Who pays?

The ifs published a briefing note on the impact of the changes to student finance announced in the budget. There was plenty of media coverage, but as always, there’s more in the report than has yet been covered.

Firstly, the background. In his budget the Chancellor announced two specific decision, and three proposals for consultation relating to higher education:

Decisions

• Increasing the maximum loan to £8,200
• Replacement of maintenance grants with loans 

For consultation:

• Freeze the £21,000 repayment threshold (ie let inflation reduce the real value)
• Allowing institutions with high teaching quality to increase the £9,000 fee in line with inflation
• Review the discount rate applied to student loans and other transactions to bring it into line with the government’s long-term cost of borrowing.

The coverage of the ifs report rightly – because they are the certainties – focuses on the two decisions. But the ifs report also analyses the effect of the three proposals for consultation, and its two things about these that I want to highlight.

Firstly, the effect on government borrowing. The RAB charge is the measure of how much student debt the government expects to have to write off. At the moment the RAB charge stands at 39.2% - the government expects almost £2 in every £5 it lends to students to be written off as un-repayable. If all five measures are introduced, the ifs expects the RAB charge to reduce to 21.9% - effectively halving the amount of debt write off. This is all to do with changing the discount rate. In the ifs’s own words:

The proposal to reduce the discount rate is essentially an accounting ‘trick’: it will not change the real resources going to students or universities; nor will it increase repayments from graduates. Instead, it means that future repayments will be valued more highly today. This has the effect of increasing the value (but not the cash amount) of repayments made in future, hence making it appear that the cost of the system (in net-present-value terms) is lower than it was before.

And secondly, a change in the balance of who pays for higher education. To quote from the budget document:

The government must therefore ask graduates to meet more of the cost of their degrees once they are earning.

Using the ifs data it is possible to work out the graduate’s share of the costs of their education, as in the following table.

So, at the moment the costs are shared roughly equally between the taxpayer and the graduate. If all of the budget reforms are implemented, the graduate share increases to 75% of the total cost. What looks like a technical accounting decision has real consequences for individuals.

Dealing with uncertainty

A really excellent blog post by Gavan Conlon on wonkhe got me thinking about uncertainty within the higher education sector. Gavan’s post was about the RAB charge for tuition fee loans, which turns out to be higher (at the moment) than had been forecast. But also about the longer term changes to the higher education sector which arise from the policy changes.

This is just one example of the uncertainties around UK higher education at the moment. Let’s name check a few of them:

• Will international students keep coming to the UK given growing HE sectors elsewhere, and the current government’s hostile stance to migration?
• Will universities be able to regain steady patterns of student recruitment, or is the current system volatility set to continue?
• How much further will research funding be concentrated after REF, and will this make research unsustainable in some universities?
• What will the disruption to established patterns of higher education from the internet be? Is it MOOCs, or some other disruption yet to come?

There’s lots to be said about each of these, but that isn’t the point of what I want to say (not today, anyway!). The point is, that no-one who works in or cares about universities can act as if some basic assumptions won’t ever change. And this is a problem, because universities operate on a long cyclical model. For example, the students graduating in summer 2014 with an undergraduate degree, after 3 years of study, entered university in 2011, on promises made in a prospectus which was signed off in autumn 2009. Before Browne, before tuition fees, before austerity budgets.

So universities have to adapt to events, but they carry a heavy burden of commitments which make his hard, and which place burdens on staff who are very busy just delivering the day-to-day. (If universities are sometimes seen as slow to change, I think this is one of the reasons)

There’s no magic wand which will protect a university, or a team, or a person in a university, from change. But there are things you can do to help you prepare. Here’s three things you can do

1. Keep reading news.  And thinking about it.  By the time something is a headline it’s too late to avoid it, but by looking into what’s behind the headlines, and thinking a bit about what factors are driving developments, you can see further into the future.  The film Armageddon is a bit like this (honestly!)  If you nudge the asteroid far enough away from earth, it flies past harmlessly, but if you wait too long it’s gonna get you.

2. Scenario planning: imagine a few futures – in the five year horizon works well – and think about what would have to happen for that to come true, and what would be the implications if it did. So, for instance, suppose that in five years MOOCs are a dominant form of learning in higher education: a higher completion rate; reliable ways found to assess performance. If it were like this, who wouldn’t follow courses from Harvard and Yale? So universities would need to think about changing the teaching model, to focus perhaps on small group teaching as an adjunct to online lectures (welcome back, blended learning!) And to find ways to award credit for MOOCs. Will this happen? Personally, I doubt it, but if you were, for instance, responsible for quality assurance processes in a university, you might want to look at your APL rules to see how much use they would be in this scenario.

3. Keep yourself lean: I don’t mean exercise more, but lean in the sense of the processes that you use. Do you know why you’re doing what you’re doing, and have you thought about what effort you might be wasting doing things that don’t need to be done? Some of that’s about priorities, but some if it is just about being efficient. Here’s a clear introduction from the Cardiff University's Lean University team about what lean is and is about – there’s lessons and benefits for all of us.

So there’s three steps: read the future, think about it in a structured way, clear the decks so you can react.