Government reform of Higher EducationWritten evidence submitted by RealWorld Push
1. Summary
The key recommendations in this submission are as follows:
Through the funding mechanism and policy, Government should create a framework which ensure the interests of students, HEIs, employers and taxpayers are in much closer alignment.
Government should actively promote fair and wide access, based on ability, to a diverse HE sector whose growth is led by labour market demand.
The only way to avoid discouraging the least able to pay for HE is to develop alternatives to charging them directly.
There should be wide and transparent access to information, advice and guidance (IAG), delivered in contextualised approaches, supported in various ways by Government with recognition for good practice.
IAG should demonstrate more clearly the realistic outcomes for individuals.
Teaching should be the first priority of HE and Government should develop new and improved measurements of this and other indicators in HE.
The admissions system should be reviewed to explore a post-qualification entry mechanism, creating an opportunity for students to undertake social service or personal development.
HEIs should be incentivised to improve the demonstrable employability of their students.
A clear, simple and sustainable model for HE funding is needed, which the current plans do not provide.
A graduate tax on employers is recommended with the proceeds returned to the graduate employee’s place of study.
2. About Johnny Rich and RealWorld Push
This evidence is submitted by Johnny Rich on behalf of RealWorld Push, one of the leading providers of independent information and advice for prospective and current students and graduates. Its main services are as follows:
2.1 Push: One in three prospective students uses either the award-winning Push website or attends a Push schools talk during their university choosing process.
2.1.1 The website (www.push.co.uk) features detailed profiles of every university in the UK and other IAG for prospective and current HE students.
2.1.2 Push talks take place at over 200 schools and colleges annually, providing advice on whether to go to university and deciding which is best for the individual.
2.1.3 Push’s IAG is based on its own research involving annual site visits to every university in the UK as well as gathering data from HEIs, national data sources, its own surveys and other resources. Many of the areas covered are exclusive to Push.
2.1.4 Push is perhaps best known in the media for the annual Push National Student Debt Survey, the most authoritative and the only widespread annual study of students’ actual financial position (a copy of which is in the HOC Library and which will be quoted extensively in ONS’s Social Trends Survey to be published in May 2011). Push’s other research also includes the Student Living Costs Survey, the Student Work Survey, etc.
2.2 RealWorld is the leading on-campus and online graduate recruitment magazine (see www.realworldmagazine.com). It is distinctive in providing expert independent advice and is highly regarded among large employers.
2.3 The Recruiters’ Guide to Course and Campuses (see www.rgcc.org.uk) is an annual statistical report for employers analysing HESA data for the benefit of recruiters that want to make better informed choices about where to target their recruitment campaigns in order to attract the most suitable candidates.
2.4 Johnny Rich MA is the founder of Push, which merged with RealWorld in 2010. He is widely acknowledged as an expert on student issues with particular focus on IAG and contributes regularly to the media and specialist conferences. He is a former students union President and is currently a member of the Board of Directors of the Higher Education Academy, the Online HE IAG Group, the Bridge Group (on Social Mobility through Higher Education), the steering group for BestCourse4Me.com, the Institute of Careers Guidance, the Association of Graduate Recruiters and is also project manager of the Unibox initiative (a joint venture with The 1994 Group of universities to facilitate better access to high-quality IAG about HE online).
Comments on the Future of HE
3. The Role of Government and the Importance of HE
3.1 The Leitch Report (2006) articulated clearly the need for a large and vibrant HE sector to ensure the long-term economic competitiveness of the UK economy, particularly in the light of new economic competition from higher skill levels in BRIC countries.
3.2 The Government’s role in determining policy should be to facilitate an HE sector that serves the needs of the nation. Its focus should be on creating a framework where the best use of the nation’s resources—human, financial, intellectual, etc—is in alignment with the aims of individual students, HEIs and potential graduate employers. If that alignment is achieved, the market forces driven by those parties will serve the national interest.
