The Future of Higher Education

Written evidence from GuildHE

Summary of Key Issues

· UK Higher Education (HE) enjoys a world class reputation amidst rising domestic and global demand for higher education.

· Higher education delivers social as well as economic goods and the broader economy and society should be more clearly factored into a co-payment approach for tuition funding. Graduates should pay their part, but so too should employers and wider society.

· Browne bases his views on a particular type of student making choices in a single national system free of constraints. We don’t believe that either students or the sector can sensibly be considered in such a way.

· No one can really predict the effects of the new regime on student demand and participation – especially among the most disadvantaged groups. Ambitions to widen participation and boost access and social mobility through the role of OFFA and the National Scholarship Programme are untested and unproven.

· Specialist higher education is a key part of the sector and of sectoral ecologies – higher education reforms underplay their role and threaten their contribution to the economy, as well as the choice and diversity they offer to students.

· Higher education is essential to both national and local economic growth and this role is significantly underplayed in both Browne and the Government’s response thus far. The reforms have unpredictable effects and potentially place this role in jeopardy.

Introduction

GuildHE, one of the two formal representative bodies for higher education, has 32 members across a diverse spectrum, including universities, university colleges, specialist vocational institutions, and further education colleges with significant proportions of HE. Our members also include public, as well as private ‘for profit’ and ‘not for profit’ institutions. GuildHE’s membership is varied in size and institutional character, and covers many perspectives – small and larger, private and public, with varied specialisms and research interests. They include institutions as varied as the Royal Agricultural College, the Universities of Worcester and Winchester, University College Birmingham, the University for the Creative Arts and Bishop Grosseteste University College Lincoln and Norwich University Colleges of the Arts.

GuildHE members and the HE sector as a whole has benefitted from many years of popularity and expansion in domestic and global higher education. It is clear from OECD evidence, that there is a strong international trend for more people to go to university. Average OECD net entry rates into higher education increased from 40% in 2000 to 57% in 2008, with the UK rate increasing from 48% to 57% in the same period. Every single OECD country has been increasing net entry rates over this period.

Part of the incentives to gain a degree in England have been the well publicised wage returns to graduates. On average a graduate will earn comfortably over £100,000 more in today's valuation, net of tax, than a similar individual who achieved university entrance qualifications but did not go into higher education – this premium has held up in spite of the recession. There is also a continuing strong employment premium. Returns to higher education participation are not just economic – graduates are in general more healthy, more active in their community and more likely to pass on generational benefits to their children.

The reputation of UK universities is a continuing economic strength and the value of a UK degree in the global education market remains high. In institutional terms, Eversheds have recently valued UK degree awarding powers at between £175 and £250 million.

The Browne Report and Government Response

The Browne Report contained some welcome progressive proposals, including higher repayment thresholds on student loans and more support for part-time students, which Government has acted upon. It also recommended more places on higher education courses in the reiteration of the belief that the UK requires a mass higher education system. However, it also rests clearly on a vision where all students should have the opportunity to follow a traditional three-year student experience. In terms of the cost to both the state and the individual, this represents and expensive model – one that simply and ultimately may be unaffordable over the longer term.

GuildHE takes the view that HE seeks to deliver significant public benefits as well as major economic impacts for the individual, employers and local economies, as well as for UK society as a whole. From this a principle of co-payment for tuition should be in place, namely that graduates should pay their part, employers should pay (through the understanding that they contribute through general taxation) and the wider public good should also be reflected in contributions by the state (and also funded through general taxation).

Substituting state income with graduate income is not therefore appropriate or ideologically fair. The principles of co-beneficiaries and co-payment should continue to underline the government’s approach to any new system. Anything with too much weight on one beneficiary may be better affordable in the current climate but 'unfair' over the longer term.

Economic growth

Instead, the emphasis should be on how we sustain a world class HE system for the UK and how institutions are maintained as key economic and social assets. When the HE Framework was launched in 2008, the overarching question was how to create and sustain a world class system over the next 10-15 years. This must still be a question in our minds as we collectively consider how to implement Browne’s recommendations and how we fund the system that develops from it.

The direct relationship between higher education and economic growth is well and widely made. The possibilities of reduced participation and resources could dangerously weaken the ability of the sector to drive economic growth in the short, medium and longer term. This is a part of public policy that should not be left to chance. Higher education as a sector should play its part in reducing the deficit, but it must also play its fundamental part in spearheading the recovery.

Funding world class research is clearly a major part of both our world standing and our ambitions to develop an innovative, knowledge based economy across the UK. The financing of capital expenditure that will support the best facilities for both teaching and research is also in doubt. Both will be crucial to the broader HE package and significant cuts will have a detrimental impact on our current world standing. We currently punch well above our weight and stand only second to the US in our scientific output. Deep cuts will erode the UK’s chances of attracting the best students, scientists and businesses looking to take advantage of our position.

