Uncapping the sector is a risky business

Source: Paul Bateman

The relaxation of controls appears to be the final, desperate attempt to create a market in higher education where there has been none so far

In December, the chancellor pulled a rabbit out of his hat in the Budget, taking us all by surprise with his announcement that the cap on student numbers would be removed.

Some in the sector were bemused. A few cheered first and asked questions later.

The obvious, immediate question was how and why, having starved the sector of money over the past few years, George Osborne could now pledge the resources for 60,000 additional students, with the promise of more funding if more were recruited. Challenged to explain how all of this would be paid for, he came up with the wheeze of selling the student loan book. This was rapidly characterised as a Ponzi scheme and a tale that, as a Times Higher Education leader stated (“Clap your hands if you believe”, February 2014), nobody actually believes.

Recently the pages of THE have been filled with more cheerleaders urging the government to go further and faster. My advice to these credulous souls is that they should be careful what they wish for.

Of course in an ideal world there would be no cap on student recruitment. Universities would be free to identify all those capable of benefiting from higher study and would recruit as many such students as they felt able to. But the cap exists for a reason. In reality, every student recruited costs the government money, and as the Higher Education Policy Institute has said for a long time and the government now accepts, they cost far more money under the new student funding system than was initially thought. That is why the cap exists and why all attempts to reform the system – most recently in the Browne Review of 2010 – have included such a cap.

So what is going on? It seems barely credible that the hard-headed Treasury, stuffed full of clever officials, did not realise what it was doing and had the wool pulled over its eyes by colleagues at the Department for Business, Innovation and Skills. The answer is probably to do with ideology.

Much of the rhetoric and some of the actions of the government have centred on the idea of creating a market in higher education. The government believes that a properly functioning market will drive down prices and increase quality (notwithstanding all the evidence to the contrary – remember that the government stated that a fee of £9,000 would be exceptional, because market pressures would lead to lower fees). In most important respects, however, the coalition has been unable to create a market, and controls on student numbers have been a particular source of frustration. At first, the coalition government introduced a pseudo-market, involving competition around “highly qualified students”, but that has had a dysfunctional and erratic impact. The complete relaxation of student number controls appears to be a final and desperate attempt to create a market in higher education where there has been none so far.

It is an experiment that is unlikely to succeed. The additional student numbers will have to be paid for. Given that the sale of the student loan book is unlikely to cover the cost, either the funds will be found by the government itself, which is improbable, or students will pay even more, which is possible. Otherwise the additional students will have to be accommodated without a commensurate increase in funding and with negative consequences for quality and standards. This is what has happened in Ireland, which, like Australia, allows uncapped recruitment: there has been a 25 per cent worsening of the student to staff ratio in the past five or six years. The lesson provided by the Australian experience – generally held up as an example by those who advocate instituting an uncapped system in the UK – is that a “demand-led” system works well if the government really is willing to provide an open chequebook. Sadly, that is not the case here.

We have been here before. The last time numbers were uncapped in the UK was during a brief period in the early 1990s. The policy was abandoned after just two or three years, but not before per capita funding collapsed by 30 per cent. This latest attempt, too, will end in tears – but conveniently they will not be shed before the election.

Who might gain? Those universities that are cash-hungry and careless of the quality of the education they provide. That is why in the 1990s the Higher Education Funding Council for England put in place a minimum level of funding that universities could spend on each student – in order to stop the “bargain basement” approach to higher education.

Who will lose? For sure it will be the students, who either will suffer a worse experience or will have to pay more for it. And of course the country as a whole will lose too, as the quality of its higher education and future generations’ prospects are put at risk for the sake of market ideology.