There are better ways to fund and govern universities as quasi-public services

The other day when my ETA on a campus visit was getting later and later thanks to the crumbling state of Britain’s rail network, a news item popped up in my feed on Labour’s plans to nationalise the rail network.

Shadow transport secretary Louise Haigh said that to fix “record delays and record cancellations” it will shortly unveil a plan involving bringing train operators into public ownership in a way that will bring “significant savings.”

Predictably, John Redwood, one of the architects of rail privatisation in the early 1990s, wasn’t pleased:

Passenger numbers fell away throughout the nationalised years. They didn’t make rail a popular and attractive enough way of travelling. There were too many delays, too many cancellations, poor service, poor catering, so it wasn’t attractive to passengers.

And Peel Hunt’s long-time transport analyst Alexander Paterson agreed:

It made railways even more focused on the employee and even less focused on the customer, and volumes collapsed. It took privatisation the best part of 20-odd years to get it back close to its peak.

It’s easy to read that argument as one between the private and public interest – where advocates of the former argue that as long as the competitive and regulatory structures are right, the pursuit of profit can deliver better value, better services and less subsidy.

As such, it reflects the chronic lack of imagination that we seem to have about the governance of public services. There’s either lumbering, statist public services that let staff and their managers get fat on the failure to serve the public – or lean, mean private operators that cut corners, skim off the most profitable punters and gorge on subsidy and safety relaxation to please their shareholders.

And higher education has long felt trapped between those two.

Red on blue

In the blue corner, the advocates of the current iteration of fees (and increases to them) maintain that competition and a demand-led system have meant more students studying the things they want to study, where they want to study. Aggressively blind to the impacts on place, choice or the way that the need to grow distorts decision making, in that world view, if the government would just nudge up the unit of resource through a fees increase, all would be well.

In the red corner there’s then the fees-free advocates – who yearn for a golden era of the past where decisions were all made for the right reasons, made by academics rather than ex-academics playing at being a corporate CEO, and when planning and place seemed to matter. Blind to the ways in which inefficiency ruled, the student interest tended to be dismissed and the arrogant ways in which failure was able to be ignored as everyone else’s fault, in that world view, if the government would just nudge up the unit of resource through direct funding, all would be well.

It’s all so reductive because lumbering, inefficient, out of touch public services are no more in the interests of the public than ravenous, ruthless cost-cutting ones. And it’s also an ideological dead-end – given few really think that higher education can get by on or thrive on being entirely state funded (both for research and teaching), and few think that it’s possible or wise to move to private contributions (whether backed by state loans or not), we need to find a way for hybrid funding to work better.

In England, in the form of the Higher Education and Research Act and its Office for Students offspring, there was a kind-of attempt. Both private for-profit and, for want of a better word, “public” providers were to be regulated on the same, “competitive” playing field. There’s even a set of “public interest governance” principles that supposedly apply across the board, although nobody seems to believe they work.

The fatal mistake was to assume that a set of private and competitive drivers would unleash creativity and quality, and could be tempered by regulatory brakes to protect students and taxpayers. The brakes are too slow, the insidiousness of the need to grow is both widespread and trumps all other considerations, and the result is a system that appears (both inside and outside) neither to deliver on public or individual interests, even though it often objectively does both.

And the way in which those who advocate for competition, fees and relaxed regulation have cleverly co-opted older ideas of academic and institutional autonomy to capture university senior managers and governing bodies is worthy of a blog all on its own. Even arguing for student numbers planning is derided as somehow being anti-intellectual and in opposition to the very idea of a university.

It’s why lobbying for more money won’t work as long as the options are either a return to absolute freedom (with, in the case of skills, some local authority influence) or regulatory relaxation plus increased fees. Because in the UK, the choices seem still to be institutions that are private in character, or statist in character – and both are now easy to discredit.

Hopium and copium

“Public interest” advocates sometimes argue that as long as more state funding were to be devolved, all would be well – but local authority or even regional mayoral devolution would almost certainly deliver universities into the arms of the parochial politics of the town hall.

“Private interest” advocates thus suggest if that universities could just have some more subsidised student loans, they’d stop with the aggressive marketing and course cuts. But the baseline desire to grow wouldn’t wither, the pretence of caring about anything else would wane, and the bad behaviours around the edge would diminish, not enhance, the chance of trousering public subsidy.

From time to time, those engaged in leading or representing higher education will attempt to console themselves with the fact that universities are charities, that the economy and society needs its outputs or that student satisfaction remains high or the discoveries generated through research are impressive. Others assume that the current framing of universities is all about bad faith actors in the Conservative party – and that after an election, attitudes will eventually change.

All of that is true – but none of it changes the fact that too many people right now don’t trust universities, and nor does it change the fact that the diminished scrutiny on universities in the past was inherently tied up with their much smaller size.

