Government reform of Higher Education - Business, Innovation and Skills Committee Contents


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 
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