IFS: tighter rein in Augar and Labour plans could be ‘right direction’

English universities have been accepting a greater share of applicants to cheaper-to-provide courses than their Scottish counterparts since tuition fees tripled to £9,000 in England, according to an analysis.

Such a move would be “consistent” with institutions wanting to take advantage of the extra income available from classroom-based courses that are cheaper to teach, says an annual report by the Institute for Fiscal Studies on education spending in England.

This shift could be “exacerbating” inefficiencies in the student loan system, the IFS adds, with such courses often being in subjects that need a bigger loan subsidy owing to lower graduate earnings.

The IFS goes on to suggest that one positive aspect of the reforms put forward by the Augar review of post-18 education in England – as well as Labour’s 2017 election pledge to scrap tuition fees – would be that such subject-related incentives could be reduced.

An IFS report published earlier this year showed that estimated differences in the rates of loan repayment by graduates mean that the government now spends about 30 per cent more on a creative arts degree than it does on a degree in engineering.

In its latest review of education spending, the IFS says one “concern in terms of the design of the system” was that it had the potential to “generate incentives for universities to expand” areas that were cheaper to teach, “further exacerbating” inefficiency.

It points to data from Ucas that show that the share of applications receiving offers on the cheapest-to-provide “band C” and “band D” courses are now much higher in England than in Scotland, which has no fees for domestic students.

“Acceptance rates have gone from being nearly identical in the two countries to being around 20-30 per cent higher in England,” the report says.

“This is consistent with English universities responding to new incentives by doing more to keep Band C and D courses full, although on their own these data cannot prove that this is what is happening.”

The IFS report goes on to say that the Augar proposals, which if implemented could see some subjects receiving more direct funding than others, would, “it is hoped, reduce incentives for universities to expand in ways that the government might not see as desirable”.

Labour’s policy to reintroduce a system funded through direct public spending would potentially allow even more control on where money is directed, although with a risk that caps on undergraduate numbers would need to be reimposed, the report says, and at a higher cost to the Treasury of at least £6 billion a year.

Re-establishing such quotas would mean a return to a system that was “heavily criticised” in the 2010 Browne review of university funding. “However, few would argue the ‘2012 system’ has been an unmitigated success,” the IFS report adds.

“While Browne hoped that we would see competition on both price and teaching quality, the higher-than-expected fees, rapid recent growth in the number of good degrees (firsts and 2:1s) being awarded by English universities, and the large increase in unconditional offers all appear to be evidence of universities competing in ways that were not intended and are not desirable,” the report says.

“Both the Augar and the Labour proposals would represent moves towards a more closely regulated market, which is probably a move in the right direction”, although the “degree of movement is very much a judgement call” that “deserves careful consideration”, the IFS says.

simon.baker@timeshighereducation.com