Public money, private pain

The blurring lines between public and private colleges could have mixed consequences. Alison Goddard reports

Private higher education institutions are on the cusp of change. Private and public sector colleges are in competition following the introduction of tuition fees at public sector universities and persistent rumours that institutions will soon be allowed to set their own fees. The blurring of the distinction between private and public higher education could lead to problems for private providers.

The 60-odd private establishments in the UK range from large, multidisciplinary institutions, such as the University of Buckingham, to small, specialist providers. Larger institutions appear to be faring at least as well as the public sector universities, but some of the smaller colleges face tough challenges.

"Small colleges will merge or be taken over by larger institutions," says Marcel Van Miert, director of the independent European Business School London and chairman of the Council of Independent Colleges and Research Institutes. "The blurring of the distinction between public and private has positive and negative consequences. On the positive side, it is the start of recognition of what the private sector provides. On the negative, it could be a recipe for disaster for small, independent providers."

The University of Buckingham has two intakes a year, in January and July. The most recent was the biggest ever, according to vice-chancellor Robert Taylor. The university is doing particularly well at attracting more postgraduates.

Professor Taylor is looking forward to the full competition he believes will come with what he sees as the inevitable introduction of differential fees. "It will heighten the concept that value is paid for. One of the reasons the University of Buckingham exists is to make the point that value and price are related," he says.

But Robert Pearce, pro vice-chancellor at Buckingham, points out that higher education has become more competitive since the university was founded in 1976. The creation of more universities in 1992 and the increase in the number of places means the size of the original untapped market envisaged for Buckingham has been reduced.

The Mountview Theatre School - a smaller, specialist institution with 310 students - is beginning to feel the squeeze, ironically because it is taking more money and students from the public sector. Mountview was allocated 55 student places under the Higher Education Funding Council for England's new dance and drama awards, for each of which it will receive Pounds 6,250 from HEFCE and Pounds 1,025 in student tuition fees.

"We are getting less from HEFCE than we anticipated from charging fees," says principal Paul Clements. "We have decided not to charge private students more than the price of a publicly funded place. It is going to be a struggle, but it is going to be a challenge, too." To remain viable, Dr Clements is aggressively recruiting overseas students and reducing contact hours for students from 37 hours a week, although he will not go below 30.

Accepting public money reduces flexibility for private institutions. "With public money the kind of pressures the public sector is under are entering the private sector," says Dr Clements.

At present the government contributes towards the costs of students at a recognised list of private institutions. From 2000, private higher education institutions will be able to claim public money from HEFCE if at least 55 per cent of their full-time enrolment follows a higher education course. Other options for accessing public funds include forming a link with a publicly funded institution, which validates the private institution's qualifications, and merging with a publicly funded institution.

Professor Taylor says: "In the public sector the government straitjacket is getting tighter. We want to make sure we don't take money with strings attached."

Mr Van Miert sees as unfair competition the growth in the number of public institutions offering subjects that were previously the domain of the private sector, and public institutions offering private courses. "It is still not a level playing field," he complains. "It is unacceptable that some institutions that are fully supported by government are also allowed to operate in the private sector, providing private courses."

His argument is that public sector universities receive public funding for central facilities. Sharing resources also takes place in the private sector. For example, the European Business School shares its central London site with the British American College, Henley Management College and the School of Psychotherapy and Counselling. "This is where we try to get the same economies of scale as large universities," says Mr Van Miert.

Private institutions are also eyeing the threats and opportunities posed by corporate universities. "Within five years, corporate universities will be spun off by their parent companies and will become major players in the for-profit higher education market," Jeanne Meister of Corporate University Xchange, an education and training consultancy firm, told a conference in London last week.

But new competitors could become new collaborators for colleges with degree-awarding powers. Ms Meister adds: "Corporate universities will have to team up with accredited ones." The globalisation of higher education will further blur the boundaries between private and public sector providers, according to Mr Van Miert. "Once we start to move towards a privately funded higher education system, students will be able to choose between private and public sector institutions here and abroad. The UK must become competitive globally."