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Published: 07/11/18

18-year-olds are pretty diverse, but they tend to have one thing in common: as any parent knows, they don’t have money. This is a problem for any government working out how to fund its university system. Universities are expensive things to run: high quality staff, state-of-the-art laboratories, extensive IT systems and so on. There are not many options for governments in solving the riddle of how to pay for higher education.

Historically, government paid, meeting university costs out of general taxation, so that a university education was essentially free for those lucky few who went.  But this was viable only for very small university systems and, understandably, impossible to scale up as governments around the world increasingly recognised that investing in higher education is an essential foundation for a high-skill knowledge-based economy. If some remain unconvinced, we see further evidence again this week in the Commons Select Committee report, citing that high levels of university participation benefits individuals and society, generates better productivity, lower long-term health and social costs, and more engaged citizens.

In 2012, the Coalition government developed an elegant, if complex solution to the problem. There would be almost no public funding for teaching in universities. Students would instead take out government-based but essentially private loans to meet the full, £9,000 costs of tuition, and would repay them once their salary passed a given threshold. They would repay at a percentage of salary – a marginal rate of 9% - and any unpaid loan would be written off after thirty years.

The Coalition’s reforms worked: participation in university rose, and rose most amongst the most disadvantaged teenagers. Because costs were met through private transactions, governments no longer needed to control the numbers of students attending university. So successful was the scheme that in 2015 government extended the tuition fee loan to cover all maintenance costs. 

But if the reforms worked, they created the perception, at least, of losers: graduates emerged from university with apparently eye-watering loans.  Government, itself using a complex formula, inflated the interest rate on loans. By 2017 new graduates were looking at debts of up to £50,000 on graduation. Labour went into the 2017 election promising to abolish fees and their success drove the government to establish a review, chaired by the former investment banker Philip Augar. This week’s leaks suggest the Augar review is looking at a plan to cut fees to £6,500 or £7,500 with higher fees for science and technology subjects.

The problem for the government is that this proposal does almost nothing to solve any of the real or perceived problems of the current system. The direct effect is modest: it would cut debts on graduation from £50,000 to about £43,000. There are much more deep-seated issues at stake. We won’t begin to solve the problems of student finance without a fundamental re-appraisal of the role of universities in our education system, our economy and our society. 

Three times in the last five decades government has managed growth in the university system: the ‘new’ universities of the 1960s, the conversion of polytechnics into universities in 1992 and the Blair government’s adoption of the 50% target for university participation. Each of these ‘worked’ but each was grafted onto a complex, hierarchic institutional structure which did not ask underlying questions about what universities are for, nor address even tougher questions about the relationship between the university system and other parts of the education system, including the now deeply financially strapped further education colleges. As a result, the nation has confused expectations about its universities. It wants them to be selective and accessible, elite and popular, economically-relevant and places of critical reflection, traditional and modern.

We face critical decisions as a nation over the next few months, but surely the most critical of all relates to the future of our young people. Whilst Augar and colleagues will no doubt be understandably frustrated by the distraction of recent days, their work remains a real opportunity for fresh thinking and innovation in the sector. Of course, fees need to be part of that debate, but there are much more fruitful discussions to be had around the relationship between higher and further education; between diversity and distinctiveness; and between skills and social mobility.    

We need to recognise, and rapidly, that a successful twenty-first century economy depends above all else on engaging universities  - the serious hubs of knowledge creation and high level skill development – with their communities, and build funding and incentive structures which require them not just to educate 18-year-olds but to shape lifelong engagement with re-skilling.  We need to see universities as the major driver for city and regional economies, and place them at the centre of our economic thinking. And that means abandoning some of the old ideas about hierarchies of institutions: we need all our universities.

Around the world, governments are investing in their university systems because they know, as Andreas Schleicher from the OECD puts it “you can go in to the race to the bottom, lowering wages for low-skill jobs. Or you can try to win in innovation and competitiveness”. Universities matter enormously to the nation if we want to win. Their funding matters to all of us, but their power and impact matter more.


The author:


Professor Sir Chris Husbands, Vice-Chancellor

Professor Husbands is Vice-Chancellor of Sheffield Hallam University.

"We won’t begin to solve the problems of student finance without a fundamental re-appraisal of the role of universities in our education system, our economy and our society."