The University of Exeter’s decision to set fees at £9000 announced last Wednesday (http://www.guardian.co.uk/education/2011/mar/02/exeter-university-to-charge-top-fees) makes the choice facing university managers in other research-intensive universities straightforward. Game theory would suggest a petrol station price promise or a tag of ‘never knowingly undersold’ is a price signal to competitors, so Exeter’s £9000 is a signal to the rest of the Russell Group and 1994 Group to follow suit. The cap fits nicely and many universities will wear it. Not so David Willetts apparently, who at the Dearing conference in Nottingham reiterated his threat (since much repeated) that he had no appetite for the sector to cluster at the top of the fee regime and any clustering would mean the government would have to find further savings in the HE budget. This is a punitive action well within the style and appetite of this government. A £9000 fee also comes with strings, in the form of action to support social mobility. Call me cynical, but I genuinely believe that universities are good at jumping through quality and administrative hoops, so one more form from OFFA or Simon Hughes will not be beyond them. On a more uplifting note, who is to say that universities are not doing everything in their (not inconsiderable) power to pursue a policy that creates a diverse student body? Universities can call the government’s bluff on this one; well some of them can, as the UCU analysis in December aptly demonstrates
However, I think this is a phoney war at the moment. I can’t help feeling that the government will tolerate £9000 fees provided there is price differentiation in the sector, based largely upon university ‘type’. After all Vince Cable and his colleagues having gone to universities like Cambridge, ‘tend to forget what universities like [in this case Teesside] are doing.’ So the interesting fee setting will come from the post 1992 universities, particularly those nearer the top of the league table, such as Oxford Brookes, Bournemouth, Sunderland, Nottingham Trent and Sheffield Hallam. The odds are fees below the level set by research-intensive universities, except on a handful of the most popular courses, particularly courses that show to a prospective student a direct correlation between investment and graduate employment prospects. If one of the top ten post 1992s does set blanket fees at £9000 or £9000 on too many courses at that level, then we’re in for a round of rum rhetoric from BIS, budget reductions and may be even statutory measures.
Universities have survived some of the most fundamental changes of any industry, and have done so largely intact, demonstrating a great capacity to absorb the impact of really quite major shifts in policy, funding and demand. However, the proposed changes following the Browne Review are different. The cuts in the HE budget and the transfer of funding the cost of funding undergraduate education will bring about a different order of change and some universities will be less able to respond to the challenge. In essence,
- Lessons from the past will provide complacency rather than a roadmap. Universities will face unprecedented challenges, in supply, demand, competition and in their cost base.
- In the past Universities have responded to change through market expansion, this is set to become more difficult as they will face for the first time in the UK, genuine and unprecedented competition from private providers. For those universities most vulnerable to competition, there will need to either successfully diversify their income bases or restructure their cost base, or both.
- This change will happen relatively quickly for a sector used to longer-term planning and positioning. The nature of the change will take some institutions by surprise. Universities will find it more difficult to predict and plan for demand, and unpredictability will destabilize their core income streams against a high and often rigid cost base.
- Most universities will set fees close or near to £9000, which on the surface will benefit universities by £2600 per student. However, the concept of price and return on investment will permeate choice in the sector. Price competition in the form of discounts will become a factor in student recruitment. Turbulence will lead to discounting among those universities with a higher dependence on teaching, affecting margin.
- The overall market for undergraduate education will remain stable, but there will be more e scrutiny on the value of universities provision. Reputation will become more precious and jealously cultivated. However, scrutiny is likely to be partial, with universities with high reputational value more immune to potential brand damage.
- Demand will be more varied and universities will be more likely to respond by changing delivery modes, in part being forced to provide more flexibility than exists in their current provision.
Reaction so far…
- BBC The UK slips down the rankings and now trails higher education systems in Poland, Iceland, Portugal and Slovakia for proportion of young people graduating.
- The Guardian UK’s graduation rates fall to below average. The UK plummets from third to 15th place in OECD university listing, behind Slovakia and Czech Republic
- The Times Higher. The UK is falling farther behind its competitors on higher education spending and graduation rates.
My comment following the interview with Vince Cable (talks to Decca Aitkenhead in The Guardian, Monday 9th August).
