On #Brexit and Universities

The EU referendum on 23 June is a timely prompt to look at what impact the EU has on universities.

There’s no doubt where Universities UK – the sector-wide representative group – sits. “The UK’s membership of the European Union makes our outstanding universities even stronger, which in turn benefits everyone in the UK.”. So that’ll be a preference for In, I guess.

No, it isn't Eurovision ...

The underlying argument is one about mobility: through schemes like ERASMUS, staff and students in UK universities get a chance to work and study at other EU universities, and vice versa. And this leads to a better education, better research, and more capable people.

The EU funds such schemes, and helps to make them happen: it is clear that there are not similar exchanges from UK universities to non-EU countries. The closest thing to such a scheme beyond the EU is the junior year abroad programme that many US universities operate, with some UK universities very happy to bring such students in for a semester or a year. But it’s one way traffic: there aren’t many UK students spend a year at an American university, and where it happens – such as American Studies at UEA – it is linked to a specific degree programme, and arises because the University has worked hard to make it so.

There’s a financial angle too. The EU funds research across its member states, often for projects done in collaboration between EU universities - and UK universities are active in this. And students from other EU nations study at the UK’s universities, on the same terms as home students. (This gives rise to some oddities: Scottish universities are free for Scottish students and non UK EU students, but students from England, Wales and Northern Ireland are liable to pay fees …)

If we left the EU, other things being equal, the research funding would stop, and EU students would be like any other overseas student – and pay the same fees. So what do UK universities currently get from these EU sources?

HESA data lets us find out. Using data for 2014-15, it is possible to calculate for each university how much they get in EU research funding (from finance table 5); and how much they get in tuition fees from EU students (finance table 4 and student table 11a). And this in turn lets you calculate what proportion of their overall income comes from EU sources.

You’ll be pleased to know that I’ve done the maths for you. Across the UK as a whole 4.7% of funding in 2014-15 came from EU sources, with research funding accounting for slightly more of the whole than tuition fees. Of the tuition fees, two thirds is accounted for by full-time undergraduate fees.

The picture varies greatly: while a few universities get less than 1% of their income from EU sources, for others it is a noticeable amount. Here’s the top 10:

What is immediately obvious is the London bias, and also the absence of the big-money research universities. None of the top 10 have medical schools, which drives a lot of UK research money. And of these 10, eight get most of their EU income via tuition fees. But for all of them, the risk of Brexit is clear: 10% of income is a lot to lose, and recovering it is uncertain.

Does this mean that universities are right to campaign for the EU? Money is uncertain, and in truth we simply don’t know what would happen, especially in the medium to long term, if the UK left the EU. To my mind, the better reasons are those of mobility and opportunity, and they are good and noble reasons. The Universities UK campaign seems to me to be based on hope and optimism about making a better tomorrow. I’m all in favour of that.

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.

Who Pays?

Q: What’s green, five inches long, and takes an hour to drink?
A: A grant cheque!

I was reminded of this student joke from the 1980’s by Universities UK’s establishment, announced today, of a Student Funding Panel “to consider the design of the current student fees and loans system in England, and to make recommendations on its future development.” The underlying story: universities know that the current system is unsustainable, certainly politically and possibly economically, and want to play a part in fixing the problem.

And it’s obviously a big problem. Before the 2010 election universities also had concerns about finances, but it was individual mission groups that did the lobbying, not the sector as a whole. Perhaps that is one lesson from 2010, Browne and where we ended up with the fees system. Long-term matters are too important to be left to the randomness of coalition negotiations, and universities speaking with one voice have a greater chance of being heard.

A lot was made on the Today programme this morning about the problem of cost to the public purse, so I thought I’d take a look at what the issues are. It isn’t as simple as finding the cheapest option.

There’s a long history to this question. Go back to the 1970’s and there were no undergraduate tuition fees. And local authorities provided grants to students at universities to cover living costs. By the mid 1980’s the effect of cuts in local government funding meant that student grants were worth less and less (hence the joke I opened with), and as a student you faced three options: rely on your parents or family for funding; get a job; or go into debt. Or all three, as I managed to do.

