Supplementary written evidence submitted
by the University Alliance
In our first submission to the Committee's Inquiry
into the Future of Higher Education, and during the oral evidence
session in which we gave evidence, we focussed on the central
role of universities towards driving growth and prosperity in
the UK and outlined our principles for a sustainable sector. We
also highlighted the importance of clear communication to prospective
students about the new finance system.
1. In this, our second submission, following
the publication of the White Paper, we highlight significant concerns
about the impact of government proposals on the sustainability
of a truly diverse and responsive sector that is able to deliver
against those principles.[162]
2. This submission examines the "big issue"
of the Government's ability to create a real market having been
restricted by the public cost of the new student finance system.
We go on to examine the possible consequences of the proposals
in the White Paper for student choice and social mobility, we
consider the longer-term vision that was missing from the White
Paper and then we offer some short-term and longer-term solutions.
THE BIG
ISSUE
3. The fundamental problem the Government faces—which
reads through the whole of the White Paper—is that it has
replaced a system that was too expensive to the public purse to
allow expansion and increased competition, with another system
that is equally expensive to the public purse and still does not
allow expansion or genuine demand-led competition. Public investment
has been re-directed from HEFCE funding for teaching (plus £3,000
deferred fees) to a system almost entirely based on deferred fees
of up to £9,000. However, this system has turned out to be
equally expensive for Government in terms of both the up-front
cost and long-term subsidy.
4. The White Paper was always going to be limited
in terms of options. It has had to force supply-side reform through
central intervention rather than allowing this to happen through
freeing up student numbers and allowing genuine market forces.
The high public subsidy of deferred fees meant that Government
were never going to be able to achieve their own aim of a demand-led
system despite the fact that this was clearly their intention,
but, given the restraints that resulted from their previous decisions
about the student finance system, genuine marketization was not
available to them. It was, quite simply, unaffordable given existing
levels of student demand.
5. The question now is whether the Government's
determination to drive partial and imperfect forms of marketization
and centrally-driven supply-side reform will result in both increased
quality and increased student choice or whether the HE market
will have been forced into an uncomfortable compromise. As we
will go on to describe, it is entirely possible that the proposals
in the White Paper—if allowed to play out over a number
of years—could actually reduce student choice, reduce the
resource and therefore the quality of provision in many institutions
as well as having a negative impact on social mobility.
DELIVERING THE
PROPOSALS: UNINTENDED
CONSEQUENCES
6. As the White Paper sets out the proposed reforms
are intended to "deliver a more responsive HE sector in which
funding follows the decisions of learners and successful institutions
are freed to thrive."[163]
7. This is central to our concerns about the
mechanisms that government sets out (AAB and "core and margin")
as it seems clear that these will have the impact of restricting
rather than expanding the diversity of the sector. It is our contention
that these policies, played out together over time, will restrict
the choices of students, particularly those from lower socio-economic
backgrounds (see section below on social mobility).
A POLARISED SECTOR
8. As the Committee will be aware, the White
Paper proposes two mechanisms for freeing one in four places from
student number controls in 2012:
(a) 65,000 places open to competition for students
scoring the equivalent of AAB or above at A-Level.
(b) 20,000 places removed on a pro-rata basis
to be re-distributed to providers charging an average graduate
contribution level of £7,500 or below—with a likely
strong preference to new providers.
9. The two systems of student number controls
create a unique set of circumstances that will force the sector
to polarise between £9,000 universities and £7,500 universities
with any provision between this being driven out over time.
(a) Those institutions who operate in the AAB
market can charge £9,000 without concern of having student
numbers taken away (although some will feel the effect of market
forces at that level). These will benefit from an overall shift
in resource towards these institutions as a result.
(b) For the rest of the sector, any institution
operating just below the AAB market wanting to charge over £7,500
in order to deliver the high-quality, high-cost course that their
students demand and employers want, faces having 7% of student
places taken away, year on year with no means of replacing these
lost numbers. At present, a large number of universities fall
into this category; effectively meaning that many of our most
successful universities could expect to see their provision cut
in half over the next six years and that there will be very few
highly resourced courses available for students below AAB.
