Mixed market messages: the cost of reforming British universities



One thing is clear about the government’s recent proposals to reform higher education: they will shape and sculpt the UK’s higher education system for the foreseeable future – but at what cost?

In its Fulfilling our Potential green paper, published in November, the government set out how it wants to both control the price of higher education, through tuition fees, and determine the quality of teaching through a proposed Teaching Excellence Framework (TEF), which plans to reward universities with the best quality teaching. The overall objective is to improve the quality of teaching in universities, as well as the esteem associated with teaching, and enhance social mobility.

These are laudable and valuable objectives, but the government’s strategy for achieving them is riven with contradictions.

Imagine a world where you wanted to buy a shirt. Now imagine that the government has set a maximum price for all shirts of £25, regardless of colour, size, shape or quality – from Prada to Primark, from Spandex to silk. All shops are selling all shirts at the same price. Now imagine that the government decides to introduce a way to measure the quality of shirts, even though they all cost £25.

Now substitute your shirt for higher education and the cap on tuition fees and we begin to see the inherent contradiction at the heart of the proposed reforms. The government has stated a commitment to “an open, market-based and affordable system with more competition and innovation”. If the government believes that higher education should be “market-based” then the logical place to start is by removing the cap on student fees.

Unmaking a market

The market will, in time, adjust – universities providing higher quality education will charge more, and low-quality providers less – just as happens with shirts in real life. This is basic market economics.

Yet, if the government doesn’t believe in this approach, then the logical step is to lower the cap on student fees and for the state to take on a greater burden for the cost of higher education. Here – as the main “customer” – the government would be in its rights to regulate and influence the market to ensure it is getting high-quality provision on behalf of taxpayers.

As things stand, the government is committed to an open market but is simultaneously and unusually, compared to other sectors, trying to regulate both price and quality.

An analogous sector might be energy where there is also a strong public good argument that we need electricity, just as we need a trained work force. But even here, the regulator Ofgem, explicitly states that it “does not regulate energy retail prices” and that its role is to “promote competition”, which they believe “acts as an effective mechanism to drive down prices and promote higher quality service”.

Other ways to advance social mobility

The capping of tuition fees is part of the desire to keep UK higher education affordable in order to enhance social mobility by pushing for “better access, retention and progression for students from disadvantaged backgrounds and underrepresented groups”.

This is a key initiative and should be applauded. But there is no need to achieve this through the fees cap – it could be achieved equally and effectively in other ways. For example, in a truly market-based higher education sector, universities could be forced to establish scholarships and other social mobility funds – perhaps through a tax on revenues – to help meet this aim.

There also seems to be an assumption at the heart of the proposals that the real customers of higher education – 17-year-olds (and their parents) – are unable to identify quality and that the information to support their decision-making is not available. The solution currently being proposed is for the government to provide a kite mark of quality and then “permit” universities to charge a little bit more (in line with inflation) if they meet the government’s quality threshold.

Yet, the proposal does not take into account the mass of information available to make such decisions – for example, various “good university guides” published by national newspapers and, increasingly, apps that allow students to provide immediate feedback on lectures. There is no guarantee that better information will be provided in the future than is already available.

Some universities may go private

The consequences, intended or unintended, are that the government is trying to retain influence and control over the higher education market while simultaneously demanding that it is an open market with light touch regulation.

For institutions in that market, this is an unattractive and unappealing position to be in. Doubtless some – perhaps many – universities will begin to wonder what advantage they derive from staying in that market, particularly those institutions with excellent teaching and research. The obvious choice for these institutions is to decide to opt-out of the system and go private, allowing them to set their own standards and their own fees, beyond just the rate of inflation.

Ultimately, this will leave us with a two-tier sector and although we do not know precisely what this would look like, it is likely to take us away from the laudable objectives of the proposed reforms. If that is the case, it will come at a great financial and reputational cost to UK higher education.

Author Bio: Jonathan Grant is the Director, The Policy Institute and Professor of Public Policy at King’s College London