These considerations mean that it is important to recognise the following principles for Government policy:
3.2.1 Valuable talent is to be found in all sectors of society and therefore the best use of resources will only be realised by a fair system that promotes access to HE to all, especially the most deprived for whom HE may make the greatest impact of the contribution they can make to society and the economy.
3.2.2 Anyone with the academic ability and aspiration to attend HE should not be precluded from doing so by lack of funding or opportunity. It follows that new and existing HEIs should not be prevented from growing to meet demand.
3.2.3 Growth should not be led solely by student demand, however, but also by the needs of the labour market. The growth of HE since 1992 has been largely driven by student demand for courses, rather than the market’s need for skills.
As a result there are, for example, currently nearly 8,500 students studying degrees in forensic science (the second fastest growing course area). Meanwhile there are just over 9,000 UK jobs in forensic science. Most of those jobs will not become vacant in the immediate future and most are filled by individuals who did not study forensic science, but rather biology, chemistry or other subjects.
This is a prime example of a misalignment of aims. The students concerned may well go on to have rewarding careers, but we may assume that they have chosen their courses, making financial and personal sacrifices, on the misguided expectation of a career in forensic science. The universities promoting these courses have no accountability for oversupplying the market. The taxpayer has been expected to foot the bill for this oversupply and employers are having to bridge skills gaps because they are recruiting graduates with a specialist training unsuited to their actual careers.
3.2.4 An HE sector of the current size or larger needs to embrace diversity to accommodate the huge range of courses, of students, of learning patterns, and of geographical, social and economic needs. That means catering for a student body more diverse than ever before by promoting a greater range of choice than ever before in terms of the different offerings by HEIs.
4. The Principle Barrier to Widening Participation in HE
4.1 Push’s research with prospective students from many backgrounds suggests the key reason why many able students do not decide to go into HE is that they are discouraged by the prospect of, as they see it, subjecting themselves to continued schooling only to be rewarded with high debts in the process. That is compared to the attractions of a job in the short-term with pay and—whether rightly or wrongly—many imagine they will have at least as good prospects given that they will have a three-year head-start in the workplace over peers who choose to become graduates.
In the face of average debts for new students that are likely to reach £24,700 on average (according to the Push National Student Debt Survey 2010), there are almost no progressive mitigations to the funding arrangements that will change the minds of these students. The medium-term pain vastly outweighs any promised gain without the supportive experience of family or friends who can demonstrate the benefits of HE.
Indeed, the more complex the arrangements to ameliorate the financial challenges of precisely this social group, the less likely they are to want to take up the opportunity presented:
4.1.1 Firstly, this group is unlikely to have good access to appropriate IAG. They may rely on the misinformation of peers and family who have not been to university. Such IAG as may be available to them is often focused on the lower aspirations of peers.
4.1.2 Secondly, even if they have access to good IAG, if they are already alienated by the prospect of debt, the prospect of trying to understand a complicated funding system and wading through the red tape to secure the financial support is sufficient disincentive to ensure they ignore available IAG, however good.
4.2 In order to promote genuine fair access, there is no alternative but to promise those students least able to pay that they will not have to pay directly. If the Government is serious about creating opportunities for these students to attend HE, the only way is to remove the perceived (rather than the actual) financial barriers.
4.3 Currently, however, despite claims to the contrary, it appears that the Government is not too concerned that such students are discouraged from applying. After all, the HE sector is already oversubscribed by able students from less deprived backgrounds. Taking the necessary steps to widen access further would only serve to exacerbate the financial precariousness of the sector. It is cheaper in the short term to write off generations of ability, but in the long term, society is impoverished by Government failure to optimise resources.
5. Information, Advice and Guidance
5.1 It is essential that prospective students have access to the IAG needed to make appropriate decisions in order to realise the principles in 3.2 above (particularly given the diversity of students and institutions).
5.2 HEIs, UCAS, HESA, the Student Loans Company and other organisations within the sector should be held to higher levels of transparency about data and information, such that IAG providers are in a position to support understanding of the comparative differences of HEIs’ offerings. In the context of higher tuition fees, this becomes a matter of being able to demonstrate value-for-money to the customer, but the same should hold true whoever pays.
