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Funding conundrum

Aug 12 2002 01:30
Mustafa Arif
STRAIGHT TALKING: In the wake of last week?s reports over the return of student grants, Mustafa Arif looks at the future of higher education funding.
Chancellor Gordon Brown: facing conflicting interests in the higher education funding juggling act.

The government has set itself a target of getting 50% of young people into higher education. The wisdom of getting so many people to go to university is debatable (our own Rector, Sir Richard Sykes has described it as "ludicrous"), but that isn?t really the point. The government is determined to follow its agenda and we must therefore look at how we deal with the consequences of such a policy.

Expansion of higher education obviously has a cost. The cost of new facilities, hiring more teachers, providing more accommodation, etc. Students also need some money to live on. Even without this expansion, many universities are already struggling to pay their way. Universities get a grant from the government for each "home" (including EU) student. The level of this grant does not vary between universities ? though some recognition is given to more costly courses (such as medicine).

Current funding arrangements mean that Imperial College makes a net loss on each undergraduate home student ? a problem exacerbated by IC?s recent salary increases to "attract and retain the best staff". (The overseas student cash cow helps to make sure Imperial just about breaks even.) Furthermore, while there is a universal funding formula for teaching, the College is able to get more money for research if it shows better results. This causes a distortion in commitments where teaching is often compromised (something highlighted by the redundancies of non-research teaching staff in both Geology and the Medical School last year.) Aside from the operational difficulties, everyone here is more than aware of the critical need to spend money on renewing the College?s campus, facilities and residences. (Just sorting out the College?s electricity shortage will cost around £13 million. The South Side refurbishment is expected to come to £20 million.)

Whilst a costly central London location and the ghastly 1960?s buildings make Imperial?s problems worse, its funding difficulties are shared by many other leading universities. Government figures published by the audit office show that UK universities need an extra £1 billion a year to keep going and a capital injection of £5.2 billion to bring facilities up to scratch. And all the time there is the "brain-drain" of academic talent to the United States where academic pay is significantly higher ? as is funding of research and teaching facilities. So, if the universities are struggling to cope as it is, how will they cope with higher education expansion? Or more to the point, who will pay for it?

The government?s plans for higher education expansion play second fiddle to more mainstream commitments (to improve basic public services such as the NHS, policing, primary/secondary education, renewing our transport infrastructure and tackling urban deprivation). With the British electorate consistently voting for parties that pledge low taxes it is unlikely that the Exchequer can provide the significant increases in higher education funding that are required to sustain expansion. A graduate tax had been mooted, which would allow significant amounts of money to come in, perhaps facilitating a reduction in the up-front debt burden placed on students. With this in mind, the University of London Union (ULU) had lobbied the government to consider a graduate tax as an alternative to the current system of tuition fees and loans. However, the main problem with a graduate tax is that it would take a few years for the money to actually come in (after students start graduating under the new arrangements). It was also vehemently opposed by the National Union of Students (NUS) who saw it as another blow to the principle of free education. (Ironically the NUS also supports the expansion of higher education which makes keeping it free unsustainable).

While the government?s review of higher education funding is still under way, it has effectively ruled out the prospect of a graduate tax. This essentially means that the current system of tuition fees and loans is likely to remain the mainstay of student finance. Last week it was reported that the government was considering the re-introduction of grants for the poorest students. These would be around £30 a week in term-time. While this news has been enthusiastically welcomed by the NUS, one has to wonder how these grants would be paid for. Means-tested grants were recently proposed by the Independent, which suggested applying full market-rate interest rates to student loans. The rationale being that higher interest repayments would fund the grants that would reduce the debt burden for the poorest students. While this sounds reasonable in principle, its an over-simplification of the issues concerning student hardship. Those facing the worst hardship are not necessarily those from the poorest backgrounds. For example, there are quite a few cases where (for a variety of reasons) the parents do not provide the level of support the local authority expects. (A problem former ICU President, Hamish Common, used to be keen to raise.) The government has also, to date, failed to provide a realistic level of "London weighting" ? something that ULU has been campaigning about for some time.

