What are universities for?

The growth model of academic inquiry

Before Christmas, I blogged on a couple of occasions about the likely effects of a new set of criteria for the distribution for research funding in British universities. The "Research Excellence Framework" (REF) stipulates that "significant additional recognition will be given where researchers build on excellent research to deliver demonstrable benefits to the economy, society, public policy, culture and quality of life. Impacts will be assessed through a case-study approach that will be tested in a pilot exercise."

Many academics working in the humanities were quick to point out the likely effects on their fields of an economic growth-oriented model of academic funding, in which "impact" is a key criterion. In a petition submitted to No 10, leading researchers urged

the reversal of the Research Councils and HEFCE policy to direct funds to projects whose outcomes are determined to have a significant "impact". The arts and humanities do have such an impact, but it is typically difficult if not impossible to judge this in the short term. Academic excellence is the best predictor of impact in the longer term, and it is on academic excellence alone that research should be judged. "Users" who are not academic experts are not fit to judge the academic excellence of research any more than employers are fit to mark student essays. The UK is renowned for its creative industries. But the roots of creativity in the intellectual life of the nation need sustained support and evaluations based on short-term impact will lead to less impact in the long term.

A letter from the novelist and critic Gabriel Josipovici published in the latest issue of the TLS suggests that university administrations have already taken the REF to heart, and are setting about restructuring their institutions in its image. I have a particular interest in what Josipovici has to say, as he's writing about my alma mater, the University of Sussex, where he taught for many years. His letter is worth quoting at length:

A document has come into my possession which might be of interest to your readers -- an email, in fact, which the vice-chancellor of the University of Sussex, Michael Farthing, has sent to all undergraduates, explaining to them his plans for "the development of the university". These plans consist of the sacking of over 100 staff and the closing down or reduction of a number of "areas", so that the word "development" is somewhat ironic, but in keeping with the tone of the document, which is couched throughout in the worst bureaucratese. Thus: "Our aim is to continue to invest in successful areas in the university and grow our income where possible."

As one might imagine, this is not good news for those disciplines which have always been seen as at the heart of the humanities side of English universities. "In some areas," the VC says, "there are no opportunities for sustainable growth and we need to make targeted reductions in those areas while continuing to develop our university as a broad and balanced research-intensive institution across the arts and social sciences." It is difficult to see how this last aspiration is to be met when it is followed by this: "In a number of schools we are now seeking financial savings, including engineering and design; English; history, art history and philosophy; informatics; and life sciences." By contrast, predictably: "In academic schools with recent growth and good prospects for the future, we are pressing ahead with our growth and development plans, including the schools of business, management and economics; global studies; and media, film and music" . . .

The question this raises is: Are universities really businesses? And if not, what are they? Are they to become forcing houses for the immediate economic development of the country and nothing else (ie, are business and media studies to replace engineering, English, history and philosophy)? If that is what the country wants, so be it. But we should be clear that it means the end of universities as they have been known in the west since the Middle Ages.

I don't think Josipovici's conclusion is at all apocalyptic. Rather, it seems to me entirely uncontroversial -- we're sleepwalking into uncivilisation.

I'd encourage students and academics to leave further examples of the kind of thing described here in the comment box below.

Jonathan Derbyshire is Managing Editor of Prospect. He was formerly Culture Editor of the New Statesman.

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Let's turn RBS into a bank for the public interest

A tarnished symbol of global finance could be remade as a network of local banks. 

The Royal Bank of Scotland has now been losing money for nine consecutive years. Today’s announcement of a further £7bn yearly loss at the publicly-owned bank is just the latest evidence that RBS is essentially unsellable. The difference this time is that the Government seems finally to have accepted that fact.

Up until now, the government had been reluctant to intervene in the running of the business, instead insisting that it will be sold back to the private sector when the time is right. But these losses come just a week after the government announced that it is abandoning plans to sell Williams & Glynn – an RBS subsidiary which has over 300 branches and £22bn of customer deposits.

After a series of expensive delays and a lack of buyer interest, the government now plans to retain Williams & Glynn within the RBS group and instead attempt to boost competition in the business lending market by granting smaller "challenger banks" access to RBS’s branch infrastructure. It also plans to provide funding to encourage small businesses to switch their accounts away from RBS.

As a major public asset, RBS should be used to help achieve wider objectives. Improving how the banking sector serves small businesses should be the top priority, and it is good to see the government start to move in this direction. But to make the most of RBS, they should be going much further.

The public stake in RBS gives us a unique opportunity to create new banking institutions that will genuinely put the interests of the UK’s small businesses first. The New Economics Foundation has proposed turning RBS into a network of local banks with a public interest mandate to serve their local area, lend to small businesses and provide universal access to banking services. If the government is serious about rebalancing the economy and meeting the needs of those who feel left behind, this is the path they should take with RBS.

Small and medium sized enterprises are the lifeblood of the UK economy, and they depend on banking services to fund investment and provide a safe place to store money. For centuries a healthy relationship between businesses and banks has been a cornerstone of UK prosperity.

However, in recent decades this relationship has broken down. Small businesses have repeatedly fallen victim to exploitative practice by the big banks, including the the mis-selling of loans and instances of deliberate asset stripping. Affected business owners have not only lost their livelihoods due to the stress of their treatment at the hands of these banks, but have also experienced family break-ups and deteriorating physical and mental health. Others have been made homeless or bankrupt.

Meanwhile, many businesses struggle to get access to the finance they need to grow and expand. Small firms have always had trouble accessing finance, but in recent decades this problem has intensified as the UK banking sector has come to be dominated by a handful of large, universal, shareholder-owned banks.

Without a focus on specific geographical areas or social objectives, these banks choose to lend to the most profitable activities, and lending to local businesses tends to be less profitable than other activities such as mortgage lending and lending to other financial institutions.

The result is that since the mid-1980s the share of lending going to non-financial businesses has been falling rapidly. Today, lending to small and medium sized businesses accounts for just 4 per cent of bank lending.

Of the relatively small amount of business lending that does occur in the UK, most is heavily concentrated in London and surrounding areas. The UK’s homogenous and highly concentrated banking sector is therefore hampering economic development, starving communities of investment and making regional imbalances worse.

The government’s plans to encourage business customers to switch away from RBS to another bank will not do much to solve this problem. With the market dominated by a small number of large shareholder-owned banks who all behave in similar ways (and who have been hit by repeated scandals), businesses do not have any real choice.

If the government were to go further and turn RBS into a network of local banks, it would be a vital first step in regenerating disenfranchised communities, rebalancing the UK’s economy and staving off any economic downturn that may be on the horizon. Evidence shows that geographically limited stakeholder banks direct a much greater proportion of their capital towards lending in the real economy. By only investing in their local area, these banks help create and retain wealth regionally rather than making existing geographic imbalances worce.

Big, deep challenges require big, deep solutions. It’s time for the government to make banking work for small businesses once again.

Laurie Macfarlane is an economist at the New Economics Foundation