Examination of Witnesses (Questions 520-539)
WEDNESDAY 5 MARCH 2003
PROFESSOR DAVID
EASTWOOD AND
DR PETER
KNIGHT
520. David Eastwood?
(Professor Eastwood) I think I would echo what Peter
says. For a university like mine which does have a substantial
research base and indeed is highly geared in terms of research
income, the research settlement on both sides of dual support
is good. I should say it is particularly on the OST side of dual
support, and we will receive I think real benefit from that by
2005-06. My own back of the envelope calculation would echo Peter's
that stripped of special initiatives the teaching settlement is
broadly flat so if we are looking for additional resource for
teaching it does not come until after 2006 and it does not come
until the new fee regime comes on stream. Going back to questions
you asked Howard Newby, the absence of a general increase in HEFCE
funding for teaching will be highly influential on universities
in determining whether and how much they should charge. If fees
are the only prospect of a significant enhancement of the teaching
income stream then universities may take decisions they would
not otherwise take. I think if there is a disappointment, given
the White Paper's emphasis on teaching, and on rebalancing of
the vocational higher education, it is that we do not have the
means probably to reward effective teaching in our institutions.
521. This is a strange kind of phenomenon, is
it not? Here is the taxpayer with everything they represent and
the taxpayer sees a greater amount of the national treasury devoted
to higher education and then up pop two of the leading vice-chancellors
and say it will not make any difference. That is what we are told
in the health sector, the education sector and now the higher
education sector. Are you being a little bit negative here?
(Dr Knight) No. My position is absolutely clear, and
I have given it in a set of talks I am giving to staff at UCE
at the moment, my best analysis is there is no real term increase
in funding for teaching over the next three years. Once you have
stripped out effectively, say, a national insurance increase and
the various special initiatives like 70 Centres of Teaching Excellence
and whatever else is being advocated, once you have taken out
those initiatives which will have additional costs inescapably
associated with them, there is no real term increase in the funding
per student.
522. Even if you charge them £3,000?
(Dr Knight) Ah, now then, in 2006 if we charge them
£3,000 and there is no deduction from our grant then there
would be a significant real term increase for the funding of teaching.
I do not think there is a vice-chancellor in the country who believes
there will not be a deduction in relation to our public grant
when the new fees are available and I assume that everybody is
planning on the basis that there will be, the only question is
how much.
523. Would you go along with Sir Howard Newby's
view that he would provide a ceiling of £5,000?
(Dr Knight) I assumed the £3,000 was carefully
and thoughtfully selected so there would not be differentiation
between universities and courses because it is a maximum you can
charge before differentiation comes in. If it was £3,500
I think we would have been starting to get some differentiation
on price, £4,000 certainly, Howard's £5,000 definitely,
but £3,000 I assumed was set to preclude the possibility
of much differentiation.
524. Professor Eastwood, you would like £5,000
and would you like it to come into operation sooner than 2006?
(Professor Eastwood) If you ask me what I would have
preferred, what I would have preferred was a better teaching settlement
on the teaching side in the run up to 2006. It is fair to say
both for legislation reasons and, indeed, for planning reasons
on the part of future students that some lead time on a major
change is appropriate. I do not argue with that. I have heard
so many versions of how the £3,000 figure was determined,
I am not necessarily as sanguine as Peter that it was planned
in quite that way. There is no doubt a lot of pressure still going
to our friends in Number 10 and Number 11 from some of the universities
to push up that figure for the next Parliament.
Valerie Davey
525. Given the speculation about this graduation
of money, for postgraduates as we are talking now, one college
at least in Oxford links up with your concerns, this is actually
very prescriptive and they are complaining at the moment they
are not going to charge the top up. Does that have any resonance?
(Dr Knight) I assume every university will want to
keep its options open and will plan on the basis that they are
going to charge £3,000 because if we do not and if the grant
is subsequently cut, as we expect it to be from 2006 onwards to
take account of the increased fee, then you are in an absolutely
no-win situation if you have not planned for the £3,000 fee.
My expectation is that what we are seeing is the possibility of
additional funding for teaching through the increased fee but
also the significant possibility of a switch in funding from public
resource going to the university to support teaching to private
resource going to the university to support teaching. I am expecting,
also, and Howard alluded to this, there will be another White
Paper in 2009/2010 which will move the issue on, in the way it
has in other countries so that more support for the teaching costs
of university comes through the student fee and the Government
intervenes in terms of its social objectives by supporting the
student and enabling them to pay that fee. That is the way I think
we are going and universities have very, very long planning times
in terms of positioning themselves, I suspect that is the basis
which will underpin all our planning, not the White Paper we have
got now in 2006 but what is going to happen in 2008/2009.
