Inseparable

Two weeks into the election campaign and it seems that despite university and student funding being a matter for the devolved administrations, it’s becoming an election issue where Westminster policies will drive devolved decisions.

The headline issue is Labour’s £6k tuition fee policy. I’ve blogged on this before, and noted that, in my view, this will need an Act of Parliament if there aren’t to be quite significant unintended consequences. Looking at the impact of this on other administrations makes me doubly sure.

Take, for instance. English and Welsh fees policy. They are the two most similar in the four UK nations; universities are allowed to charge up to £9k per year Home/EU undergraduate fee, subject to a test around fair access. The difference is that the Welsh Government pays some of the fees for Welsh domiciled students (that is, students who come from Wales, wherever in the UK they study).

Suppose there’s a Labour Government, and it caps English universities at £6k fees. This creates four different scenarios.

For an English university, there’s two policy worries. Firstly, will HEFCE actually make up the £3k difference? Maybe in the first year, for forms sake, but it would be a brave bet that said it would carry on as a ring-fenced spending item in perpetuity. And secondly, will they be allowed to charge £9k for a student from Wales?

For a Welsh university, slightly different worries: will the Welsh Government continue to fund undergraduate education for Welsh domiciled students at a rate about £9k, regardless of where the funds come from? That’s a question for the Diamond review, but a dramatic change in English arrangements would be bound to have an impact. And secondly, would they be allowed to charge English students £9k? And, perhaps more pertinently, if they did, would any come?

The market for higher education and UK politics intrude inexorably on the devolved administrations. There’ll be similar dilemmas for universities and governments in Scotland and Northern Ireland. Even when we’ve understood, as a political culture, how to do devolution, there’s still the unavoidable reality that England is by far the largest of the four home nations, in population and economic terms. That reality won’t be changing any time soon.

Most of the answers to the questions above require both political consensus and amendments to Acts of Parliament. If there’s a government with a small majority HE funding might become a touchstone issue. Again.

A capital week

I write at the end of a long week which saw me in each of the three capital cities on the UK mainland: Cardiff on Monday and Thursday; London on Tuesday and Friday; and Edinburgh on Wednesday. Plenty of opportunity for reflection.

Cardiff, London, Edinburgh: and some other places too

One strand of this reflection was about the changes which are occurring in the UK through devolution, and the unequal parts into which the UK is divided. Universities’ behaviour is being affected by this.

Firstly, with respect to students. Each of the nations has its own policy around student support and student tuition fees, but England, as the largest in volume and wealth, is clearly setting a tone. With each student paying £9k per year, funded through the SLC; and now without any cap on student numbers, English universities can seek to recruit (they might not succeed) as many as they like, from wherever they like.

In Wales, the government subsidises students’ fees, so that they pay only about £3,600 per year, wherever in the UK they study. Welsh universities have a financial cap on how many Welsh-domiciled students they can admit (although I understand that in practice this doesn’t constrain recruitment of Welsh students) and the net effect of this is that Welsh universities do best, financially, when they recruit plenty of students from England, creating a net inwards flow of state funding for universities.

In Scotland, universities cannot charge fees for home (or non-UK EU students), but can charge for students from England, Wales and Northern Ireland. They are grant funded in respect of the costs of educating Scottish students. This means that for Scottish universities, students from the rest of the UK are valuable, bringing fee income. But, universities are not funded at the same fee per student basis as in England and Wales, so competing with their counterparts elsewhere in the UK is tricky.

In research things are different (for now): the principal of dual support (through the block grant and, in competition, from Research Councils) is so far safe. This means that every university will get some funds for research, dependent upon their baseline quality assessed through REF. But how long will this last? As national governments (ie Scotland, Wales, NI) gain more power, will they wish to include their ‘share’ of research council funding in their allocations? Will experiments in devolution in England, like that in Manchester, lead to regional university funding?

It is an uncertain time, and each university is also having to plot its own sustainability, with uncertainties about future state/fee funding arrangements, the prospect of further cuts in the coming years, and no real confidence that post-election things will be any clearer.

There’s no moral to this reflection. But there is an obvious truth that the future for university funding and system behaviour won’t be stable for a while yet.

A pre-emptive strike

University tuition fees on the BBC from 6am today – there must be an election coming!

The story, of course, is the letter to The Times from UUK’s Board members representing English universities, protesting pre-emptively about Labour’s rumoured plan to reduce the tuition fee cap in England to £6,000 per year. (It's behind a pay-wall so I, haven't linked to the letter, but Wonkhe below gives a link to the UUK press release.)

Wonkhe blogs knowledgeably about the politics behind this, and the key point seems to be that there isn’t really a Labour HE policy yet. So what we’re seeing is an attempt to shape policy, or at the very least make the £6k cap untenable politically. Let’s take a look at that.

Firstly, what is the universities’ case? Deeply flawed though the current English fees regime is, it is possible to say a couple of good things about it.

Firstly, it has increased the money available to universities – and better-funded universities ought to be able to deliver better teaching and research. Plus, and this is a biggie for universities, it is money which comes without many strings attached, thus increasing university autonomy.

Secondly, it hasn’t caused a reduction in participation in higher education. Much like the 2006 increase to £3k, an early dip has been compensated for and the upward march of participation continues.

But, as I said, it is also deeply flawed: it’s very expensive for the country. The repayment rate is capped at 9% above a £21k threshold, and repayments stop after twenty years. Thus there is almost bound to be a built-in default, and the state picks up the tab. It is, of course, a long-term issue (July 2035 will be the twentieth anniversary of the first graduates graduating with higher fee debt) and no-one knows exactly what the default rate will be, but the forecasts on which the policy were introduced look brave at the moment. And, critically, estimates on default rates have an impact on government budgets in the here and now: meaning that real money needs to be found as estimates of default rates go up.

The problem universities have is that reducing the fee cap sounds like a good idea. If students pay less – and £6,000 is definitely less than £9,000, no matter what you think of Ed Balls – then surely it must be better for them? And many people outside HE (and quite a few inside HE) think a £9,000 flat rate is simply too much.

Clement Attlee: £6k fees weren't his policy

It isn’t that simple, of course. Because repayments are capped, graduates on low-ish salaries might still find themselves paying for twenty years, and still owing at the end of it (to be picked up by the state); the ones who would benefit are graduates who go into more highly paying jobs, and so can pay the £6k off within the time limit. And as the graduate social mobility work led by Alan Milburn showed, access to high paying professional jobs is biased towards those from more advantaged backgrounds. So, with a £6k fees policy, the ones who benefit will be disproportionately from richer families. Reducing fees from £9k to £6k doesn’t seem very progressive to me.

But it sounds it. And here’s the problem universities face. The current regime is unsustainable for the state, but is actually pretty good for universities. Any move - eg to a graduate tax – makes things worse for universities, in the sense that they become beholden to the state for money. Remember that the whole fees thing happened because the state wouldn’t pay the cost of expanding higher education whilst maintaining levels of university funding. For universities, a graduate tax is a step backwards.

And as I blogged last week, young people in Labour MPs' constituencies are disproportionately more likely to go to less prestigious universities. And the lower down the league table you go, the more plausible the argument, that £9k is too much, can feel. This is about the heart not the head.

There’s a lot at stake here. If we’re headed for coalition, then the best outcome might be a cross-party consensus not to make HE policy a haggling point. That leads to policy making on the fly, and bad outcomes. So perhaps the real message from universities needs to be “We know the current arrangements can’t hold, but let’s this time think it thought properly”. Not much of a manifesto slogan, but better for policy, I suspect.