Look for 30 seconds at the comments underneath any news piece on universities and you’ll see complaints of high fees, excessive VC pay and a lack of regard for local communities. “Third way” marketised public services as imagined by Blair don’t work precisely because the self-interest behaviours look like fuel and the public-interest drivers look like brakes – cementing the caricatures of ministerial Knights and academic Knaves.

But other choices – alternative third ways, if you will – are available.

Integrating a balance

Over in the Netherlands, for example, the framework that defines and regulates the “(semi)public sector” (de (semi)publieke sector) is fascinating – because it’s designed to ensure that entities of that sort operate in a way that properly balance the benefits of autonomy with accountability to the public interest.

With a less monolithic health system that nevertheless involves some public subsidy, the Healthcare Governance Act places legal responsibility on boards of providers to ensure quality, accessibility, and the affordability of care. It ensures that institutions not only pursue efficiency and competitiveness but also prioritise patient care and safety.

Housing corporations are regulated to ensure they contribute effectively to the public housing stock while operating efficiently and transparently. Regulations cover aspects from financial standards to tenant participation, striking a balance between operational autonomy and accountability to the public interest.

And in education, the Education (Governance) Amendment Act is specifically designed to enhance the role of internal oversight bodies, and ensure that stakeholders, including students and staff, have a say in important decisions – embodying the principle of participatory governance within educational institutions.

Universities are required to empower bodies like staff and student councils, granting them more significant advisory and approval rights on issues that affect the educational and organisational aspects of the university. Universities have to provide clear and accessible information about their governance structures, policies, and financial reports, making it easier for stakeholders and the public to hold them accountable.

Universities are obligated to have mechanisms in place that ensure continuous improvement of quality, including evaluations and demonstrable adjustments (not just “voice”, “input” or “feedback”) from students, staff, and external assessments; there are tough standards on safeguarding integrity covering conflict of interest, academic honesty, and the ethical conduct of research; and the top income standards act combats excessive remuneration and severance payments in institutions in the (semi)public sector.

The whole idea is not to triangulate between the UK’s reductive caricatures – and instead to strike a balance. Even salaries and severance are standardised and made public, and VC (rektor) salary ceilings are indexed annually – with the cap currently standing at about 200k Euros.

In 2021, a PwC study suggested that universities in the Netherlands had a long-term deficit of €800 million – in addition to a one-off shortfall of €300 million, which had happened due to a rapid increase in the number of students with a lack of funding for research.

In 2022, the Dutch government announced investments including money to support university recovery, cash to support disciplines, substantial investment in projects related to large-scale research infrastructure and student wellbeing (as well as matching applicants with European research funds) and resource for the personal budgets of university researchers in the form of “starter and stimulation grants” – as well as billions in research, innovation, and education paid out of the National Growth Fund.

Accountability realities

This isn’t just about regulation. Some argue that universities will never meet the health and welfare demands of students unless funding increases. Others argue that meeting the health and welfare needs of students should be nothing to do with universities. The lack of imagination is palpable – especially when increases on either side don’t feel like they’ll fix the student mental health crisis.

When Belgian student services are operated through distinct governance and funding routes (with more direct student engagement) to that of the education and research, they look and sound more responsive. When more of what we might think is for professional services to do is carried out by city-based student associations in the Netherlands, I see a society more focussed on co-operation and citizens.

And when I think of Norway’s cooperatively owned regional student welfare organisations (and regionally run student welfare representative organisations) – covering housing, mental health, careers support and even the renting of mobile sauna units to students – I may be missing how high the tax burden is, or not noticing how helpful it is that such things are linked closely to academic mission.

But I may also have noticed that the structural participation and proximity to the interests of those they serve is what enables the funding to flow to them, permanently prevents the over-promising inherent in the market model, and sets a visible and visceral example for the way in which the rest of society should be run that students carry with them into later life.

The point is that the debate about public v private behaviours in public services is point-less. It instinctively knee-jerks, sets aside the beneficial behaviours of the side we don’t like, and imagines a near-future that can’t be achieved. The sector’s emergent size and subsidy means it will never be as free as some long for, yet state control would strangle it too. And watching the sector’s academics innovate in participatory project work, while staff, student and citizen participation in the sector itself is reduced down to salary negotiation or customer feedback is profoundly dispriting.

Universities are (semi)public sector bodies. Integrating a proper balance into their funding models, accountability systems and corporate governance structures shouldn’t be something we wait for the wonks at the Tony Blair Institute to write a paper on for it to funnel through into Labour policy in a second term – it should be something that the sector accelerates now, to prove that it has the imagination and courage to embody public service delivery through more than just asking for money that Rachel Reeves says isn’t there.