Will power be matched with responsibility in the market?

In the aftermath of the USS strikes the media has been full of stories critiquing numerous aspects of the higher education market. For this year, the open question is whether the sector is willing or able to address these wicked issues – or whether ministers or the regulator might have to step in.

Both degree grade inflation and unconditional offers are indicators of the market in action, but that doesn’t mean they don’t deserve scrutiny and collective restraint. In market terms grade inflation is the degree trader responding to consumer demand for an award of high value, but even a marketised NHS can’t control output in this way and simply declare all its punters cured! Arguably, only Volkswagon is analogous in adjusting test results to aid sales in the market-place. And whilst the uncontrolled and growing use of unconditional offers is indicative of a market not based on price competition but entry-grades, the potential impact on A-Levels motivation means that headlines will remain.

Price competition?

Emerging discounting on the £9250 sticker price by way of special offers – cash-backs, freebie iPads, free gym memberships, and so on, is also attracting attention. Arguably these should be welcomed, given there are those who indeed want to see a real price-led market in HE rather than our current quasi-market – here the discounting is effectively a version of the hitherto non-existent price competition around the £9250 (though not the case for taught Masters degrees and for international fees for first-degree course where provider’s brand clearly dictates the market price that can be got). But will any mainstream provider ever break the £9250 “cartel” and offer the core product for less, short of Augar slashing the maximum? Or, since the first-degree is an experiential good greatly confused by information asymmetry, is the £9250 the only (hoped-for, albeit sadly misleading) indicator of quality that the applicant can detect?

Contracts

The egregious lack of a student-provider contract that is compliant with the Consumer Rights Act 2015 remains a problem. A compliant contract ought to make it clear what the higher education provider delivers at least as a quantum of teaching (given that its quality has never been pinned down despite thirty years of ‘quality’ agencies and their endless acronyms – although is the TEF making a difference?). The HE industry’s trade body, Universities UK, could self-regulate and agree a fair standardised contract with the key players- the Office for Students, the National Union of Students, the Competition and Markets Authority, the Advertising Standards Authority, MumsNet, and ‘Which?’ – just as other industries did over the decades such as second-hand car dealers, photocopier suppliers, and the package tour industry. The question is whether UUK is capable of being pro-active and whether its members will allow it.

Class actions and complaints

On a related issue, we will have to wait and see whether there is to be class-action litigation re the student-consumers’ new statutory right to ‘an appropriate refund’ under the CRA15 for missed lectures. If this doesn’t arise from the 2018 UCU strike action then it could from the (possible, probable?) next wave of action in 2019 re the USS issue. We will need to find out what a court implies as the terms of the still missing explicit business-to-consumer contract, and whether it accepts the industry’s line that such strikes are force majeure events (assuming any such ‘small print’ disclaimer term is not deemed an ‘unfair’ term under the Consumer Rights Act 2015). And it will be interesting to see the Office of the Independent Adjudicator’s view on this, on the assumption that at least a couple of complaints have reached completion-of-procedures and beyond.

Going bust?

There is also the question of insolvency. Alarmist press coverage suggests that at least one institution could fall victim soon- but will it be a recruiter-provider running out of customers despite the use of marketing tricks? Or will it be an over-leveraged provider at the other end of the brand scale that has to service bond interest payments linked to capital used for glitzy buildings that are often late and over budget? In some cases yet more loss-leader research activity is being packed in – with grants that fail to recover adequate overheads for normal running costs, let alone to finance the bond interest now payable. As TEF develops, the need to take student outcomes more seriously means it will become progressively harder to fall back on subsidising research costs from teaching income. And without case-law clarity (probably at Court of Appeal level) re damages due under the S-HEP B2C contract, nobody can calculate the sums involved in creating a credible Student Protection Plan under HERA17 that really will robustly protect the students’ interest when a provider hits insolvency.

Car parking and VC pay

I assume campus car-parking will never be solved, but let’s hope that another wicked issue – the grossly inflated salaries  of some VCs – is on the way to being addressed. In the non-profit part of the sector one would hope that the rate of increases is being slowed to match that which all staff are paid in HE, and ideally incoming leaders won’t be getting the fat-cat treatment. With governing bodies ultimately responsible for remuneration, degree standards, and teaching quality if there isn’t evidence of progress on these issues (responsibility to go with the power) too many will conclude that there is a grievous level of governance failure across the HE industry, and providers’ much prized autonomy will rightly be under threat.

David is a member of the OfS board but writes here in a purely personal capacity

One response to “Will power be matched with responsibility in the market?

  1. Interesting stuff, of course, from David, but I’d raise two issues

    There’s much more to grade improvement than a simple link between £9250 and 2:1s.

    Then, I’d like to note that ‘discounting’ has been a feature of the system since 2012. There’s been fee waivers and cash-back deals, scholarships and even IT kit right from the start. What’s interesting is the £9250 is such a dominant figure that data on the real cost hasn’t been turned into league tables. It’s probably the sheer complexity of different universities’ arrangements and their different targets. Is the Moritz-Heyman Scholarship at Oxford (where the poorest students only pay £6250 fees and get a £3700 bursary) a market discount?

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