(c) Low-cost providers—made up of new providers
(eg FE College and for-profit private providers) and existing
universities that are willing and able to offer their courses
at £7,500. It is not clear what these low-cost providers
will have to demonstrate in terms of quality of provision, value
for money or projected graduate prospects in order to be allocated
places. It seems likely that "new" providers will be
favoured given the emphasis on supply-side reform.
10. If you roll these proposals forward over
a few years, you quite quickly reach a stage where there is no
market between £9,000 and £7,500. This separation would
mean a gulf in the sector would appear over time as those at £9,000
are able to invest more into the student experience. The two mechanisms
effectively impose a false "cliff edge" at each side
of the spectrum reducing diversity in the sector and reducing
student choice.
STUDENT DEMAND
11. The White Paper places a strong emphasis
on the new system being able to follow student demand, on the
basis of government funding now flowing through the student (in
the form of government loans rather than direct HEFCE teaching
grant). The Government proposes to create more of a market within
HE and reduce regulation and yet, because of the need to control
Treasury expenditure, the White Paper proposal will actually increase
control and regulation of student numbers.
12. While it is right that the new system remains
untested and, therefore, we cannot solidly predict what will happen
to student demand, we should not forget the considerable research
and evidence base available based on student behaviour in the
current system as well as in more marketised systems such as the
United States. There are a number of factors that lead us to believe
that overall demand is both likely to increase over time (with
a possible "blip" in year 1 as the market adjusts to
new deferred fee levels) and that students will continue to opt
for a variety of institutions depending on their requirements
and aspirations (as noted below in our discussion of the different
HE markets).
13. Demand for HE is determined by a number of
factors. The system of student finance is one of these factors
but by no means the most significant. Participation trends in
the UK and international comparisons have demonstrated the fact
that the introduction of increased fees in 2006 had very little
effect on participation. We know that for full-time undergraduate
entrants (for whom variable fees were introduced) demand can largely
be determined by attainment levels and population trends. Indeed,
there is a considerable body of evidence and international research
that has shown that price elasticity of demand for HE is low.[164]
14. Despite the focus in the White Paper on entrance
to the most selective universities, we also have considerable
evidence about the level of demand for universities in other parts
of the sector—particularly those parts of the sector likely
to be caught in the middle of new mechanisms for student number
control. For example, Manchester Metropolitan University has one
of the highest number of applications of any UK university or,
in terms of applications per place, Oxford Brookes University
has an average of eight applicants per place—again, one
of the highest in the UK. As our recent publication "More
than just a degree: stories of empowered students"[165]
has demonstrated, student choice is affected by a complex mix
of factors that include location, career aspirations, the learning
environment on offer and previous educational experience. Whatever
impact we might expect the new system to have we must surely ensure
that an equality of choice remains for all students.
15. In terms of new providers of HE, the White
Paper seems to assume strong demand from students (no evidence
is presented) as well as equating low cost with value for money
without questioning this assumption—clearly there is no
necessary correlation. It assumes that "broadening"
the supply side is good for student choice without providing evidence
of demand for this particular form of "breadth". Where
there is a limited supply of places, taking places out of the
sector where there is un-met demand (or proven high demand for
places) and moving it to an area of un-tested demand does not
necessarily improve student choice and further evidence should
have been provided to support this assertion.
VALUE FOR
MONEY
16. We have already questioned the assumption
in the White Paper that low price equals high value for money.
There is no necessary correlation between price and value for
money and we believe that any responsible Government should be
more concerned about the latter.
17. This is not just about Alliance universities
but to use them as an example, in terms of value for money these
universities are delivering:
— Genuine
social mobility: this is not just about getting students but about
jobs for graduates with exciting and rewarding future prospects.
— Graduates
with the skills that employers need: because of the strong focus
on business engagement in Alliance universities these universities
provide courses that have active business involvement in course
design as well as additional employability skills programmes,
have a high proportion of student placements embedded across programmes
and have a high proportion of professionally accredited courses
(up to 70%).
