The Russell Group claims that Britain faces meltdown if funding cuts are carried out. Now like our private schools, our universities are an excellent industry, competing well on quality and earning export credits for the UK. If you described any other industry in those terms, you would struggle to connect it with the word ‘meltdown’. Firms that offer world-beating services, encouraging customers to move from all over the world to experience it, tend to do well.
The reason for this paradox is that universities are not able to charge all of their customers anything like the proper going rate for their services, and hence rely on a large, politically vulnerable subsidy. Terence Kealey – a vice-Chancellor* – identifies the solution when he says in the Guardia:
Universities that take government money are not allowed to charge the fees the market would bear, nor to expand popular departments or courses. These restrictions on the market are self-defeating.
He predicts that an inability to charge will lead to universities discriminating more by ability-on-entry – which would disadvantage poor students, naturally.
The FT goes into more detail. As well as calling for an end to national pay bargaining, and more openness to prospective students as to what they will be offering (hence making it more obvious to the consumer what he/she will be getting), they suggest lifting the cap on student fees, and allowing interest on student loans.
Terence Kealey points out that higher tuition fees have not so far discouraged poor students:
The fear that higher top-up fees will deter students, particularly from poor backgrounds, has been disproved by the increasing demand for places. The demand is rising because students understand that education is not simply a right but an investment.
Such reforms make sense. As the FT acknowledge they are “politically contentious . . . they cannot be justified unless universities have demonstrably done all they can to make the market work well.” The customers are adults, capable of making rational choices. What matters is giving them that choice, a decent funding arrangement so they pay when they can, an industry that can expand supply when demand rises, and above all a better pre-18 years education system so that more people can get in the position to make the choice.
It makes sense to subsidize it a little, because good educations yield great externalities for all of us. But most of the benefit is privately enjoyed, and in a time of fiscal strain it makes sense to charge more for it, rather than tax the less educated.
In a tight fiscal situation, money is better prioritised lower down in primary and secondary schooling. See Time’s Up.
*Hat-tip to Tim, below: worth pointing out that T Kealey is VC of the only private university in the country.