‘Over the past decade the British economy has become deeply unbalanced...We need a new approach. One that empowers local leadership, generates local economic growth, and promotes job creation in all parts of the country.’ [1]

The themes of a rebalanced economy – both sectorally and geographically – and a private sector led growth model – all less dependent on debt also underpinned David Cameron’s first major speech as Prime Minister [2] as well as George Osborne’s first Emergency Budget.

Economic growth is not just a generic, national story but is also relevant in specific areas throughout the country too. GuildHE members, whether in High Wycombe, Carlisle, Bradford or Birmingham are experts at generating human capital, supporting local businesses and the highest quality public services in their areas. Using the unadjusted principles of ‘market’ to drive choice and competition, runs the risk of driving HE out of places where its benefits can make a real impact.

Growth is also likely to be driven through key sectors of the economy, also represented by GuildHE members such as specialist institutions supporting the creative industries, land-based industries and advanced manufacturing and environmental industries. The private sector may indeed be able to take some of the strain in replacing some of the jobs that could be lost. However, they will not be able to easily replicate the value and impact of a local or specialist university.

A flawed and outdated conception of student choice?

Browne’s vision of student choice depends critically on a one dimensional view of students in England and their geographical mobility. Browne is based on the view of a student as a school leaver planning to move away to university, fully informed of his or her choices and prepared to take on the commitments and repayments of a lengthy loan. GuildHE simply do not believe that students or their choices are quite like that. The reality for some time in higher education has been that the school leaver embarking on a traditional three year degree is in an increasing minority.

· HESA data shows 47.4% of all undergraduate students enrolled in public HEIs are aged 21 or over.

· Exactly one third (33.3%) of all Undergraduate students were studying part-time in 2008/09 and 32.4% of UK-domiciled Undergraduates studying for their first degree in 2008/09 were 21 years or over.

· These mature students made up 92.8% of all part-time first degree enrolments. 58% of part-time first degree entrants were aged 30 or over. [3]

So we should be very wary of using an outdated stereotype as the defining principle of a new system. Many students have homes, jobs and families who cannot easily be uprooted. GuildHE institutions educate higher than average proportions of such 'non-traditional' students. For part-time students and employers local provision is vital. Though this is the only real choice that many have, we rarely admit it openly.

New providers

Flagged up in opposition and in the early days of the Coalition’s time in government, both Vince Cable and David Willetts (Secretary of State and Minister of State at the Department for Business, Innovation and Skills) have repeatedly looked to FE colleges as well as to other new providers as a way of bringing choice and competition to England’s higher education sector. [4] But Government will still need to look at the needs of students in a new choice-driven market. It should reflect on what students want – and where provision of proven quality is meeting these demands – before throwing open the doors to providers. And because the key kitemark for recognition in HE is quality, policy must avoid perverse typologies of institutions based on cost.

As the 157 Mixed Economy Groups have pointed out: ‘HE in FECs is already a distinctive part of the HE system. While it is dangerous to over-generalise about a diverse system, HE students in FECs are more likely to be over 25, more likely to study part-time, and more likely to come from areas with low rates of participation than other students in HE. They are more likely to be studying foundation degrees and sub-degree programmes such as HNCs and HNDs.’ [5]

Supporting student choice means recognising the routes into HE, the diversity of applicants and the choices they make. The largest proportional growth in applicants for 2010/11 entry was those progressing from FE colleges (7.3%), from foundation degrees and through independent applications and other, less "traditional" routes (18%). The GuildHE group of institutions, which saw a 9.3% increase in acceptances compared to the sector’s overall growth of 0.4%, and which includes small and specialist providers, has accepted larger than average proportions of students progressing into HE through these routes. And with the continued rise in mature students, and over 40% of UK students accepted to local institutions, enhancing student choice must be about maintaining a diverse ecology of HE provision.

Alongside, Further Education Colleges, ministers are also keen to encourage private providers into the UK market. In both cases, we welcome a commitment to new providers in the market as long as they are able to meet the rigorous and exacting standards that have underpinned the sector up to now. In this, as well as in all matters of funding and quality, we support the continued existence and enhanced roles for both HEFCE and the Quality Assurance Agency. Both roles should develop and change as the sector evolves not least into more regulatory functions ensuring continued quality, fair competition and market functioning.

Government’s plans for Widening Participation and Access

We wholeheartedly endorse the Government’s aim to further improve participation, access and outcomes for students from under-represented groups through more rigorous powers for OFFA. We hope, over time, that the measures are successful and that access and participation are improved at all universities and across the sector as a whole.

For GuildHE institutions and many others, this will build on the considerable achievements that have been made in widening participation and improving access to date. Taking into account existing performance and how far institutions have to travel against benchmarks is the right approach and if allowed to address challenges in their own ways and free of other constraints, then we should be confident of further progress. A focus on progression and effective working with schools and colleges is crucial to widening participation and access and collaboration with the pre-HE sector is a two-way process.