— Massive
efficiencies through business-like practices: for example through
driving down costs, delivering shared solutions and delivering
major programmes of reforms and restructuring.[166]
— Market-driven
programmes: many review courses and delivery on a yearly basis.
SOCIAL MOBILITY
18. Social mobility is another big focus within
the White Paper but it is largely narrowly defined in terms of
the access to selective universities by the lowest socio-economic
groups.
19. Our concerns about the potentially negative
impact on social mobility from these proposals stem from the stubborn
correlation between social class and attainment.[167]
A quarter of the richest 20% of students get top A-level grades
(BBB and above) in comparison to just 3% of the poorest 20% of
students.
20. This strong correlation means that the proposed
student number controls have the potential to negatively impact
on social mobility in two ways:
(a) The redistribution of public investment towards
high achieving, high social class students (because their courses
will be publicly resourced at £9,000 per student whilst other
universities face having 7% of numbers taken away year on year
unless they reduce their average fee level (and average resource)
to £7,500).
(b) The majority of students from lower social
classes will not have access to well-resourced courses because
they will have less choice available to them
FUTURE SKILLS
NEEDS
21. As highlighted above, in the UK's global,
knowledge-based economy, where 80% of new jobs are in high skill
areas and new and growth industries take a high-tech, high-skill
and innovative approach, universities are playing a critical role
in driving the UK's economic future.
22. With this in mind, another key way we should
assess the impact of the White Paper is against whether it will
be able to deliver this workforce. There are two areas where the
proposals may mean this is not deliverable:
(a) There will be fewer student places than in
previous years.
(b) Universities delivering valuable skills caught
between the two student number control mechanisms will be forced
to reduce the number of graduates they educate.
23. The White Paper would seem to signal the
end of the Robbins principle that "courses of HE should be
available for all those who are qualified by ability and attainment
to pursue them and who wish to do so."[168]
While the White Paper endorses this principle subject to public
expenditure constraints, in reality we are already in a position
where there are 10,000 fewer places than in 2012-13.
24. Reducing numbers in the part of the sector
that needs to charge above a £7,500 average fee to deliver
a broad and deep student learning experience would also impact
on the spread of graduates that businesses need.
THE WHITE
PAPER VISION:
STUDENTS AT
THE HEART
OF THE
SYSTEM
25. The HE White Paper is framed around a vision
for the HE sector that:
— seeks
to put HE on a sustainable footing by shifting public funding
away from teaching grants and towards repayable tuition loans;
— places
students (specifically undergraduate students) at the heart of
the system, with the intention of their choice about where to
study driving a more responsive sector;
— aims
to "drive more investment, greater diversity and less centralised
control"; and
— takes
responsibility for delivering social mobility.
26. While we absolutely support the Government's
intention to achieve the above objectives our main concerns with
the White Paper are two-fold:
(a) The paper sets out a limited vision of the
role and purpose of HE in the 21st Century, it is more than an
extension of the education system.
(b) We have strong concerns about the mechanisms
that the White Paper seeks to introduce. It seems highly likely
that these will inhibit rather than aid the delivery of the objectives
set out above. We believe they will have significant unintended
consequences for the future dynamism and diversity of the sector.
LONG-TERM
VISION: ROLE
AND PURPOSE
OF HIGHER
EDUCATION
27. By situating HE as continuation of the education
system[169]
the White Paper creates a narrow vision of its role and purpose.
It does not effectively set out the vital contribution Universities
can make to the future strength and growth of our economy, nor
the wider public good role of universities within our society.
28. The paper also demonstrates a limited understanding
of the role of different markets within a diverse HE; we believe
this means that the regulation Government seeks to introduce does
not fully anticipate the consequences in a sector that is already
incredibly diverse and responsive to student demand.
DRIVING AN
INNOVATION-BASED
ECONOMY
29. As we outline in our publication, 21st Century
Universities: engines of an innovation driven economy,[170]
there is a weight of evidence to demonstrate that universities
are not just part of a growth strategy, they are central to it.