Yet, tinkering with means-tested grants and market-rate loans are not going to provide the significant increase in funding required to sustain, let alone expand, higher education in this country. The problem is most acute with the leading research universities, which see their position in the world sliding with the lack of funds. The government is juggling competing priorities and something has to give.

UK academia is beginning to accept (albeit unwillingly) that sole reliance on state funding is not going to work. The original Dearing Report (which paved the way for tuition fees) had two of its key recommendations ignored. The first was the retention of means-tested grants for the poorest students. The second was giving universities flexibility in the level of tuition fee they wished to charge (read "top-up-fees" for elite universities and sought-after courses such as law and medicine). With the government now seemingly prepared to accept one of the two Dearing recommendations it ignored, it is conceivable it may accept the other. In March this year Margaret Hodge, Minister for Higher Education (and target of London Student?s Hodgewatch campaign) refused to rule out top-up fees.

The Russell Group (a self-declared group of 19 elite research universities, including Imperial) have formally adopted the position that any higher education should not be denied to potential students on the basis of their ability to pay. That does not represent a complete ruling out of tuition fees. Two Russell Group universities, York and Glasgow (who?s VC is to be London University?s next VC) have publically opposed top-up fees. But some others have been more receptive. It?s perhaps worth looking at our own Imperial College. In 2000, Natasha Newton, ICU President, was able to secure a "guarantee" from the then Rector, Lord Oxburgh, to "rule out" top-up fees. When Sir Richard (who was a member of the Dearing committee) took over last year, he was widely quoted in the press as suggesting students should pay fees of up to £20,000 p.a. He later told Mr Common (and Felix) that he had been "misquoted". However, since then he has made fresh comments saying that he favours the freedom to charge top-up fees. While he maintains that his "preferred" option is to be free of state-funding with a £1 billion endowment that is unlikely to happen soon (although it was suggested by the Tories at the last election) since "privatisation" of the universities could be even more polticially apocalyptic then top-up fees. It seems that there has been a shift in the College?s position on top-up fees and this is something that the should seek to clarify with the Rector. Its possible that the Rector?s comments are being made in an attempt to "hold the government to ransom" by demanding more money to avert top-up fees but it?s a fairly hollow threat since the government would need to first grant powers to charge such fees.

Any introduction of top-up fees (even in limited form) fees would be politically explosive. At last year?s Labour Party conference, Tony Blair recognised that tuition fees had been a major campaign issue on the door-step. The government would need to offer sufficient carrots (such as headline-appeasing student grants) to be able to introduce such a measure. Of course top-up fees would act as a further barrier to higher education, putting the government?s targets in jeopardy. The paradox, however, is that there don?t seem to be too many alternatives if the government?s expansion targets are to be met.

So what will the government do? Well, with endowments, graduate taxes and top-up fees unlikely to figure, there will be some playing around with grants and market-rate loans. But the government doesn?t seem to have any long-term solutions. It seems the more prestigious research universities will be forced to build-up their own endowments through fundraising (Imperial is aiming at raising £350 million in five years). The universities lower down the pecking order are likely to wither away. As for the government?s "50% in higher education target"? They?ll probably have to find some way of claiming it without achieving it. Vocational education is already considered to be in the higher education sector. Perhaps they will just classify modern apprentice-ships to be too?

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Discussion about “Funding conundrum”

The comments below are unmoderated submissions by Live! readers. The Editor accepts no liability for their content, nor for any offence caused by them. Any complaints should be directed to the Editor.
1. Sunil   
Aug 13 2002 02:53

I think the solution is perfectly simple.

Keep the Russell Group and other genuinely world-class institutions state-funded but with larger handouts. This way you don't lose out on the poor students, but at the same time you don't compromise standards. This is vital.

This could easily be subsidised by the other universities being set free to charge fees for those who can afford them. Some form of means-tested grants and fee waiver could be brought in to minimise grief for students who would otherwise be deterred from applying.