5.3 Simply making data more widely available is not sufficient, as evidenced by the failure of Unistats to attract broad interest (even though recent research for HEFCE demonstrated that its data sets are seen as useful by prospective students). The information needs to be contextualised and made meaningful to candidates. The Government is rarely the right body to do this, not least because a multiplicity of approaches is needed to appeal to different audiences. However, Government should provide a supportive environment for good IAG provision:
5.3.1 The best IAG is not always the most profitable and therefore grant aid may help the right providers to thrive.
5.3.2 A recognised standard for the high-quality use of data is a natural extension of the professionalisation of careers guidance.
5.3.3 Financial support does not have to be centralised or direct. For example, in order for an HEI to charge higher fees, OFFA might accept a demonstration to support high-quality independent IAG as part of a package of commitment to widening participation.
5.3.4 AimHigher has been one of the Government’s main direct channels for promoting wider participation to candidates. Like Unistats, AimHigher serves a useful purpose, but does not serve it well and is poor value for money. Nonetheless, AimHigher does provide value by being in a sufficiently expert position to pass on funds to reputable IAG providers to which it subcontracts services, thereby supporting a socially valuable industry. Following withdrawal of AimHigher’s funding, a successor should be reconstituted with a clearer framework for quality and value for money, possibly as an adjunct to the all-age careers service.
5.3.5 Government should support efforts to direct candidates to high-quality IAG that already exists. The Unibox venture is a good example of how this can be inexpensively and effectively achieved by harnessing the potential of Web 3.0 technology.
5.4 As well as supporting wider data transparency and facilitating a supportive environment for it to be made meaningful, Government could do more to disown disinformation, such as so-called “university league tables”. These are based on the assumption that certain HEIs provide a de facto better education than others. In the context of IAG, this is entirely unhelpful as the diversity of the sector means that such comparisons are meaningless. The prospective student needs to be encouraged to find the institution that will most closely meet their personal needs. This message will also help to align the success of the institutions with those of their students. To this end:
5.4.1 Government should cease to perpetuate the notion of “top” universities in ministerial statements and departmental briefings.
5.4.2 Government relies too heavily on poor proxies—particularly when it comes to quality—encouraging others to do the same. For example, the Government-supported proposals for Key Information Sets will use the National Student Survey as the foremost indicator of course quality, whereas it is actually a measure of satisfaction—a function of delivery versus expectation, rather than quality, and the responses are from students with usually no point of comparison. Performance in HE tends to be measured on the basis of what can be (and is) counted rather than on the basis of measuring what actually counts. Where needed, Government should develop new or improved metrics.
5.4.3 As recommended in 5.3.2 above, a recognised standard for high-quality IAG would clarify the position of “league tables” as unofficial rankings.
5.4.4 The most effective way of undermining misinformation is to support better alternatives (see 5.3 above).
5.5 HEIs have little investment in the success of their students after graduation. Their aims are only indirectly aligned. HEIs should be required to demonstrate more clearly the value (for money) they provide to students based on their employment outcomes. This is not merely an issue in the context of better IAG, but if an HEI’s funding was contingent on the employability of its students, its aims would be aligned not only with those of its students, but also the labour market and society in general.
6. Quality Assurance in Teaching
6.1 Research outputs are easier to measure than the quality of teaching. As a result highly academic institutions are disproportionately influential in policy-making and academic preferment within HEIs is more commonly based on research output than pedagogic effectiveness. This skews the agenda of the sector away from good teaching. Teaching standards should be the key performance indicators for HE, but currently they are barely researched.
6.2 Government needs to support the work of the Higher Education Academy and Quality Assurance Agency in monitoring, protecting and enhancing teaching standards. Without developing these functions, there is little relevant data about teaching standards to feed into IAG and few models of good practice. HEIs will find it hard to recognise scope for improvement or bring it about.