For example:
(a) Research undertaken by NESTA[171]
has confirmed that innovation and high-tech approaches are the
most likely to be successful in driving economic recovery and
economic growth in the UK economy. The same research highlights
that innovation was responsible for two-thirds of productivity
growth from 2000-07 and was the common defining feature of the
fastest growing 6% of businesses between 2002-08. These businesses
generated half of all new jobs created during this time.
(b) The hourglass prediction for the future shape
of the labour market[172]
means that investing in graduate level skills remains critical.
UKCES find that that the most significant increases in employment
up until 2017 are likely to be in higher level occupations such
as managers & senior officials, professional occupations and
associate professional & technical occupations. Conversely,
declining employment levels are projected for: skilled trade occupations
and machine & transport operatives.[173]
This means a polarisation of skills needs, with growth at both
the high end (graduates) and the low end, alongside a decline
in demand for intermediate-level skills—hence the hourglass
shape.
(c) If we stand still we will fall behind—our
global competitors are continuing to invest heavily in universities,
despite their own budget deficits. In 2000, the UK was 3rd amongst
top industrialised nations in terms of the proportion of young
people graduating. In 2008 we had fallen to 15th position because
competitor countries have been investing at a faster rate than
us.
30. Put simply, it is the quality and scale of
our HE (delivering highly skilled graduates), science and research
that will determine the future pattern of economic growth in any
innovation-driven economy. It is this that should drive our vision
of what the future shape and size of the sector should look like.
DELIVERING A
PUBLIC GOOD
31. As the supporting evidence put together by
BIS for the White Paper highlights, HE has an important impact
on a wider range of social factors.[174]
The Government shares many of the economic priorities of universities
including: equipping a highly-skilled workforce; driving innovation
through partnership with business and world-leading research;
providing real-time business solutions through shared expertise;
providing entrepreneurial leadership in areas such as regeneration
and sustainability; and fostering social mobility and inclusion.[175]
32. Universities have a long history of working
with government in a public-private partnership that is driven
by a mutual priority of delivering this public good. This shared
public priority means that the partnership goes far deeper than
the White Paper's description of it being based on "Government
funding and institutional autonomy". This background understanding
is key in the light of the White Paper's proposals for new for-profit
private providers in the HE ecosystem. New for-profit providers
will no doubt add value to the diversity of the sector but it
is important to understand that they will have a different purpose
and set of drivers. It is not simply a case of replacing one type
of provision with another at a lower cost to the public purse—the
issue of value for money needs careful consideration in order
to protect the interests of students and public investment alike.
WHAT DOES
A HEALTHY,
DIVERSE SECTOR
LOOK LIKE?
33. As noted above, the White Paper sets out
to create a diverse and responsive sector. We strongly believe
that the mechanisms for achieving this set out in the White Paper
cannot be fully understood without first considering the existing
size and shape of the sector - which is already incredibly dynamic
and diverse.
34. Central to this is recognition that several
different markets operate within HE, catering for different students
with different requirements and aspirations. University Alliance
would suggest that there is no single hierarchy for universities
in this country and that different students will be attracted
to studying with different types of providers. In many cases HE
providers simply aren't competing for the same students whether
they are a Further Education College, a private provider, an ancient
university, or indeed an Alliance university that has a strong
focus on business engagement and employability. As we will go
on to highlight, understanding this diversity both in terms of
institution and student needs will be critical to creating a system
that can be truly demand led.
SHORT-TERM
SOLUTIONS
35. A one year pause in implementing these proposals:
we ask that no additional complexities (eg AAB and core and margin)
are introduced in year 1 whilst there is a tectonic shift in student
finance system and market settles down.
36. Reduce the "core and margin" to
5,000 places so that the market for new low-cost providers can
still be tested but without harming universities with proven,
strong demand.