526. Professor Eastwood, do you echo that scenario,
that it is going to be a blanket £3,000 irrespective of institution
and course and all the planning from the Government point of view
is taking place on that basis?
(Professor Eastwood) Two comments. I should say I
spent the first half of my career working at the University of
Oxford. The University of Oxford had resources available to it
that other universities in the sector do not have but I still
would be very surprised if it did not charge £3,000 across
the board. Secondly, I think there are very real difficulties
in differentiating the charge within institutions, I happen to
agree that with £3,000 a great many institutions will go
to the top of the band. In a more differentiated environment I
think there are real problems, for example, in charging more to
read English than to read chemistry. You turn students into consumers
who inhabit rooms adjacent to one another in the same institution
and wonder why one is cross-subsidising the other. I do think
there are quite serious difficulties associated with differentiation
within the institutions which is not to say that when we gather
in the additional income that we will not do things, as it were,
below the line. We will use part of the additional income to promote
access, we will use other parts of it to enhance the student experience
and we may well do other things in terms of bursaries and so forth
to deal with the recruitment issues. I think that is the way we
will seek to manage access and recruitment, rather than in terms
of the headline charges.
527. Very briefly, you are both assuming that
the regulator will be satisfied with everything you are doing
at both your universities and everywhere else?
(Dr Knight) Absolutely.
(Professor Eastwood) If we both outperform our benchmarks,
I should say yes.
Chairman
528. I think Peter wants to come back in on
the question?
(Dr Knight) Could I just add one thing on the courses.
There are a couple of exceptions where £3,000 is not going
to be viable. I do not think we will be able to charge £3,000
for foundation degrees, I suspect we will not be allowed to, and
I do not think higher national diplomas would sustain £3,000
so there are issues about the level of qualification which would
have to be thought through quite carefully. It would be interesting
if either the market or the regulations prevent us charging £3,000
what other incentives may have to be put in place in order to
avoid that aspect of the provision not occurring in universities.
Mr Jackson
529. I want to ask a question which normally
the Chairman asks, and I think it is a very good question. Is
it your view that the use of—I think the figure is—one
and a half billion pounds of public money to subsidise the interest
rate or repayment of the loan is a sensible use of money compared
with what else has been happening?
(Dr Knight) I am almost going to cop out on that one
because I have heard Nick Barr and been extraordinarily impressed
by the advocacy of the arguments he has put forward and the arguments
for real interest rate repayments because there is a massive subsidy.
I was extraordinarily pleased that we had both a zero interest
rate and fees paid after the graduation, that is really good news,
that higher education is free at the point of delivery is excellent
news because we have all had difficulties over the last couple
of years in collecting the fees. So taking the obligation to pay
fees upfront away is tremendous news and reduces an enormous amount
of hassle and difficulty that universities face. I suspect that
in my imaginary White Paper in 2008/09 this issue will have to
be revisited because the long term costs of the funding option
for students that the Government has put in place are extremely
expensive and real term interest rate is one aspect of that cost.
(Professor Eastwood) We may come on to this later.
I think many of us in the sector are very sincere in seeking to
promote access to higher education. I think broadly that the settlement
certainly will not inhibit access and probably in some ways will
promote it. I would not like us to do things now which might have
a fairly deterrent effect. I think I am with Peter that the time
to adjust this would be the point after we have seen how the new
system beds down and whether there are ways in which we do need
to adjust it in order to ensure appropriate access to higher education.
Chairman
530. This question of what courses you can charge
for and which you cannot, does it not give you great freedom?
If you take a speech by Sir Geoffrey Holland last week where he
likened universities to supermarkets, will this now lead to the
opportunity to reduce the price of your apples or pears or whatever,
if you have a course that has low take up, say engineering, you
can waive the fee because you want to keep that department going
and expand the student numbers. Does that not give you a new flexibility
which is welcome? Do you welcome Sir Geoffrey's views of supermarket
universities?
(Dr Knight) The phraseology was perhaps a little inelegant
for an ex-Permanent Secretary. Do I welcome the freedom to charge
nothing? Yes. UCE experimented with reducing fees for full-time
students. We had concessionary fee arrangements for part-time
students for many years and I welcome that freedom. What I do
not think is that that freedom is going to be generally used in
2006. What I could see happening is that with a particular course
which has low enrolments, and that course is perhaps strategic
regionally, like Quantity Surveying which recruits poorly at the
moment, you might get intervention from other agencies, such as
the Regional Development Agency saying, "Look, there is a
serious skill issue here. Can we provide support for students
on this course both to recruit and retain them to work in the
economy of the West Midlands?" So what I suspect is that
the freedom will be used, but it will be highly targeted and people
will be cautious about experimenting and discounting.
