Tuesday, 15 February 2011

University tuition fees: can't work, won't work

A great deal of the discussion about university tuition fees in England has been around the emotive issue of whether they are right - morally right, that is, given that many argue much higher costs will deter students from non-traditional backgrounds and shift the burden of costs from a well-off generation to a poorer one.

Less attention has been paid to the problem of whether the system will actually work - whether it will pay for our universities to continue teaching and researching at the same relatively high quality level they do now.

The problem here is that the new system bids fair to completely bankrupt the Exchequer, while delivering very few quality or efficiency gains. It's a slow-motion car crash - a system that won't work and can't work.

There are at least four reasons for this:

1. The Treasury has assumed very high and rising graduate salaries, going up by 4.47% every year. They have rarely touched such dizzying heights, even in the booms of the 1980s and 1990s. If that figure sinks down to four per cent, or even three per cent, the whole scheme's sunk. This at a time when the system will probably expand, due to the dropping of the 'cap in detail' on each institution's numbers - so the relatively value of a degree will sink.

2. Universities will charge much higher fees than the Government expected. Some newer universities, such as Staffordshire, are indicating that they might stick near to the £6,000 that the Government thinks of as the 'normal' level. But even here, Staffs' Vice-Chancellor has said that some courses may well cost more. Much higher up the traditional pecking order, Cambridge (above) is well advanced in its plans to charge the maximum £9,000. The whole Russell Group will probably follow suit, along with the 1994 Group of universities. Most other HE institutions will probably charge an average of £8,000 or so rather than the average of £7,500 the Treasury has been modelling. As Mike Baker has pointed out, what's the point of differentiating on price when the gap is £3,000 over three years for graduates being charged £27,000? Who will pay back very similar amounts of their later salaries anyway? It's pointless. Universities also won't want to look like they are offering 'cheap' courses. Higher Education is a 'Giffen' or 'positional' good - something that evokes demand the more it costs, not less. Already there is anecdotal evidence of student consultations bringing back the clear message: 'charge us more'.

3. Undergraduates attending from low-income EU countries will pay very little back. No-one pays anything until they earn £21,000. If you go back and work in Estonia - or perhaps, in the fulness of time, Turkey - you are unlikely to earn much over that amount. Ever. So the UK Treasury will be paying all your fees when they're written off after thirty years.

4. The Government will not be able to 'claw back' most of the cash hemmorraghing out of the system. Nick Clegg threatened Vice-Chancellors recently with some form of 'claw back' of teaching money. When he was told that there isn't going to be any teaching money, he switched tack to say 'well, we'll take some of your research money off you then'. Some VCs apparently laughed in his face. On the EU students front, few member governments will do much to help the UK Exchequer in its increasingly desperate bids to recover funds from ex-students, even those who've gone back to work in relatively rich countries. So the money will dribble away out of the many, many holes in the system.

The Government says it has £3.6bn a year to spend, down from a peak of something like £9bn three years ago. I reckon the above means it'll be spending much more like £6-7bn. Saving £2-3bn a year has never felt so painful.

The whole thing will have to be completely redrawn within a few years. Presumably this will happen early in the next Parliament, when there's either a majority Conservative government or a coalition of a rather different hue in power. The present administration won't be able to admit that the whole thing's been a terrible botch-up without immense damage to its reputation.

This might well be the stage at which Oxford, Cambridge and some other Russell Group universities decide to go it alone, saying to government: 'you're not giving us any money, but you are loading on demands. We're off'. Then we really will have a two-tier system.

That's enough of the Nostradamus for now...