37. Ensure there is no false, single cut-off
point at £7,500 for the allocation (or redistribution after
initial allocation) of the "margin" places. We would
recommend allocating these numbers through a more gradual / tapered
mechanism to reflect the different markets in HE (eg 20% allocated
to £8,000 fee places, 20% to £7,500, 20% to £7,000,
20% to £6,500, 20% to £6,000). These numbers are illustrative
but they would avoid the false "cliff edge" at £7,500
and allow a market to continue to exist between £7,500 and
£9,000 whilst averaging out at the same cost for the public
purse overall.
38. Move beyond the AAB threshold more quickly.
The consequences would have to be modelled to mitigate unintended
consequences but the faster we can move towards a more genuine
market, the better.
39. A major focus on evidence of student demand,
value for money and quality for Year 2 so that the parameters
of both proposals can be evaluated / adjusted on the basis of
this evidence.
LONGER-TERM
SOLUTIONS
40. Consider ways to reduce the Government's
long-term costs (subsidy reduced) and short-term cost (up-front
sale of loan books / encourage up-front repayment).
41. Seek to re-introduce the Robbins Principle.
Can we achieve the separation of some undergraduate numbers from
Government subsidy in order to grow the system and achieve a real
market in HE?
42. Reconsider priorities. How should public
investment be directed in order to achieve value for money?
43. Can a stronger case be made for increasing
both public and private investment in HE as a central part of
the UK's economic growth strategy rather than an addition to the
education system?
44. Do we need to re-consider the balance of
private/public investment in HE. Is 70/30 balance the right level?
Annex A
PRINCIPLES FOR A SUSTAINABLE SECTOR
1. Driving growth and prosperity across the
UK: Universities are driving growth through innovation and
enterprise; they are not just part of a growth strategy, they
are central to it. Universities should be central to the government's
strategy to rebalance the economy across the regions. This is
not just about skills but about the central role universities
play in the economy, driving growth and innovation in new sectors
and markets.
2. Delivering graduates that will drive our
future international competitiveness: In 2000, the UK was
3rd amongst top industrialised nations in terms of the proportion
of young people graduating. In 2008 we had fallen to 15th position
because our competitor countries have been investing at a faster
rate than us.[176]
It is vital that we move towards a system that is flexible enough
to educate the number of graduates that will be needed if we are
to remain competitive.
3. Supporting a world-class, dynamic and responsive
research base: Innovation was responsible for two-thirds of
productivity growth from 2000-07 and was the common defining feature
of the fastest growing 6% of businesses between 2002 and 2008.
These businesses generated half of all new jobs created during
this time.[177]
We need a system that is able to support excellence in different
universities enabling us to fully utilise both research and innovation.
4. Supporting and enabling genuine partnership
with business: Formal links between universities and business,
what we call knowledge exchange, generated £1.94 billion
in income in 2007, growing by approximately 12% per annum over
the period 2001-07.[178]
We should aim to increase support for these activities with an
appropriate funding infrastructure that enables universities to
lever additional funding from business, to foster partnerships
that generate innovation and to develop the future of the UK economy.
5. Protecting a broad and deep learning experience:
As Dearing highlighted, HE should demand disciplined thinking,
encourage curiosity, challenge existing ideas and generate new
ones.[179]
Amongst any forthcoming reform, we must not lose sight of the
value and importance of a university experience that offer breadth
and depth to students, equipping them with the skills, knowledge
and tenacity to succeed in the world of work.
6. Providing a quality offer for students:
The UK operates a rigorous quality assurance system that plays
a critical role in maintaining one of the best university systems
in the world.[180]
While regulatory reform is clearly needed, we must ensure that
we continue to safeguard the reputation of UK universities.
7. Fostering social mobility and inclusion:
This is important for society and the economy. With 80% of
new jobs in high-skill areas[181]
it is vital that we have a system that enables all those who have
the ambition and ability to succeed at university.