I’m sure you’ll agree that self-deprecation and honesty are admirable characteristics in a politician, but in the case of Vince Cable and without the customary spin, it leads to some frightening insight. Reading his interview in Monday’s Guardian, I wasn’t surprised that that he is surrounded by colleagues who have gone to Cambridge, but that they consequently ‘tend to forget what universities like [Teesside] are doing’ is a bit rich. It certainly does not bode well for the Coalition’s higher education policy. This is really poor politics, because diversity among the institutions that form higher education in the UK has long been recognised and the pattern of that diversity has been researched. Some advice – why not read Malcolm Tight’s book on the Development of Higher Education in the United Kingdom since 1945 as a starting point, or just Chapter 5 in this case?
Regardless of whatever has been written and or what is understood about the sector, I fear that it will not prevent the Coalition from making funding cuts without thought to the consequences.
How are we to be distracted this summer waiting for Lord Browne? My suggestion is to look at the lesson from history.
So far the story of the dying days of the last government and the early days of the new government is one of cuts to the higher education budget (now up to £1.25bn, by 2013 and likely to be an additional 20%, or £2.8bn in the October comprehensive spending review). For scale and style, this has the look and feel of the 1979-1983 first Thatcher government when the subsidy for overseas students was progressively withdrawn and there was a reduction in annual expenditure on home students by 8.5% by 1983-4. At the time, it looked like an attack without ‘any thought about the real consequences’. However, policy did emerge with two papers which defined the thinking – Joseph (1985) centred on efficiency savings, less dependence of the taxpayer, and engagement with business and Baker (1987), which focused on increasing demand coupled with Joseph’s efficiency agenda. The drive was pure Thatcher: more for less; an attack on a (allegedly) liberal elite and the supremacy of management and (then) the market. The governments of the 1990s bought this orthodoxy because it expanded access to higher education, at a reduced unit cost and with more central control. The universities bought it because it secured funding (research and teaching), and for some, a new status, and it ‘allowed’ freedom to respond to globalisation and generate additional income, particularly through internationalisation. The problem of funding further home expansion was then addressed by Dearing (1997); a report which like Browne (2009-10) started under one government and concluded under another. Dearing led to the introduction of tuition fees and more marketisation, added to choice was the introduction of the concept of the ‘student as a consumer’ and the sector was rewarded with above inflation increases in funding in 2003. And now here we are, awaiting a severe contraction of funding – the party well and truly over.
What does history tell us about how the higher education sector coped with change over this period? One lesson is that it did so through an increase in the number of providers, offering diversification in subject and mode of delivery. However, the new providers were essentially recognisable as universities, with a high degree of strategic isomorphism, all pursuing broadly an allegiance to both teaching and research, albeit with differing levels of success and emphasis compared with the sector as a whole. Now the scene is set for more change. Similarly there will be contraction in funding, efficiency savings, need for more employer engagement and flexibility of offer and it will again bring another group of providers into the market. This time the providers will also drive down unit costs, but they are likely to be different. In keeping with current government ethos, these new providers will probably be private, and some may even be sponsored to take over ‘failing’ universities or FE colleges. Existing universities that increase private sources of income will be lauded and some will be encouraged to expand into FE provision. Any contraction in research funding will lead to further concentration among research-intensive universities, and the notional binary divide will reappear and become more apparent. Unlike the late 1980s and early 1990s, this time round however, it really will be the survival of the fittest. Some universities will not survive. Many will be unrecognisable.
If you have another view of the history or the future, please comment. Your views are welcome.
 Sizer (1988:79) cited in Tight (2009:79)
 Kogan 1983:110 cited in Tight (2009:79)
Hello and welcome to theinsightedge blog.
I am passionate about Higher Education. I want to chronicle, understand and debate the changes facing Universities, as they respond to the current economic climate and the demands of the knowledge economy. This could be achieved through three elements .
1) Contributions from the potential network of academics and practitioners, who are faced with the challenge of making ‘third-stream, mainstream.’
2) Dissemination from the doctoral study I’m undertaking at the University of Nottingham, looking at opportunity recognition and enactment in Higher Education Institutions. This will include a multiple case study over a minimum period of one full academic year, across at least four institutional types.
3) Lessons from practice, sharing case studies from theinsightedge, a specialist strategic consultancy focussed on generating income in Universities, and others.