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The tuition fee showdown

Mike Boxall

Education Investor

6 March 2015


To the surprise of many observers, higher education is climbing the pre-election agenda, prompted largely by ‘will-they, won’t-they’ speculation that a Labour administration would lower the cap on undergraduate tuition fees. Indeed, public and political debate around universities has been fixated on fees – how they should be set, who should pay for them and what the funding system really costs.  The debate has generated more heat than light, fogged in arcane technicalities, dubious implications and contradictory arguments.
What few people seem to be asking in all this is, what problems in our national higher education (HE) system would be solved by changes to undergraduate funding? And, are those really the biggest difficulties facing the system?

There are three key problems implied or alleged with regard to undergraduate funding:

  • That high tuition fees and loan repayments are deterring students from entering HE, especially those from disadvantaged backgrounds

  • That the level of loan-backed fees is inadequate to sustain high quality teaching by cash-strapped providers.

  • That the public expenditure implications of the student loans system are excessive and unsustainable.

The trouble is, none of these are compelling problems. Despite the continuing fall in the 18-year-old age cohort, overall demand for full-time undergraduate courses appears to have held up since fees were increased; indeed, applications from disadvantaged groups have actually grown since £9,000 fees were introduced.
For providers, tuition fees of £9,000 (even allowing for inflation and outreach contributions) still represent a healthy windfall over pre-2012 funding levels and comfortably exceed the £6,500 or so costs of course delivery (according to the Higher Education Funding Council for England). With regard to the alleged burden on taxpayers, the much-vaunted 45% shortfall in loan recovery values is based on a number of contentious accounting assumptions. An equally plausible case can be made for the current loan system actually being cheaper than its predecessors, and in any case we will not know which is right for another 30 years.

Much more importantly, there are some scary issues emerging for the health of the national higher education system that have nothing to do with tuition fees or student loans. These include:

  • Falling enrolments in all categories of students for many universities. Higher Education Statistics Agency (Hesa) data show that up to half of providers have experienced falling enrolments over the past three years, especially (but by no means only) from part-time and mature students, some by as much as 30% of previous peak levels. This fall cannot be blamed on increased tuition fees, because those are faced by all providers, some of which have grown their student numbers quite significantly. Nor is it explained by a ‘flight to prestige’, because the enrolment losers include several Russell Group universities while the ‘winners’ include several post-’92 and private providers.

  • Doubts about the career value of university study. Perennial employer complaints about the work-readiness of new graduates are louder than ever, with the CBI and sector bodies recently joining the fray. The rhetoric is backed by employer reports that 25% of graduate vacancies are going unfilled for want of good enough applicants, while some 40% of graduates report that they are stuck in non-graduate jobs. There are signs of employers and young people looking elsewhere than university for improved career prospects, with steep growth (albeit from relatively small numbers) in high-level apprenticeships and direct recruitment from schools and colleges.

  • Worries about the UK’s competitiveness in the global higher education market. The steadily growing international demand for a UK university experience that most universities have relied upon is flattening and may well be declining. Factors in this include the effect of negative messages about student immigration policies, felt most keenly in the 50% fall in entrants from India and Pakistan; the competitive squeeze from aggressive recruiters in Australia, the USA and Canada as well as continental Europe; and the rapid growth of domestic capacity in hitherto dependable export markets, including India, Malaysia, Singapore and of course China. The latter is fast becoming a regional magnet for internationally-mobile students around SE Asia, and has credible ambitions to become a global exporter of HE.

None of these challenges will be lessened by changes in the level or mechanics of undergraduate tuition fees. Providers of all kinds need to look beyond taxpayer-subsidised funding and get closer to their changing markets, through more relevant programmes, more effective marketing and recruitment and better fulfilment of their promises to students. They will hate to hear it, but many universities could learn a lot in each of these regards from the best of the new private providers. 


Mike Boxall is a higher education expert at PA Consulting Group


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