Admissions process
6.3 The current system of university admissions has remained broadly unchanged for 40 years. Meanwhile, the HE sector has changed radically. HEIs are involved in a guessing game and students suffer uncertainty for months before having to make plans in a rush. This applies to the entire system, but the deficiencies of “clearing” exemplify the problem. There is a clear correlation between those HEIs which admit the largest proportions through clearing and those with the highest drop-out rates.
6.4 Government should explore ways to move to a post-qualification admissions system (PQA). This may involve changes to academic year at many institutions.
6.5 The gap created for many candidates between school/FE and HE represents an opportunity in terms of employability and the “Big Society” agenda. For example, in Germany, most young people engage in a period of social service. Similarly, in this gap young people might be entitled to a small allowance (much like the now-abolished EMA) if they engage in voluntary work which benefits society or which furthers their learning and employability (such as an IT course, a language, internship, etc).
6.6 As well as creating more mature, better qualified students, it would give HEIs the security of accepting the right number of suitable students.
7. Employability
7.1 As mentioned, IAG does not often focus on career outcomes or, when it does, it uses poor proxies such as the DLHE data which is a snapshot just six months after graduation. Therefore, applicants’ choices are rarely influenced by comparative employability and consequently HEIs have only an indirect incentive to ensure their students have workplace skills, are aware that they have them and are able to articulate that they do.
7.2 This is a misalignment of interests. HEIs would ensure better data was available and would enhance employability if it had a significant impact on their funding. They would forge better links with employers, incorporate workplace skills into their courses and provide better careers support. The students, universities and employers would all benefit, as would the economy.
7.3 Government should explore the possibility of hypothecating income from student’s post-graduation contributions back to their places of study to reward good practice based directly on outcomes.
8. HE Funding Plans
8.1 As was the case when the possibility of differential top-up fees was introduced, over time most HEIs will gravitate towards charging maximum fees if only through inflationary pressure, but also because higher fees will be seen by many as a mark of quality. There will be increasing pressure to raise the £9,000 cap. As has happened repeatedly since the early 1990s, the next parliament will need to revisit the issue and face the opprobrium of voters if they do not resolve the issue satisfactorily. A long-term model for funding is required.
8.2 The lack of clarity on certain elements of student funding and support is an unnecessary disincentive to HE applicants, particularly those from poorer backgrounds. Details are not clear about Scholarships, maintenance arrangements or bursaries. Uncertainty and complexity are highly damaging and unnecessary. If Government cannot give clear and simple messages without further delay, its planned changes should be abandoned or postponed until it is in a position to lay out the full plans.
9. Fairer Funding
9.1 The HE sector has three principle beneficiaries: students, the economy/society, and employers. It is fair that the burden of paying for it should be shared proportionately and that market forces should be allowed to determine what division is proportionate. Lord Browne’s report suggested that employers would make their contribution through higher graduate salaries, but in the absence of a shortage of supply there are no market forces operating to drive this.
9.2 The Government should review its HE funding plans to remove the disincentive of high fees and debts from applicants, divide the cost more equitably among beneficiaries, reward universities that are effective in delivering value to students and the economy and create mechanisms for necessary growth of the sector driven by labour market demand. A graduate tax on employers is recommended with the proceeds returned to the graduate employee’s place of study. This would be at worst cost-neutral compared with current Government plans and not only sustainable in the long term, but it would also create a framework for positive change by aligning the interests of students, effective HEIs, employers and taxpayers. Details of the proposal are outlined in Appendix A.
APPENDIX A
FAIRER FUNDING
In the face of the Browne Report, the Government’s response, the HE cuts in the Spending Review and the ongoing funding challenges of the sector, this proposal outlines an alternative mechanism for the funding of higher education students and institutions, which provides adequate funding for students and universities alike with minimal impact on the taxpayer or the economy.
The mechanism proposed is more equitable, encourages social mobility, would have a wider mandate from the electorate and, compared with the Brown Report, is effectively neutral in terms of the distribution of costs.
The Key Features
Employers pay a graduate tax through national insurance contributions for each graduate they employ (who they have taken on since the introduction of the scheme).