(Professor Eastwood) If you look at the pattern of
student applications across the country, many of the areas where
institutions find it most difficult to recruit are the most expensive
programmes to deliver and that, I think, will be one of the reasons
why the discounting is not widespread. You cited engineering which
would be a good example why it will not be done up-front, but
institutions will need to think strategically about how they deploy
the additional resource, but I think that is the level at which
it should be done.
Paul Holmes
531. You have answered the question about subjects
like engineering where, when I was head of the sixth form, you
sometimes got letters in from universities on results day saying,
"Well, we know you've failed you're a levels, but please
come here to do an induction course to get on to an engineering
course" because they were so desperate to fill the places.
Surely charging £3,000 differential fees for courses like
that will be counterproductive since the courses are already so
under-subscribed?
(Dr Knight) I do not think this process is wholly
rational. Higher education, is it a positional good? People assume
the value they are getting is associated with the value they are
paying. It is not a rational process and I suspect universities
will be very cautious about seeking to price themselves down in
the market even in areas like engineering. They are also going
to be cautious because I come back to my great worry, which is
that I think we are going to see the substitution by private funds
of public funds rather than significant additional public funds.
Therefore, the assumption will be that we will be charging £3,000,
therefore, our grant can be cut, therefore, we will end up not
much better off than we are now, except it will be private money
rather than public money. I have to plan on that basis if the
institution is to remain financially secure in 2006, which is
part of my job.
532. So most universities will charge the £3,000
and most students will, therefore, be in £21,000 to £25,000
of debt and yet they are actually no better off in terms of the
facilities and the teaching resources?
(Professor Eastwood) Clearly Peter and I will never
talk about what we were going to charge because we could not be
part of a cartel of university vice-chancellors to determine the
level that we charged at, so if there is any coincidence in what
we say, it is wholly unplanned. I think the reason that we are
more sanguine than you might think we would be or should be is
that we are not talking about an additional £3,000, but we
are talking about an £1,800 or thereabouts premium by the
time we get to 2006 and we are talking about a move from front-loading
to end—loading of the payments. It seems to me that if we
are talking about the market, it is a different environment that
we will be operating in. Going back to your putative engineer,
for example, I think that is the environment where that engineer
may well say that he or she will want to pay for the high-value
premium branded course because they want high-quality higher education
and there is a presumption that there is a correlation between
price and quality. We may all be wrong about this and if we are,
there will need to be some very swift re-orientation, but it seems
to me that we are talking about an end-loaded £1,800 addition,
but unloaded and students will make choices in that environment.
533. Once students are making those sorts of
choices, moving away from a specific subject like engineering
to the wider area, if graduates are looking at what their future
career is going to be and they have got this £20,000 odd
worth of debt to sort out, is that going to be even more of a
deterrent against graduates going into areas like social work,
nursing and teaching which are generally lower paid than other
graduate jobs?
(Professor Eastwood) I think you are quite right,
that what we might describe as the new debt regime will have some
implication for employers downstream and some of those employers
will be in the public sector. If you ask why do vice-chancellors
have the sort of deep suspicions that Peter has been talking about,
well, that is one of the reasons, because of the way it might
impact on public expenditure elsewhere in the system. I do not
think we should underestimate the sophistication of students.
They are aware that in going to universities and availing themselves
of higher education, they are repositioning themselves in the
labour market and they do know that they are in a position to
command a premium by being graduates. Now, they may not choose
to do so for vocational reasons, which takes us back to the sorts
of challenge Mr Holmes was talking about, but they are prepared
to invest in a number of things in their lives and it seems to
me increasingly they think that higher education in the current
funding environment is something they are prepared to invest in.
Of course in terms of their own indebtedness, they are not foolish
and they do know that what has happened in the housing market
over the last three years has done much more to determine the
debt they will carry than anything that we do, for example, around
student fees. Now, I do not say that glibly, but I do think sometimes
we underestimate the subtlety with which students and potential
students make these sorts of choices about their lives.
Chairman
534. Peter, you shook your head vigorously.
(Dr Knight) Well, it was probably partly agreeing.
