Tuition Fees, Ponzi Schemes and University Funding

Last week the Higher Education Funding Council for England (HEFCE) finally released information on allocations for 2014/15. As expected, there are large cuts in recurrent grants pretty much across the board (a full table can be found here).  These cuts reflect the fact that government funding for teaching in many subjects is being progressively replaced by tuition fee income in most disciplines, the prominent exception being STEM subjects, which continue to attract a (small) element of grant support in addition to the £9K fees.  Grants for research are largely unchanged for the time being; the big upheaval there will happen when the outcome of the Research Excellence Framework is applied, from 2015/16 onwards.

If you look at the table you will see that some big research universities have relatively small cuts, especially if they focus on STEM disciplines; the obviously example is Imperial College which has a cut of only 3%. Typical Russell Group universities seem to be getting cuts of around 15%. My own institution, the University of Sussex, has been handed a cut of 24%, which reflects the fact that a large majority (greater than 75%) of students here are doing non-science subjects. Universities with less research income and a higher concentration on Arts & Humanities subjects are having to bear cuts of up to 60%.  These reductions are larger than anticipated as a result of the government’s decision to increase the total number of places by about 30,000 this year.

These numbers look alarming, but in most cases, including Sussex, the net income (FEES+GRANT) will actually go up next year, as long as the institution manages to recruit a sufficient number of students. The ability of a university to generate sufficient income to cover its costs has always depended on its ability to attract students, but this has previously been managed using a student number control, effectively applying a cap on recruitment to institutions that might otherwise corner the market.   This year some institutions who failed to recruit strongly have had their cap lowered, but worse is in store from 2015/16 as the cap will be lifted entirely, so that there will effectively be a free market in student recruitment. I sure I’m not the only person who thinks the likely outcome of this change will be a period of chaos during which a relatively small number of institutions will experience a bonanza while many others will struggle to survive.

As if this weren’t bad enough, there is also the growing consensus that the current fee regime is unsustainable. Revised estimates now suggest that about 45% of graduates will never pay back their tuition fees anyway. If this percentage grows to about 50% – and I am very confident that it will – then the new tuition fee system will end up costing the Treasury (i.e. the taxpayer) even more than the old regime, while also saddling generations of graduates with huge debts and also effectively removing the sector from public control.

Apparently, the response of the government to the level of default on repayments is to consider increasing fees to a level even higher than the current £9K per annum. It seems to me that the likely consequence of this would simply be to increase the default rate still further, largely by driving UK graduates abroad to avoid liability for paying back their loans, and thus drive the system into runaway instability.

The more one looks at the fees and loans debacle the more it resembles  a Ponzi scheme that’s destined to unravel with potentially catastrophic consequences for England’s universities; note that Wales, Northern Ireland and Scotland are not covered by HEFCE arrangements.

So what can be done?

I’ll assume at the outset that the only really sensible plan – taking the entire system back under public control – is, by the very nature of the British political system, unthinkable.

My first suggestion reflects the fact that I am a scientist and that I think  science education and research properly should be a very high priority for any system of university funding. Whatever is done therefore must address the point I made a post about the threat to STEM subjects presented by HEFCE’s policies the essence of which is that the £9K flat-rate fee across all disciplines does not reflect the true difference in cost of teaching between, say, English and Physics. Differential fees would have a disastrous effect on recruitment into science subjects while the current system underfunds STEM disciplines so severely that it offers a perverse incentive for universities to focus on non-science areas. Under the current system, fees from Arts disciplines are effectively subsidizing science subjects rather than providing education to those paying the fees; in other words, Arts students are being ripped off.

Second, if the taxpayer is going to foot a significant part of the bill for higher education then HEFCE (or whatever organization replaces it in future) must have sufficient clout to manage the sector for the public interest, rather than allow it to be pulled apart by the unfettered application of market forces.

Third, any new system must be designed to reduce the level of graduate debt which, as I’ve mentioned already, simply encourages our brightest graduates to emigrate once they’ve obtained their degree.

I’ve actually never really been opposed to the principle that students who can afford to should contribute at some level to the cost of their education; I have, on the other hand, always been opposed to fees being set at the level of £9K per year. The Labour Party’s suggestion that fees should be cut to £6K would go some of the way to satisfying the third requirement, but would be disastrous unless the cut were offset by increased state funding through recurrent grants. I think a better suggestion would be to cut fees by a greater amount than that if possible, but to have a much bigger differentiation in the unit of resource paid to different subjects. I’d say that the net income per student should be about £15K per annum in STEM subjects, whereas for Arts and Social Sciences £6K probably covers the full cost of tuition.  So if the fee is set at £X across the board, STEM disciplines should receive £(15-X) from HEFCE while Arts subjects get a subsidy of £(6-X).

 

 

 

 

 

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3 Responses to “Tuition Fees, Ponzi Schemes and University Funding”

  1. Current Theoretical Physics and Cosmology is the biggest Ponzi Schemes in human history.

  2. Methinks catastrophic consequences for England’s universities are well on the way. And that my daughter will continue to live abroad.

  3. Anyone who has an offer of a permanent teaching job in a university with fees and one at a university without fees should not only take the latter, but announce very loudly that he is doing so and why. Capitalists say that they understand competition and that it is good, so give them a taste of their own medicine I say!

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