8. Shaping a proactive, engaged and democratic
society: Universities were founded as centres of knowledge,
learning and enterprise and are powerful instruments of change
and social justice. They have always emphasised civic responsibility
and community partnership and this ethos has remained integral
to Alliance institutions through well over 150 years of civic
service.[182]
9. Providing an explicit and clear offer to
students, business and society: Universities have a responsibility
to demonstrate their contribution, as described above. Students
must know up-front what the offer to them is and we must improve
the understanding of our contribution amongst business, industry
and wider society.
11 July 2011
162 These principles are outlined again in Annex A Back
163
BIS, Higher Education: Students at the Heart of the System, June
2011 Back
164
Aston and Shutt, The impact of fees: a review of the evidence,
January 2010,
http://www.university-alliance.ac.uk/wp-content/uploads/2011/05/Publication_Impact_of_fees_review_of_the_evidence.pdf Back
165
University Alliance, More than just a degree: stories of empowered
students, May 2011
http://www.university-alliance.ac.uk/wp-content/uploads/2011/05/3563_UA_STUDENT_BROCHURE-for-website.pdf Back
166
For more details see Aston and Shutt Back
167
Aston and Shutt, The impact of fees: a review of the evidence,
January 2010,
http://www.university-alliance.ac.uk/wp-content/uploads/2011/05/Publication_Impact_of_fees_review_of_the_evidence.pdf Back
168
Robbins, Report of the Committee on Higher Education, 1963 Back
169
For example, see Paragraph 1-3, Page 4, Higher Education: Students
at the Heart of the System-consider what is missing from these
paragraphs. Back
170
L Aston and L Shutt, 21st Century Universities: engines of an
innovation driven economy, September 2010 http://tinyurl.com/5tv22js Back
171
Shanmugalingam S et al, Nesta, Rebalancing Act, June 2010, http://www.nesta.org.uk/rebalancing_act Back
172
Working in the Twenty-First Century, by Michael Moynagh and Richard
Worsley, ESRC 2005 http://www.flexibility.co.uk/flexwork/general/tomorrow-work.htm
"Workplaces will be transformed as the British economy moves
up the value chain. Knowledge-intensive sectors account for 41%
of jobs in Britain, much higher than our EU neighbours, and are
the fastest growing sectors of the economy. Higher skilled jobs
will increase - but so will lower skill jobs in the service sector,
intensifying the 'hour-glass' structure of the labour market.
It is jobs in the middle most under threat from overseas competition." Back
173
UKCES, Working Futures 2007-2017, December 2008,
http://www.ukces.org.uk/upload/pdf/Working%20Futures%203%20FINAL%20090220.pdf Back
174
BIS Economics Paper No 14, Supporting analysis for the Higher
Education White Paper, June 2011 Back
175
The wider social benefits of higher education were also well documented
in the recent New Economics Foundation (NEF) report, Degrees of
value: how universities benefit society, June 2011 Back
176
OECD, Education at a Glance 2010 Back
177
Shanmugalingam S et al, Nesta, Rebalancing Act, June 2010, http://www.nesta.org.uk/rebalancing_act Back
178
HEFCE, Evaluation of the effectiveness and role of HEFCE / OSI
Third Stream funding, 2009, http://www.hefce.ac.uk/pubs/hefce/2009/09_15/ Back
179
R Dearing, Report of the National Committee of Enquiry into Higher
Education, 1997 Back
180
Critical Thinking, Considering the UK Honours Degree Classification
Method, International Summary, a report for the QAA/SHEFC Quality
Enhancement theme group on Assessment, 2004,
http://www.enhancementthemes.ac.uk/documents/assessment/JaneDenholmfinalreporthonoursclassificationREVISED200904.pdf Back
181
Wilson R and A Green, Department for Education and Employment,
Projections of Occupations and Qualifications: 2000/2001: Research
in Support of the National Skills Taskforce, 2001, http://www2.warwick.ac.uk/fac/soc/ier/publications/2001/projections2001.zip Back
182
L Aston, University Alliance, Impact of fees: a review of the
evidence, January 2010,
http://www.universityalliance.ac.uk/downloads/Publication_Impact_of_fees_review_of_the_evidence.pdf Back
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