This way the Government funds the most important research and teaching without having to subsidise time-wasters, layabouts and mediocre students on "soft" degrees with two lectures a week and coursework involving analysis of porn movies.

Industry will only fund big projects in universities once they see a genuine commitment to excellence from the government with sustained investment at US governmental levels.

2. idris   
Aug 13 2002 14:53

Wha a bloody stupid idea: charge for the crap places and not for the good ones. Wakey wakey!

3. Sunil   
Aug 13 2002 19:17

Explain: why is it such a bad idea?

I laid out why it should be done above. You need more money going in to the best places, and at the same time you want to make absolutely certain that people from all backgrounds can study the very best courses. This is the best way of ensuring that in the immediate future.

If the crap places shut down because less people apply to study there, so much the better. I don't see why the government has to subsidise crap places at the expense of the Russell Group. Do you?

[Then we could have perhaps more plumbers so they could all stop charging ?60 for piddly little jobs.]

Aug 13 2002 22:37

Sunil, sounding a little like an elitist snob there mate. The UK still has relatively low university attendance as a proportion of the population but you?re encouraging a return to before the widening of access in the mid-20th Century when attendance was tiny.

Higher education fulfils a greater purpose than simply to create the next generations leaders, people at all levels of society can benefit from the skills and disciplines a degree (even media studies) can provide them with. Having had a fair amount of contact with corporate Britain, I wish more people were educated to good degree (not necessarily Russell Group) standards ? it?s the only way the UK will maintain any kind of advantage as a service economy.

Giving a free education to those who will benefit most from it is rather counter-intuitive (unless you think Russell Group grads should be somehow indentured to the state after graduation?). Also cutting student numbers to secondary and tertiary universities is bad for the top tier ones in the long run, thinking multi-generationally. The children of today?s ex-poly graduates are more likely to attend a Russell Group Uni than the child of one of your 60 quid plumbers (a sad fact but one which will remain even if you make top-tier uni?s free).

I?d like to think we all want to see improved quality education with maximum availability and minimal student hardship. Given my earlier point that the Government is right to continue to widen access to higher education across the board, the only way for this and improved quality to reconcile is increased funding for the sector as a whole. My personal preference is for general taxation or possibly a graduate tax to fund this but I?ll leave it to wiser men (/women).

Doesn?t stop me taking the piss out of my parents for working at Portsmouth and Southampton Institute though..!

  • rob
5. stef   
Aug 14 2002 12:28

' Also cutting student numbers to secondary and tertiary universities is bad for the top tier ones in the long run'

Not just in the long term, but also relatively short term aswell. A large number of MSc students are from 'non-Russell' universities. Blocking access at a lower level would destroy most of the Russels in a very short period. Probably a good idea;)

Aug 14 2002 13:52

I know I said you'd never hear from me again, but I was getting bored, so ...

I agree that trying to restrict access is a bad idea, purely from a utalitarian point of view. As Stef has pointed out, this will hurt the Russell Group just as much as the lower-level universities. Idealogically, the idea of stating that one group of people deserves to be educated to the highest level they can achieve, but another may not, purely on the fact that they can't afford to pay their own way is frankly appalling.

The government's target of getting so many people into higher education may turn out to be impossible, but they should be lauded for attempting it. If they could come even close to achieving their goal, not only the individuals, but the whole country would be strengthened. But the question is how to pay for it.

As far as I can see, there is very little difference between a Graduate Tax and the repayment of a student loan - it comes out of your pay-packet at a pre-determined rate and it only affects people who've taken a degree. So let's combine the two.

Let's set the fees, possibly twice or three times rate they are now, but probably not a lot more, and combine them with a realistic student loan for living expenses, which can be repaid in the current manner.

This has the advantage that people will make a contribution to their fees, but at a time when they can afford to. It also removes the possibility of parents refusing to pay for fees, leaving hapless students having to pay them out of their loans. When repayments start, there would also be an eventual end in site, rather than a tax until death, or a huge debt to the university.

