Sunday, 24 July 2011

Research Excellence Framework 2014

After the publication last week of the Guidelines for the operation of the Research Excellence Framework (REF), we now know a lot more about how REF 2014 is expected to work, including the detailed schedule. The Guidelines have been published by HEFCE, acting on behalf of all four HE funding bodies operating across the UK, and can be found in full at this link.

As was announced by the Government a while ago, the schedule has slipped back a year from the original plans - it was going to be REF 2013. On the new plans, institutions will be invited to make their submissions to REF 2014 in January 2013, with submissions closing on November 29th 2013. The results will be published in December 2014, so a whole year has been allowed for the review of submissions across the 36 units of assessment (UoA).

For each UoA, the evaluation of research will be based on three elements. These are output, impact and environment. Research output will account for 65% of the overall rating of each UoA, research impact 20%, and the research environment the remaining 15%.

As with the previous Research Assessment Exercise (RAE), each researcher included in a given UoA will be able to submit up to four publications for assessment, their quality being judged in relation to relevant international standards, and for their 'originality, significance and rigour' (p6). Apparently some panels might choose to use citation data to support their judgements, though when this idea was first proposed - for universal use - it was shot down in flames. There are huge differences between disciplines in citation practices, for some disciplines there is hardly any published data, and citations are subject to well known distortions - such as self-citation, citation of one's friends, etc. It's not as objective, consistent and reliable as people initially assumed.

Research impact has been the most controversial measure, and is still widely debated - and criticized. The aim, though, will be for the impact of each UoA on the economy, society, culture to be judged. To me, this sounds an absolute nightmare, with assessments highly vulnerable to subjectivity, prevailing fashions in research, and the like. But hopefully my skepticism will prove to be unfounded.

Judging the research environment is a bit less problematic, I think, except that there seems to me to be a built in bias towards large size, in that a larger UoA with lots of staff and PhD students will have an easier time showing that it possesses the required attributes of 'vitality and sustainability' (p6). Yet these days, with collaboration across department in different institutions, and much easier research networking through the internet, I would have thought that the scale of a Unit should matter far less than it used to. One almost gets the feeling that those who have designed the REF haven't quite caught up with the huge benefits we get from IT and electronic communication to support our research. But you never know, the assessors might find ways to take all this into account.

REF 2014 will be a big and costly exercise, so it's worth asking what the results will be used for - apart from being highlighted on institutional websites when they come out well!

Three aims are featured in recent HEFCE publications about REF 2014. These are:
  • To provide the basis for the selective allocation of research money to individual higher education institutions (in the past, this was the QR stream of funding; I don't know if it will continue to be denoted this way);
  • To give the sector a means of benchmarking its research standards and providing a measurable basis for research reputation;
  • Given that much research is supported by public funding, either from the Funding Councils of the Research Councils, there is a perceived need for public accountability and the results of REF 2014 are expected to show both how public money has been used, and to demonstrate value for money.
It's probably quite handy to collect just one set of data to fulfill these three rather different aims, but it's hard not to wonder whether the data we shall have can really serve such distinct purposes. I need to think about this a bit more, and discuss the area again in later posts.

Friday, 22 July 2011

A New EU Package - Buying Time!

Well, rather to my surprise - and relief - European leaders managed yesterday in Brussels to cobble together a new financial deal that provides further support to the ailing Greek economy. The new package comprises Euros 109 billion of official financing, with private sector involvement expected to add a further Euros 39 billion (this part is dependent on bondholder agreement, not yet assured). The interest rates payable on much of Greece's debt are being reduced and maturities extended, all of which takes a bit of pressure off the Greek 'sovereign'. This is a big step forward and the result will help to bring down total Greek debt and provide the country with a breathing space to put through various reforms.

