Treasury Committee inquiry: tackling higher education's 'knottiest problems'

It has been 20 years since the publication of the Dearing Report and just five years since the first cohort of undergraduates who were charged fees of up to £9,000, as a result of changes introduced in response to the Browne Review, entered university. Yet there is already talk of another government inquiry into higher education, with the Treasury Committee leading the charge, by holding its own investigation of “student loan systems and related financial implications”. 

The terms of reference for this inquiry make it clear, if there were ever any doubt, that the knottiest problems underlying the future size and shape of any higher education sector are about its funding. These questions are most acute when there is a commitment to widen participation and, as in the UK today, more than 50 per cent of young adults have a higher education qualification.

The country as a whole spends 1.8 per cent of its GDP on tertiary education (compared with an OECD average of 1.5 per cent) but more than 70 per cent is from private sources – mainly student fees – compared with an OECD average in which the position is reversed, so that about 70 per cent is from public sources. 

From these headline figures (which include data from Scotland and Wales, where the student’s contribution to the cost of her university tuition is smaller or non-existent), the radical nature of the solution that England adopted in 2012 to fund undergraduate education is clear. In support of these moves, politicians – in particular the minister then responsible for higher education, David Willetts – claimed justification from the economic theory of markets: creating a system in which the fee would follow the student and uncapping of places would enable institutions to be responsive to the pattern of demand from applicants.

In this model, the argument continued, price competition would occur naturally and quality would be assured by incentives created within a demand-led system, with only light-touch regulation needed. 

While this basic market theory might serve as a good model for consumer goods that we buy and restock on a regular basis in our weekly supermarket shop, we already knew by 2012 that, for most young people at least, the level of tuition fee was not a significant factor in the choice of university or subject. We had also seen that universities behaved as if they believed in "premium pricing" – charging the maximum fee possible, on the basis that cost is an indicator of quality. Somehow though, it was thought that a near trebling of the fee cap would change these behaviours. Now we know this was not the case, either for applicants or for institutions. 

The 2012 changes also perpetuate, and place increased emphasis on, three key inconsistencies in thinking that already underpinned the English system of undergraduate fees and funding. First, they treat students as if they were both dependent family members and independent adults – the size of maintenance loan (and many institutional bursaries) available depends on a student’s family circumstances, but she is told she is taking out a loan that she will only pay back from her own income as a working adult.

Then, applicants are told that a degree is an investment in their future, which will result in higher lifetime earnings, but not to worry about their student debt, as they will not pay it off if they do not earn enough (indeed figures from the Institute for Fiscal Studies suggest that, under the latest repayment terms, less than a quarter of all graduates will pay off their loan completely before it is written off 30 years after graduation). And finally, we are told that it is right for students to share the cost of their degree with the government, because they are major beneficiaries of their higher education, but with no explanation of why another category of significant beneficiaries – employers – is excluded from the cost-sharing model of funding. 

Twenty years ago, the Dearing Report recognised that “employers, too, are major beneficiaries of higher education through the skills which those with higher education qualifications bring to the organisations which employ them...With a movement to a knowledge-based economy that depends even more on the knowledge and skill of individual workers, this is likely to be increasingly the case as we advance into the next century.” 

By introducing the apprenticeship levy, we have finally taken a welcome first step towards acknowledgement of the direct benefits that employing organisations gain from access to a more highly qualified national workforce.  Therefore, above all, I trust that the Treasury Select Committee’s inquiry – at which I am giving evidence on Wednesday (18 October) – will place the question of employer contributions firmly on the agenda of the national debate about sustainable and fair funding of higher education.

Helen Carasso is pathway convener for the MSc in education (higher education), department of education, University of Oxford.