Oil on troubled waters

From the desk of Lord Browne of Madingley to secretary of state Vince Cable

Dear Vince, I got your message about the difficulties with the White Paper. I'm happy to do a bit more to help.

You do seem to have got into a muddle over markets, because "market" usually means a coming together of buyers and sellers free to decide how much to buy or sell, from or to whom, and at what price. But in your market, the government wants to tell sellers what to charge, how much to sell and to whom, and dictate to buyers the best places to buy from.

The coalition also wants to tell some sellers that they should get out of the business and others that they are not selling to the right kind of people. This is presumably not what you meant when you said last July that you wanted the higher education system to deliver better outcomes by "allowing the market to operate more freely".

Luckily, we can learn from the private sector (that's why I didn't need to commission any research for my first report) because higher education is just like oil. It is produced and consumed all over the world, and by the time it has been refined and sold at the service station, almost every brand does exactly the same thing.

We already have some of the most expensive fuel in the world, and next year we will be able to say the same about higher education.

So for the White Paper, I suggest you go back to basics (you probably won't want to use that exact expression). Higher education, like fuel, comes in two basic kinds, which need different sorts of intellectual engine.

In the motor industry, the elitists prefer petrol (think Formula 1); so do the aspirational commoners (think Jeremy Clarkson). It's the same in higher education: the people who matter think some subjects are more important than others. We'd probably better not call them "priority subjects" this time, but they are more expensive and some of them take much longer to study.

To make it easy to learn the lessons of the oil business, let's label the important subjects Protecting Everything Technical Regardless Of Length (Petrol) and the others Doing Intellectually Easy Subjects - Education-Lite (Diesel).

So much for the product; now let's look at who is selling it.

Petrol and diesel are really commodities, the same wherever you buy them, so to improve profit margins you need to differentiate by branding. Higher education is the same - best to keep it simple by starting with just two main brands. There is the premium price product, the kind that people like us buy for ourselves. Let's call that Built-in Privilege (BP). And then there's the other stuff that's OK for the common people. Let's call that Standard Higher Education/Lifelong Learning (Shell).

You sell different brands at different service stations. To protect the premium price for BP you need to invest, especially in information, advice and guidance, as I said in my first report.

Otherwise, lots of people who could afford BP will prefer to buy Shell because it's locally accessible, they like the other customers and the people running the service stations, and they are more likely to get what they need. So as my first report said, they need advice and guidance to get them to choose what they don't want, because student choice must be paramount.

Not for hundreds of thousands of people, obviously, or it would destroy the market premium - just enough to give your policy the illusion of meritocratic social mobility for people who don't know any better. About 3,000 should be enough. For a target group, I suggest the "Students UTTerly Outstanding, No, TRUly Sensational Token 3,000" (Sutton Trust 3,000).

For the other million or so, it doesn't really matter who sells Shell, so I think you're right to let anyone open a new service station. That will mean that, for all the Shell stations, simply surviving will keep them too busy to complain. And pretty soon you'll get some new brands emerging, with names such as BP-Private (BPP).

We must protect the premium price for BP in the world higher education market to preserve our elite universities and their global competitiveness (I think I'd keep out of Russia, though). Is that enough for the White Paper?

All the best

John