider benefits get lost as the accusations fly.

Labour’s new education policy has the virtue of avoiding the midfield trap. Calling for a National Education Service, shadow chancellor John McDonnell explained, “we’ve always believed, as a movement, that education is a gift from one generation to another. It’s not a commodity to be bought and sold.” This is a crucial distinction, but it will need to be unpacked for voters as it applies to higher education. Labour will have to show how its core feature, scrapping tuition fees, solves root problems without plunging universities into poverty.

I interpret McDonnell to be rejecting the Coalition government’s shift of universities from a public good to a private good footing – particularly in the form of its massive cut to the teaching grant. If Labour terminates tuition charges, they’ll need to replace £10 billion or so with a new central government grant. This means British society will be paying for university instruction again, so something needs to be quite wrong with the private good, tuition-paying, student loan model that has been in place in recent years.

In fact there is. The private good model sets up a doom loop for universities that I’ve just published a whole book about: here I’ll mention four of its elements.

First, pushing universities even half-way out of the public-good frame reduces their benefits to private market gains, calculated in the form of higher personal income, and negates most of the university’s total value to the society. The majority of the university’s benefits are nonmarket, indirect, and social – some mostly for individuals, like better personal health, some mostly social, like the spread of the ability to solve complicated political problems. The economist Walter McMahon called this majority of university benefits ‘dark matter’, and calculated that in the U.S. they are about two-thirds of total university benefits.

UK research budgeting would alter this calculation without changing the point that the public should pay most of the cost of university teaching and research because it gets most of the benefits. The current government policy of near-zero teaching grants unfairly obliges individual students to subsidise the public’s gains.

Second, when universities are treated as private goods, they wreck their claim to public support. The United States has ample experience here: once tuition goes up, taxpayers wonder why they should pay twice for universities, once over the years that they pay their taxes and a second time when their family members enrol. Tuition hikes lead directly to an explosion of student debt, which further damages the university’s popular appeal while putting pressure on politicians to cap or freeze tuition hikes.

In the US, most state legislatures have created a zero-sum game with public funding and tuition: if universities raise tuition, the legislature freezes or cuts public funds. Although UK universities got a short term jolt from their first £9,000-level tuition streams, they also gave up their claim on more sustainable public revenues. While dependent on tuition at levels that create high student debt, universities destabilise their revenues and dampen public interest in supporting them. This helps explain recent closures and strategic redundancies even at Russell group universities, which will continue or even escalate.

Third, inequality grows dramatically in a private-good university system, which lowers private market benefits for students at poorer universities and lowers aggregate benefits for society as a whole. Again the US case is instructive: the small minority of university students who attend private universities now receive on average twice as many resources per student -up from the 30-50 percent more that was typical in the 1980 – and have far better graduation rates.

At the extreme, an elite university like Stanford spends 10-20 times more per student than the 2-year college down the road. This is great for the tiny number of Stanford graduates and a disaster for the overall system, where investment is actually upside down: the low-income students crowded into poorer institutions need more spending per capita than perfectly-groomed Stanford students, and yet they get far less, predictably leading to lower learning gain and graduation rates.

As the UK’s tuition model forces broad-access institutions to educate less prepared students with less money, it will intensify the “separate and unequal” system that unjustly stratifies students while hurting national attainment. This process would be accelerated by for-profit providers, since they are built to minimise spending on their vulnerable students and have, in the US, produced the worst outcomes for the most money in human history. The private good framework induces universities to reinforce social inequality rather than cut it: why would a regular citizen pay for that?

Finally, the private-good model induces nonelite universities to spread commodity skills, thus weakening the business world that private-sector discipline supposedly serves. When universities are funded according to ability to pay, they ration quality of service, reducing high-quality instruction in the broad-access institutions that serve the majority. This, in turn, discourages business from investing in sectors requiring high productivity growth that depends on the generalised creative capabilities of large numbers of employees.

The running complaint of a skills gap is actually a symptom of a political system that likes high-skills in small numbers, but that refuses to fund immersive learning at scale. Its de facto solution – importing much of the middle-skill and high-skill workforce from other countries – helped generate the Brexit backlash.

These are four stages of the decline cycle that McDonnell’s public good definition of education wants to stop.

A gift is a good or service that passes among people without being run through the system of market price. Givers decide who receives without checking to see whether the recipients can pay; in a democracy, givers and receivers make the rules together. They also decide the desired quality of service through various kinds of democratic deliberation that considers cost but also social needs, goals, and ethical principles.

Casting universities as public goods helps fix the four problems I’ve described. The public good frame puts increases in future salary in their proper place as a one among many, large nonmarket, indirect, and social gains for which society as a whole should pay.

When the public pays for universities, it has a direct stake in their quality and effectiveness. People can feel that universities, rather than trying to make money from a core social need, are directly helping them and are on their side.

General funding enables a rough equality of service. A National Education Service can decide to send more money to universities that serve disadvantaged students with greater educational needs. We could learn to see less prepared students as a major social asset and pay to give them Oxbridge tutorials. Why not ‘tutorials for all’, with an understanding of the jump in well-being and capabilities that would result?

Finally, mass quality – high educational quality for every student – is Britain’s best shot at addressing its ongoing productivity problems. The country needs deep personal ingenuity on a vast scale and can draw on the institutions, its universities, along with further education providers and other levels of schooling, that make creativity exciting and meaningful. The public-good frame puts the university at the heart of personal and social development, enables universities to work across society, shows universities to be a means by which we help each other understand the world better, address impossible technical issues, solve the hardest social problems across all cultural divides, and involve the non-university parts of the population that have been left out.

There are no guarantees that business or society will know what to do with the new legions of highly skilled graduates, but the legions will know and will tell them.

The UK can always continue to muddle through with growing student debt, ongoing university squeezes and cuts, and lukewarm public support for the university system. But Labour’s concept of education as a public good offers a real alternative, and the higher education sector should help it work out the kinks.