There are, of course, disadvantages. People would leave with much larger debts, which could be a turn-off to poorer applicants. But with no 'up-front' expenses, this should not be too much of a hinderance.

There is also the problem that even tripling the fees would not be enough for some universities. But it would certainly go a lot further than the current system.

The other stumbling block is that universities would have to wait at least three years from the start of such a scheme before they got any money. This would need government spending in order to fill the gap, but for such a short term, this should be feasible.

7. moi   
Aug 14 2002 14:34

Does anybody know why the mail service on Arif's website doesn't work? I need to check my emails!!!

Aug 14 2002 17:33

Stuart, there is a subtle difference between a graduate tax and the current system (which was debated in excruciating detail at ULU Council...). A graduate tax would be universal. Every graduate would pay, say, an extra 2 or 3 pence in tax. This means that everyone "pays back" the same amount - regardless of the support they required at university. The advantage of this is that students from disadvantaged backgrounds don't have to pay back more than their more affluent colleagues. So, it really is not a form of debt - just self condemnation to a higher rate of income tax. The disadvantage is that by breaking the link between level of support and amount of pay back is that you take away from people part of the personal responsibility that they currently exercise (i.e ., at present if you are careful with your money and need to borrow less, you pay back less. With a graduate tax that wouldn't be the case.) Whether this is good or bad overall is a matter for debate.

Of course a graduat tax is not just a substitute for paying back of "loans". It can also be a substitute for up-front tuitition fees as well / instead. Removing this up-front financial obstacle was why ULU lobbied the government to consider it.

Aug 14 2002 17:34

Dear "moi", look at - if one of the email systems is broken try one of the others...

Aug 15 2002 14:43

Well, I'm sure that everyone agrees that any kind of up-front payment is a BAD IDEA, so lobbying to remove this part is a definite must.

But I'm not convinced that a graduate tax would be the best way forward. Quite often, taxes are imposed as a discouragement - taxes on alcohol, tobacco, cars with higher fuel consumption and so forth. Is it really a good idea to introduce what could be seen as a penalisation against going to university? This, surely, would not help to meet the government's target.

And would this tax include the student loan repayments, or would this have to be paid back seperately? Let's hope that the former situation would prevail, as lumbering graduates with both a tax and a huge debt would be ludicrous.

Aug 15 2002 15:22

Stuart, I think the idea was that there would be no loan repayments under a graduate tax scheme.

You also need to remember that ULU did *not* lobby for a graduate tax. They merely lobbied for such a concept to be *considered* by the government as part of their wide-ranging review of HE funding (due to report in the Autumn). While you, I an d many others would prefer to see taxation (if that's how we're going to pay for it) come from income tax and not a graduate supplement, political realities make it difficult for the government to introduce such a measure.

Aug 15 2002 18:00

I think you're probably right, Mustafa. Although ideally we'd prefer not to have to pay, realistically, we'll all have to in the end. From a socialist pint-of-view, we should probably be glad to help to pay for a service that benefits the whole community, as well as providing for those students who come after us.

13. Sunil   
Aug 18 2002 01:02

This is not an ideal world and others have pointed out why graduate taxes are unworkable and why the socialist ideal of degrees for all is unreachable in the next x number of years.

In the meanwhile, it is critical that the best institutions be protected from decline while we go on wrangling about how to widen access to education to everyone. There's little point in widening access if every country from the US to India ends up having better institutions than Britain, institutions that over time are attracting the best talent away from here.

My interest is simply in preserving the present degree of educational and research eminence in the country, while at the same time trying not to narrow access down. Certainly not to the very best institutions. Top-up fees or other schemes diverting funding away from the Russell Group may widen access for all in general but will almost certainly restrict access to the Russell Group for poorer students. Which is ultimately counter-productive.

[Also, you don't really need a degree from anywhere to be a cultured, educated or well-read person in a general sense. That's more down to your upbringing and schooling. When you do absolutely need a degree is if you require specialised high-level training to enter a particular academic field.]

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