The tax is charged at 9% of the graduate’s salary over £18,000 (irrespective of whether they studied full-time or part-time).
The tax income is provided to the university where the graduate studied.
Students are entitled to means-tested funding to cover their maintenance costs on a progressive scale comprising part-grants and loans for the poorest students and no support for the most well off.
As revenues start to flow into universities, they are released from any limits on student numbers.
Key Advantages
1. No barriers: This will ensure there are no actual barriers to entry to HE, nor perceived barriers, nor any disincentive to any able student.
2. Fit-for-purpose university funding: Universities’ future income will be based directly on their proven ability to add value to their graduates’ employability and earning power. They will be free to plan for a future based on success and invest accordingly. Their income will be linked directly to providing the highest possible standard or education and ensuring the employability of their graduates. Courses most needed by the future economy will grow and receive the most investment.
3. Minimal cost to employers: For employers, the tax cost is unlikely to differ significantly from the salaries they would have paid those same graduates, because if graduates were to try to demand more than a fitting premium for their increased value to their employers, market forces will drive (or hold) down graduate salaries as employers choose to employ non-graduates.
Also, since graduates will enter the workplace with low debts (if any), they are unlikely to feel under pressure to demand high wages.
However, if graduate salaries remain the same (or even rise), it would be because their value to employers is free to adjust to reflect the real premium of graduates to employers. The employers’ greater contribution to the cost of HE would a fair adjustment recognising the shift over the last few decades from training carried out on the job at the employers’ expense to education conducted within HEIs.
Meanwhile, the Government’s current proposals are based on the somewhat tenuous promise that graduates will earn £100k net more over their working lives than equivalent non-graduates. This is likely to drive up graduate salaries as the earning expectations of the most employable rise, creating a ‘trickle-down’ effect among all graduates.
4. No barrier to work: Because employers would not start paying tax on graduate employees at the lowest salary levels, there is no disincentive to them to take on graduates with little or no practical work experience (although their universities will be better incentivised to make sure graduates are as attractive as possible for the labour market).
5. The best universities for the best students: So-called “elite” universities will be equally open to any student who deserves a place on the basis of their academic potential. Students will be able to choose whatever university is most suitable to their needs—elite or not—rather than be limited to those they can afford.
6. Maintain our HE sector: Universities will be discouraged from privatising. Under the Government’s proposals, some universities which feel they can charge more than £9 thousand pa in fees may see little reason to remain part of a system that makes restricts them in this way and makes demands that they should subsidise certain students’ places, especially when in return the Government only contributes to the cost of certain courses.
Under this proposal, these “elite” universities will have every reason to continue to participate in the wealth of the nation’s higher education system.
7. Courses that respond to labour market needs: Universities will have no incentive to offer large numbers of places on courses that might be popular among prospective students, but which are unlikely to lead directly to relevant employment (and which therefore may be misleading the students).
For example, forensic science is an increasingly popular course, but the labour market need for forensic scientist is small and is not growing. Universities would not want to offer more places than were likely to pay for themselves in the long run and so would limit places. If the courses remained popular, there would be grade inflation for entry which would direct all but the most able students into other course where their careers prospects would be more realistic.
Possible Objections
1. “No new tax on business”: The strongest and most likely objection is likely to be from the business community which may perceive this proposal as an unwarranted tax increase. The response is that it is assumed that they will reduce graduate salaries over the short term to compensate. If they do not wish to do so, it can only be because they are afraid they will lose the competitive advantage of attracting the best graduates—in other words, they value graduate talent sufficiently highly to be willing to pay more for it. This would imply a correction in the graduate demand and supply market.
2. “Graduates ought to pay”: There is a case to be made that graduates should also contribute directly to the cost of their education. To this end, the proposal could be adjusted to include a repayment of fees of, say, £1 thousand a year, through tax after graduation once the graduate’s earnings exceed £21 thousand pa (in much the same way as the Browne Report proposes, but at a lower level of fees).
