Quality, Equality and

Economy ( “So, how did it go with deregulation in England?” )

HE Reform

Summit Melbourne

12-13 November 2014

Professor Chris BrinkVice-Chancellor

Newcastle University

UK

It started in Newcastle …

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• 14 Sept 2007: Northern Rock applies for a bailout to the Bank of England

• Next few days: the first run on a British bank since 1866

• Start of the global financial crisis

• Kickstarted reconsideration of Higher Education in England

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• In England: the Browne Review 2009-10“In November 2009, I was asked to lead an

independent Panel to review the funding of higher

education and make recommendations to ensure

that teaching at our HEIs is sustainably financed,

that the quality of that teaching is world class and

that our HEIs remain accessible to anyone who

has the talent to succeed.” Lord Browne of Madingley

Introduction to the Browne Review, 12 October 2010www.independent.gov.uk/browne-report

Reconsidering HE in England and Australia

• In Australia: The HE and Research Reform

Amendment Bill 2014“The main purpose of this Bill is to enable reforms

to expand opportunity and choice in higher

education in Australia, and ensure that Australia

is not left behind at a time of rising performance

by universities around the world.”

UK HE deregulation: a short chronology

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• 6 May 2010: UK General Election yields Coalition Government

o … leading to various blue/yellow trade-offs & compromises

• 22 June 2010: Emergency budget in parliament

• 12 Oct 2010: The Browne Review reports

• 20 Oct 2010: Comprehensive Spending Review o Higher education spending to be cut by 40%

http://www.bbc.co.uk/news/uk-politics-11579979

o 44% reduction in capital by 2014-15

o Flat cash protection for Science and Research

• 4 Nov 2010: Gov’t proposals on fees deregulation o Tuition fees from £3,000 to £6,000, or £9,000 “in exceptional circumstances”

• 9 Dec 2010: Government wins vote on tuition fees in Parliament: 323 - 302.

5 weeks

UK HE fees reform in a nutshell

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A “lite-Browne” approach:

“A new £6,000 minimum annual course fee

is to be introduced. However, some

universities can charge up to £9,000 in

"exceptional circumstances”. Loans will not

have to be repaid until a graduate is

earning £21,000 a year. Graduates will

start repaying their loans at 9 per cent of

their income at a real rate of interest when

they earn £21,000. They will face interest

repayments of inflation [RPI] plus 3 per

cent if they earn more than £41,000 per

year. After 30 years, outstanding debts will

be written off.”

4 November 2010http://www.independent.co.uk/news/education/education-news/rebellion-

fears-as-tuition-fees-rise-to-1639000-2124588.html

UK HE deregulation: a short chronology (2)

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• August 2012: First intake of students under new fees regime

• Dec 2013: Student numbers deregulation: Chancellor’s Autumn Statement

• Oct 2014: HEFCE consults on quality assurance deregulation

So: Fees cap, but no numbers cap

Who said what when?

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• “I pledge to vote against any increase in fees in the next parliament” LibDem leader Nick Clegg signing a student

petition, election campaign 2010

• The cost of HE is “a burden on the taxpayer that has to be tackled”

David Willetts, The Guardian, 9 June 2010, http://www.theguardian.com/education/2010/jun/09/david-willetts-students-tuition-fees

Who said what when?

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“Mr Deputy Speaker, this emergency budget deals decisively with our country’s record debt.

…

The formal mandate we set is that the structural current deficit should be in balance in the final year of the 5-year forecast period, 2015-16. … This mandate will be supplemented by a fixed target for debt, which is that in this parliament we ensure debt is falling as a percentage share of GDP by 2015-16”

George Osborne, Emergency Budget speech, 22 June 2010

http://www.theguardian.com/uk/2010/jun/22/budget-2010-vat-austerity-plan

Who said what when?

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“Universities Secretary David Willetts made it

clear last night that such [exceptional]

circumstances would apply to elite

universities such as Oxford and Cambridge

which are trying to compete on a world stage

with institutions from the United States.

…

He said he could also foresee a growth in

two-year degree courses, with universities

charging students £7,500 a year for a 48-

week course rather than £6,000 for a three-

year version.

…

Mr Willetts added that the Government was

considering a 5 per cent levy on those who

sought to repay their loans in full immediately

after graduation.”4 November 2010

http://www.independent.co.uk/news/education/education-news/rebellion-fears-as-

tuition-fees-rise-to-1639000-2124588.html

Mantras of deregulation

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• Expand student choice

• A market economy in HE

• HE as a private benefit

• More private providers

• Competition will drive up quality and drive down price

• HE remains free at the point of access

• Pay back once you earn

• “No win, no fee”

The Main Idea: The paymaster will change, from the state to the student

So how did it work out ?

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• National finances? (UK, not just England)

– National debt up from £0.76tr (51% of GDP) in 2010 to £1.26tr (75% of GDP) in 2014

– Structural deficit down from £121bn (8.5% of GDP) to £84bn (5% of GDP)

• University finances? – Some universities have done well. Student numbers up means

finances up.

• HE less of “a burden on the taxpayer” ?– No. Government not saving any money

– Projected 45% non-repayment of debt (“RAB charge” intricacies)

• Prices down? Market Economy? Fee variation? – Almost none.

– Virtually every (“public”) university charges £9K

– … irrespective of the degree course on offer

– “It’s a funny market where every product costs the same”

So how did it work out ? (2)

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• Quality up? – A (welcome) increased focus on teaching & student experience

– National Student Survey scores as a KPI

• Student numbers? – Took a dip in 2012, but now more than recovered nationally

– Uneven across the sector

• Disadvantaged students? – Enrolments went up, not down

• Postgraduate study? – No loan system

• Free at the point of access? – Yes

• “No win, no fee” – Yes

• Two-year degrees? – None amongst “public” universities

Some observations

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Most universities will outlast most governments

HE is both a private benefit and a public good

“If it walks like a tax, and it quacks like a tax, perhaps it is a tax”

“Never let a good crisis go to waste”

Loan money going out is real money. Money coming back is funny money.

Some observations (2)

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• Unintended consequences – Flat fee everywhere for everything

– Coupling high fees to conditions on accessibility was intended to enable “elite” universities to charge high fees, provided they increase accessibility. Instead, it enabled any university which met accessibility criteria to charge high fees, regardless of quality.

– 3 x £3,000 = £9,000, but 3 x £0 = £0. No new expectation on those below the (increased) threshold

• Perverse incentives – We offer a fantastic deal to any student with no desire to earn

above £21K p.a. (against average national income of £26.5K, and starting point of £10K for paying income tax)

– We offer every incentive to UK students to go and study elsewhere

– Expanding student numbers in low-cost high-volume subjects makes more financial sense than expanding high-cost subjects like Science or Engineering

Some questions

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When does letting go of the regulatory levers of government become an

abrogation of responsibility?

Should we charge what it costs, or charge what the market will bear?

Is “no win no fee” fair?

When the university admits a student, the government is obliged to give that

student a loan. Why?

HE as Veblen goods?

Thank you

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Thank you