A market in universities: one import the UK could do without?

Why the US funding model will cause British institutions more harm than good.

It is no surprise that the new Secretary of State for Business has led the charge to reduce the numbers of people going to university. To the chagrin of many Liberal Democrats at the time, this is precisely what Vince Cable said in opposition.

The cut in additional student numbers will do little for the social mobility which is allegedly a linchpin of the coalition government's higher education agreement. Universities now have to manage a £1bn reduction in funding, with David Willetts implying that student support is a burden on the taxpayer. Are these good enough reasons to transport the US model for the funding of higher education to England, as David Blanchflower suggests ("The case for higher university fees")?

The answer is almost certainly no. Unlike their US counterparts, the UK universities which are arguing for higher fees do not want to become private institutions. Rather, they want to have their cake and eat it: taxpayer funding for teaching, research, fee loans and student support, with the university then given the right to charge additional fees either upfront or through additional fee loans financed by bonds and commercial providers.

It is no surprise that the universities which want to compete on price and quality on the back of state funding are the ones that have the most socially exclusive profiles. By "quality", they mean not standards, but quality of the "student experience", based on small campuses where students study away from home and full-time. This is very far removed from the experience of most of the UK's two million students, over 40 per cent of whom study part-time, many of whom have to work to pay their way, and some of whom live at home to save money.

A quasi-US-style system would be certain to deliver inequity for most of the UK's higher education students. Like US health care, it would have outcomes that would be neither as equitable nor as productive as the UK's current system. In particular, a market based on state funding with higher tuition fees backed by private finance will have the inevitable outcome of delivering less resource to the universities that contribute most to social mobility. This is not a policy that the left would advocate for schools. Why should it be an acceptable outcome for UK universities and students?

The Westminster government could easily create a fairer funding system. By introducing a small (1-2 per cent) real rate of interest on student loans, similar to that applied in countries such as Norway, Denmark and Sweden, and by extending the period when graduates in England repay a contribution to the costs of their higher education, the Exchequer would benefit by £1bn per year.

This would be enough to fund many more students, avoid the cuts in higher education imposed by the deficit hawks and even extend fee and maintenance loans to part-time students who at the moment still have to pay their fees upfront. Fairer funding for all is on the table if the government (and the opposition) want to pursue it.

Pam Tatlow is chief executive of the university think tank million+

Getty Images.
Show Hide image

Why relations between Theresa May and Philip Hammond became tense so quickly

The political imperative of controlling immigration is clashing with the economic imperative of maintaining growth. 

There is no relationship in government more important than that between the prime minister and the chancellor. When Theresa May entered No.10, she chose Philip Hammond, a dependable technocrat and long-standing ally who she had known since Oxford University. 

But relations between the pair have proved far tenser than anticipated. On Wednesday, Hammond suggested that students could be excluded from the net migration target. "We are having conversations within government about the most appropriate way to record and address net migration," he told the Treasury select committee. The Chancellor, in common with many others, has long regarded the inclusion of students as an obstacle to growth. 

The following day Hammond was publicly rebuked by No.10. "Our position on who is included in the figures has not changed, and we are categorically not reviewing whether or not students are included," a spokesman said (as I reported in advance, May believes that the public would see this move as "a fix"). 

This is not the only clash in May's first 100 days. Hammond was aggrieved by the Prime Minister's criticisms of loose monetary policy (which forced No.10 to state that it "respects the independence of the Bank of England") and is resisting tougher controls on foreign takeovers. The Chancellor has also struck a more sceptical tone on the UK's economic prospects. "It is clear to me that the British people did not vote on June 23 to become poorer," he declared in his conference speech, a signal that national prosperity must come before control of immigration. 

May and Hammond's relationship was never going to match the remarkable bond between David Cameron and George Osborne. But should relations worsen it risks becoming closer to that beween Gordon Brown and Alistair Darling. Like Hammond, Darling entered the Treasury as a calm technocrat and an ally of the PM. But the extraordinary circumstances of the financial crisis transformed him into a far more assertive figure.

In times of turmoil, there is an inevitable clash between political and economic priorities. As prime minister, Brown resisted talk of cuts for fear of the electoral consequences. But as chancellor, Darling was more concerned with the bottom line (backing a rise in VAT). By analogy, May is focused on the political imperative of controlling immigration, while Hammond is focused on the economic imperative of maintaining growth. If their relationship is to endure far tougher times they will soon need to find a middle way. 

George Eaton is political editor of the New Statesman.