However, it should be remembered that every time complexity is added to the funding arrangements for students, the poorest students are disproportionately disincentivised. Even when checks and balances are built in to ensure equity in the system, those most in need of financial support, are the least likely to make considerable effort to understand what is available. They are also the least likely to be well advised on the arrangements and many are put off by the impression of high debts and a labyrinthine system of disclosures, conditions and qualifications.
Even with fees at their current levels, for many students from non-traditional backgrounds who are capable of going to university, but uncertain whether it is worthwhile, the promise that the debt will be easy to pay off just does not enter into their considerations in the face of five-figure debts. It should be noted that Government-sponsored student loans are not the only debts most graduates incur. This year’s Push National Student Debt Survey (the most detailed and authoritative study of students’ financial situation) found that around four-fifths of student debt is owed to the Student Loans Company. The rest (currently around £3,500 by graduation on average) is owed to banks, credit cards, parents and other sources.
3. “A loan is temporary, a tax is for life”: The unfairness of a lifetime penalty for having studied to a certain level is one of the main arguments that has been made against a graduate tax charged to the graduate themselves. The same criticism could be made about this proposal, however, the sense of unfairness seems somehow diluted if the charge is to the employer rather than the graduate (even though the premise of this proposal is that money paid by employers in tax is equivalent to money paid to the graduate and then paid on as tax).
It is also worth arguing that 20 years after graduation, the difference between graduates and non-graduates at the same level of seniority is negligible. For this reason, the proposal could easily be amended such that the graduate tax on employers is only charged for 20 years after graduation or until the age of 50, whichever is the sooner.
4. “Graduates will go abroad”: In a global market, there might be concern that, if UK graduate wages were depressed by the full extent of the 9% tax, they might look to overseas markets for higher wages. While this is true, it is not likely to be a large effect and is likely to be more than outweighed by (i) the potential for inward investment through an increase in international students made possible by the extra investment in UK universities, and (ii) the better preparedness of all graduates for the world of work. Furthermore, the danger of a ‘brain drain’ is surely greater under the Government’s current proposals where graduates can emigrate to avoid repaying their student loans.
5. “Business will stop employing graduates”: Business groups are bound to object that if they are taxed for employing graduates, they will simply stop employing them. If that were the case, they would have stopped employing them already as non-graduates are already cheaper to employ.
Furthermore, by only charging the graduate tax when the employee earns over £18,000, SME employers of new graduates and employers of graduates in non-graduate jobs are unlikely to be significantly affected.
If, however, the demand for graduates were to slow down, universities would have to respond by reducing student numbers or cutting costs. The market will determine how many graduates the economy really needs.
6. “Universities will only teach what pays”: Certain courses do not attract high wages and universities might lose their interest in devoting any resources to running them, when they are not likely to yield significant revenue. However, many of these are important socially (such as social work and nursing).
It may be necessary for Government to consider funding these courses directly or placing requirements on universities to offer at least a certain number of places on selected courses. This is preferable to placing requirements on them to admit a quota of poorer students, which is arbitrary, demeaning to the student themselves (who may feel that the magnanimity of being allowed to attend an expensive university for free was tokenistic) and is likely to be whittled away by ongoing measures of economy.
In any case, if there were a shortage of, for example, social workers, but there was a genuine need, employers would need to increase wages to attract people into the industry, adjusting the market to value these key workers more appropriately and generating income for the universities with sufficient foresight to offer these courses.
It may be argued that some other courses—which are not thought to attract high wages, but which are academically important (eg philosophy, sociology, etc)—would be endangered. However, it is a fallacy that these courses do not lead to higher than average salaries. For the vast majority of graduate jobs (particularly in SMEs), no specific course is required; employers main concern is that the employee should be a graduate with a good degree and good employability skills.
By offering courses which students want to study, they are likely to perform better, which is often more important than the specific field of study. Also by linking the universities’ funding to the graduates’ employability, the universities will do more to ensure that students on these less obviously vocational courses emerge with demonstrable transferable skills.
10 March 2011