Remember, in nursing, paramedical, social work, PGCE teaching,
there are now no fees and I am assuming that regime will continue,
so where the Government is the employer or there is a statutory
duty on the Secretary of State to ensure the supply of, I am assuming
the Government will intervene and that those students will be
exempted from the £3,000 fees and the money will come to
the universities in a different way.
Paul Holmes
535. But the majority of students who go into
teaching do a three-year degree and then do the PGCE, so they
are going to have the fees for the previous three years.
(Dr Knight) That is correct, yes.
536. As more graduates are now coming through
the system with higher levels of debt, have you noticed the knock-on
effect in terms of their willingness to go on to postgraduate
work?
(Dr Knight) Yes, postgraduate work is moving in the
areas that UCE operates, increasingly away from full-time towards
part-time, often supported by their employer where the employer
is paying the part-time fee. I actually think we are comfortable,
but we are in the middle of a large metropolis, so we have a ready
supply of part-time students. One implication which has not been
yet worked out is that at the moment the part-time fee is effectively
tied to the undergraduate fee of £1,000 which means we have
been catastrophically under-pricing some of our part-time work
and my expectation again is that part-time fees will rise from
2006 as the full-time fees rise and that is a much more interesting
market.
Chairman
537. Just before we leave funding, could there
be some sort of guarantee, in your view, that the Government would
say, "We will give you a guarantee that the percentage of
income flowing down will not be altered when the £3,000 comes
in"? In other words, you have a guaranteed position, though
of course that cannot be guaranteed with a change of government,
but can you envisage some guarantee which would make you feel
less that the glass is half empty and rather that it is half full
because you are a glass-half-empty man today, are you not, Dr
Knight?
(Dr Knight) I would like to see what was in the glass!
I cannot envisage any guarantee being available that would provide
that level of confidence, but it may be that vice-chancellors
over the years have become a little cynical.
538. Do you share the sort of AUT view and the
NUS view that they only want money for higher education to come
from the taxpayer through income tax? Are you as convinced by
that? It seems to me that when we were talking to HEFCE, they
were welcoming the notion of a diversity of income.
(Dr Knight) I welcome the notion of a diversity of
income. At UCE, HEFCE grant is now less than a third of our total
income, so HEFCE is the minority funder of the university, but
I cannot see any political circumstances arising where the Government
is able to fund higher education at the level of income which
the system probably needs, so I do think we are looking for private
funds in the future.
(Professor Eastwood) My answer to that question would
be that the benefits of higher education are experienced partly
by the individual and partly by society and the economy more generally
and that seems to me to be a justification for a shared contribution
between the state and the student to the cost of that higher education,
so I have no difficulty with that. I think what we crave is a
degree of stability. Many of us are well aware that as we move
into a charging environment where the amount paid by students
goes up, we have to attend to the quality of the student experience
and the quality of the student environment, and it would be enormously
helpful to us in our planning for the capital costs of that to
know roughly what the funding position would be 2009-10 and the
banks would like us to know that as well.
(Dr Knight) Absolutely.
Mr Jackson
539. In his initial remarks, Peter Knight referred
to the White Paper exhibiting an unwarranted sense of ownership
by the Government of universities. Does he not agree that actually
one of the advantages of moving towards a mixed-funding regime
is that it might actually establish more clearly that governments
do not own universities and universities are not departments of
state?
(Dr Knight) I would hope that would be one of the
consequences. Unfortunately, the White Paper is fairly prescriptive
in a number of areas in the way government policy has not been
prescriptive in the past, so I would like to think that the Government
recognised that universities were private institutions providing
a public service with the State. I have to say I do not detect
that particular thread of thought running through the White Paper.
Mr Jackson: Chairman, could I make a
point for us to consider? I think one of the issues, and I am
slightly addressing this to our advisers, is that in a sense we
are experimenting and moving into a mixed-funding regime in British
terms, which obviously we used to use in the past, but quite a
long and remote past. This kind of regime for higher education
is actually quite common in quite a lot of other countries and
we have heard about the Australian story. Now, I know there is
a whole lot of Treasury doctrine, or one might almost say Treasury
dogma, in all of this, but I wonder whether it is not something
for us to consider perhaps by looking to experience in other countries
to see whether there are mechanisms which do, as it were, provide
some kind of institutional assurances for genuine additionality.
It is a European Union concept and it would be quite interesting
to see how the EU rules on additionality for funding actually
work and see whether there are any lessons there that we can perhaps
apply and put before the Government in our study.
Chairman: That is something we take note
of. Let's move on to expanding higher education.
|