The National Scholarship Programme is part of this approach and while it is to be welcomed for the additional support it will bring to individuals from poorer backgrounds, it is important to be clear that is a competitive fund where relatively small numbers will benefit rather than an entitlement for all students with certain levels of household income. Many students from equally poor backgrounds will not be able to get support because the NSP is of limited size and reach. Although the greatest uncertainties on participation are likely to be nearer to 2012, Government funding for NSP will take three years to reach its full £150m size.

Ministers must now make sure that they avoid both intended and unintended consequences of their access and participation proposals. It is a concern that the letter to OFFA brings together the imperative of improving access with the need to keep the cost of government funded loans down. Threats of Government intervention to avoid the clustering of tuition fees at high levels and the enforcement of price competition is likely to cause problems in the short and longer term. Conflating Access Agreements and price control mechanisms is likely to create perverse incentives and outcomes and could impede the worthy policy intentions of improving fairness and social mobility.

We simply cannot know the impact of higher graduate contributions on participation levels among students from poorer backgrounds, so we do not know who will be applying for study in future. We also, therefore, cannot yet know whether the proposed system is fairer than the current system. In a few years we could need a further review to assess the impact on widening access and on the world standing of our higher education sector

Reducing loan book costs

To satisfy ambitions for reduced costs and increased (or at least) maintained participation levels from less well off groups, it is important that Government looks at how more flexible number control and institutional innovation might be encouraged. ‘Off quota’ students on ‘low or no fee’ provision, with no loan book commitment, will allow for a more dynamic system with better choice.

This might mean domestic students paying fees of some form without taking up loans or reducing their loan levels to a minimum. The White Paper should explore opportunities for additional numbers and income from those locally based students who are likely to be risk averse and potentially deterred by a large, thirty year loan commitment. In practice the ‘off quota’ ideas involve developing some models whereby institutions could develop low fee options when they consider what to do with marginal cost capacity. Such models might include:

· Intensive part time programmes – spread out over 4+ years where study/contact comes under the 25% intensity threshold.

· Partnered programmes (2 + 2 or 2 + 1 or similar) where some study is part time and some is full (thereby keeping loan commitments away from all or part of the programme apart from the final year/phase)

· Modular courses combined with employment (brokered by HEI and partners – especially relevant in specialist sectors)

· Employer sponsored programmes (fully or partly) where employers pick up all or some of fee costs (not practical in new loans system) and combine with paid work phases (may work with public as well as private sector employers)

Recognising the cost of provision and the real value of providers

Browne suggested removing funding from the two lower cost bands (bands C & D). Cost of provision is a significant consideration in setting fees for courses (although not the only consideration). However, if the fee/student contribution package does not encourage participation, the impact on specialists, or generalists with a large WP student orientation, may be particularly severe. Lord Browne – and in a statement to the Commons in October 2010 Vince Cable – stated that £7,000 a year is roughly what institutions will have to charge to maintain investment at current levels, based on assumptions about the reduction in HEFCE funding.

However, more recent statements by the Minister for HE and Science that have been revised down to £6,000 for Band D and just over £7,000 for Band C based on HEFCE’s existing funding model. HEFCE currently uses price bands to determine the level of funding needed to meet the cost of different subjects. Basing estimates on broad sector averages taken from existing data does not bear relation to the costs of provision in different subjects, or at specialist providers with varying opportunity for subsidy – either now or in future. Simultaneous reductions in funds for widening participation (including the abolition of Aim Higher), specialist funding, capital investment and Higher Education Innovation Funding (HEIF) all impact more severely on price calculations of small and specialist institutions. This should be valued and recognised in broader considerations of price calculation and future funding decisions.

Specialist institutions, alongside all universities, have a powerful role to play in the economy at both a local and a national level. The Browne report and the Government’s response seriously underplays this role as well as the effects that the planned reforms may have on it. Worse, by focusing on unconstrained market choices and general pricing levels, this may undermine this role further as well as reducing choice in the sector as a whole.

The Government continues to develop its policies for supporting economic growth including at the local, regional and sectoral levels. This work is being developed in other parts of BIS as well as in other Government departments including Communities and Local Government and the Treasury. The future of higher education will be critical to these ambitions. However, as in other areas of emerging policy such as in schools, health and immigration control, the effects are unexplored, the joining up between departments unclear and the overall consequences unknown.

We believe that the contribution of higher education is vital but we are prepared to work with Government to further improve its role and value in all of the aspects of society and the economy that it touches. However, we worry that in the race to develop and introduce new policies, to make savings to address the deficit and to introduce reforms while the public and political appetite is clear, that we will reduce the role and impact of higher education in the future.

10 March 2011