Thursday, 31 July 2014

New university funding 'plans': complex, risky and unlikely


Those of us who actually work in, or analyse, English Higher Education have always said that the coalition's £9,000 tuition fee hike was going to get them into trouble. It was just too large a step to jump in one go. It was totally understandable, of course, for David Willetts and Vince Cable to push the funding off onto undergraduates as the only way to get the Treasury to agree to fund our universities at anything like the level they needed. But somewhere in the mix the public interest - in affordable, high-quality, and above all communally-rewarding education - got lost. Universities racked up fees; the taxpayer took up the slack in the short term, which turned out to involve a lot more effort than hitherto thought when graduates turned out not to earn as much as forecast. We did tell you that would happen back in February 2011, but who listens to academic historians?

Which brings us to this week's non-shock: that the Government is thinking about allowing universities to buy up some of the Treasury loans that have been issued to students. In return for this apparent act of altruism towards Her Majesty's Government. those institutions might be able to charge more than £9,000 - probably quite a lot more if they're to think about taking on such a lot of debt.

And here's the main flaw in the concept. Only a very, very few universities will want to get involved at anything more than the margins of such a scheme. Why? Because even a few years' student loans would completely overwhelm their asset sheets in a sea of red ink. It's just too risky, even leaving aside the fact that most banks and other financial institutions seem to have shown a marked lack of enthusiasm for such plans in private. Which you would, really, unless the Government acted as a backstop for such a lot of debt. But if they do, that sort of negates the whole point of offloading all those liabilities in the first place. The outcome? Oxford, Cambridge, Imperial, UCL and perhaps a very few others might take up some of the slack and then raise their fees. But most redbrick civic universities will only dip their toes in the water, and most of the rest of the sector will not want to put themselves under pressure.

That emerging 'ivy league' might come to regret their rush towards the bright lights of 'freedom', though. For this idea also depends on Whitehall computer systems being able to track and trace graduates to give the cash back to those individual universities - otherwise no link between students' place of learning and their later salaries can be established. A large-scale govenrment IT project? What could possibly go wrong? Except, of course, everything - especially as the now-ex Universities Minister Willetts met criticism of the impact on courses likely to produce lower-earning graduates with the farcical, bumble-your-way-through concept that detailed 'regulations' and 'formulae' could be put in place to tilt the playing field their way. So might a drowning man in quicksand thrash around, rather than calmly looking for a plan to get him out of his trap.

The Historian simply does not believe that the Department for Business, Innovation and Skills, universities and the Student Loan Company have anything like the dense, thick, experienced managerial capacity to make such a scheme work. They'll probably form a consortium and call it something like a 'Student Loans Company'. Or - heaven forbid - a 'government', differing only in form from what we've had for decades only on the basis that big accountancy firms run it rather than Parliament and Ministers. Which takes us back to the reason we have a relatively large public sector in the first place: it pools risk, and it lowers the complexity of contract-making in what the remnants of economic true believers term that myth called 'the market'.

It's just another sad snapshot of a government turning this way and that, and then that way and this, as they desperately think of ways to get out of the corner into which they've painted themselves. Next up: David Willetts crowd-funds a mission to Mars on Kickstarter.

It is of course perfectly possible to say that the debt burden on the Treasury will come to look rather smaller as the economy improves. It probably will - though not by the vast amounts that would really justify the upheaval we've lived through. But what happens if graduate earnings have been permanently lowered by the Great Recession? If there's another, after the economic disasters of 1980-82, 1990-93 and 2007-12? And you have to ask yourself this: if everything's so wonderful, why are the Government scratching around for ways to bring more money into the system? Rising costs were always going to involve putting a higher price-tag on a degree than £9,000, once the few years' grace that injection of cash gave to the system had come to an end. The key to Ministers' endless search for cash is quite clear, and has been from the start: they have launched out on an enormous, expensive, disordered and above all very complicated 'reform' of England's previously-successful Higher Education system without a compass, map, chart or design. It's therefore no wonder that they've got lost.

And now they're making it up again - whistling to keep their spirits up as they go along. Fingers crossed they get it all right, eh?

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