The introduction of student loans in the early 1990’s provided an alternative to relying on funding from families, which will have helped some people, but another problem was brewing. The UK Government was pursuing a policy of expanding higher education, but on the cheap, meaning that for some universities – and especially for the new universities – the amount of funding they had per student (the unit of resource) was declining.

To address this, tuition fees for home undergraduate students were introduced in 1998, at £1,200 per year. This means that state funding via the national higher education funding councils was supplemented by money from students themselves. (A cautionary note about devolution: different arrangements apply in some respects to the devolved administrations. Another post, another day, I’ll look at this in detail. But the underlying issue – how much do good universities need to operate, and who pays? – affects all parts of the UK.)

And a few years later it was clear that this hadn’t solved the problem. Students were still in debt and finding jobs whilst studying; universities’ finances were in a bad state. In 2004 the government again passed legislation, amidst much controversy, to grow the student contribution, to £3,000 per year. This took effect from 2006.

And then guess what? A few years later universities were saying that the problem still wasn’t solved. And they were right. Further student expansion had again eroded the unit of resource; and universities needed investment in their buildings and other infrastructure to keep standards high. Following much lobbying Lord Browne was asked to chair a group to think about it, make recommendations, and report after the 2010 election. Thus, supposedly, removing student fees and university funding as an electoral issue. Nick Clegg can tell you how well that turned out.

So what was the 2010 settlement? Dramatic reductions in direct state funding to universities, coupled with increased access to loans for living costs, and much higher maximum tuition fees. And, significantly, an accounting trick which took state-backed student borrowing out of the government’s current spending. This is what the current hoo-ha about default rates is about: estimates of non-repayment by graduates are higher now than they were when the system was introduced, meaning that it costs Future Us more than Past Us thought that it would. But this depends on forecasts based on current levels of graduate employment and salary, which are subject to change. Present Us doesn’t really know how much Future Us will pay. And some Present Us-es would like other Present Us-es to be the Future Us-es that pay more. While other Present Us-es think that Future Us shouldn’t bear the cost, but that Present Us should. And a lot of those Present Us-es are the Future Us-es that the other Present Us-es think should bear more of the cost. Clear now?

And now let me bring in an expert view. I was fortunate to attend, a couple of weeks ago, a debate organised by the Institute of Welsh Affairs. You can see the debate again here. The panel included Professor Nick Barr of the LSE, who knows more about the topic of student fees and loans than anyone else in the world. Probably. And he was very erudite on the topic. (In a nutshell: the 2004 system was well designed, the 2010 system cannot be described using words which are fit to write in this blog a least.) But what I thought was interesting was that he went beyond the economic into a political judgement: the reason universities need to be able to charge fees is that they can’t rely on governments to fund them properly. And looking at the history, you can see his point: four attempts to reform student and university finance, and none of them lasted for more than a few years. About the life of a parliament. Short-term solutions don’t work very well for long-term issues.

The hope is clearly to have a grown-up conversation about how to fund universities. The UUK panel has VC’s from old and new universities, and is inviting contributions from any interested parties. It is only focused on England, but will have an effect on Wales and Scotland. The Institute of Fiscal Studies, whose research underpins the launch, is on board. These are good signs.

But my prediction is for another fudge: a solution which works for a few years and then leaves a mess for the next parliament to deal with. Why am I so cynical? You can’t get consensus without all political parties coming on board. There’s an election coming, there’s the unpredictable factors of UKIP and the fall out for the LibDems following their tuition fee promise in 2010. Who’d believe a politician now about student funding? David Blunkett, as Education Secretary in 1997, cherry-picked from Lord Dearing's recommendations, which were presented as a coherent package. The current coalition cherry-picked from Lord Browne's recommendations, which were presented as a coherent package. Do we really think that third time round government wouldn't do just the same?

And the sad thing is that this really matters. To lots of individual students. To the quality and sustainability of lots of UK universities. To the prosperity of the whole country. I’ve no solution in this blog post. Perhaps another day.