However, the new deal leaves some important issues and questions for later consideration. These include the following:
  • Will the deal restore Greece to solvency? Probably not, so there will be further rounds of discussion further down the line. Rating agencies might already treat the present deal as a 'selective default', but it's probably not the end of the story.
  • Some funds are expected to be raised through a wide-ranging privatisation of Greek assets, with figures as high as Euros 50 billion being mentioned. But it would be unwise to put much weight on this as privatisation takes time and should not be rushed for the sake of quick sales (probably at fire-sale prices).
  • The current deal does nothing to stimulate Greek economic growth, though in due course that remains the key to improving Greece's situation.
  • Greece remains in the Eurozone,which constrains the policy actions it can take to improve its competitiveness. It remains to be seen whether this will be viable for long. On the other hand, exit would clearly be messy and difficult. It is not an easy option.
For the Eurozone more widely, the leaders agreed to make the use of the EFSF (European Financial Stability Facility), a fund of Euros 450 billion, rather more flexible, but there has not (yet) been an agreement to increase the size of the fund - some economists argue that it needs to be of the order of Euros 2 trillion to be really credible, and I agree.

Moreover, a declaration by the Eurozone leaders, released at the time of the summit, has some worrying features, in particular:

'All euro area Member States will adhere strictly to the agreed fiscal targets, improve competitiveness and address macro-economic imbalances. Deficits in all countries except those under a programme will be brought below 3% by 2013 at the latest.'

The history of member states adhering to fiscal targets is not a happy one, and there are no penalties for failure to comply. More importantly, in a European economy still struggling to recover from recession, it's not obvious that these fiscal targets are very sensible ones, especially in a context where the European Central Bank has already started to push up interest rates. Sure, deficits and debts need to be managed, but it's surely not urgent to achieve stringent targets quite so rapidly.

So, some welcome progress in Europe, which buys some time. But still no sign of an agreement on the debt limit in the US, so that remains a worry.

Monday, 18 July 2011

Debt crises: US Dollar and the Eurozone

At the moment in the UK there's almost nothing in the news, especially on TV, except for the latest updates on the phone hacking crisis, linked to News International and the Metropolitan Police. It's all rather dispiriting, I find, particularly as immensely more important things are going on in the world, some of which I suspect the British people would like to be hearing more about.

What I have in mind here, are the rapidly worsening Euro crisis and the US debates about lifting their legal debt limit to avoid a US default in early August. Taken together, these two things are seriously frightening and threaten a major financial/economic crisis quite soon if our politicians in Europe and the US fail to reach constructive agreement on the way forward. Given the importance of all this, I have decided to take a break from my usual writing about higher education to comment here on the current financial mess facing the (so called) advanced countries.

As a result of the 2007-8 world financial crisis, many advanced country governments injected huge amounts of public money into their financial institutions - mainly the major banks - to prevent their collapse; this converted a good deal of private debt into public debt. The subsequent recession led to falls in tax revenues and increases in public spending (social welfare spending, etc.), further increasing both government deficits and the accumulated public debts. The incidence of these phenomena varied a good deal between countries, with Greece and Ireland, later Portugal, being especially hard hit, to the extent of requiring financial rescue operations supported by the EU and the IMF. Last week, for the first time, financial market concerns extended to Italy, and later this week there is due to be a Eurozone summit meeting to agree on a second bailout package for Greece. As I write this, the chances of getting a good agreement do not look too promising. Let me offer a few observations about the difficult situation we now face:

1. When the Eurozone was set up it was understood that, in the absence of a central (EU-level) fiscal authority, member countries needed to exercise a sensible degree of fiscal discipline. In fact certain 'rules of the game', the Stability and Growth Pact (SGP), were established with this in mind. Unfortunately, SGP rules were broken first by Germany and France, without penalty, setting a terrible example for the rest of the zone. Thus the Eurozone has always been a monetary union with no corresponding central fiscal authority (unlike the US, for instance).

2. Within the Eurozone, financial markets treated the debt of each member state pretty much as equivalent to the very safe German debt, with bond rates low and almost identical across the Eurozone. I presume that all these bond issues were assumed to enjoy some sort of collective guarantee, though to my knowledge there is nothing in the Eurozone rules to say that. In effect investors treated all Eurozone governments as equally safe, with virtually no risk of default. As a result, countries like Greece (which later turned out to have been less than wholly honest about their national accounts, in order to meet the initial conditions for Euro entry) enjoyed a massive investment boom for at least a decade, with quite modest debt servicing costs.

3. Shortly after the start of the financial crisis in 2007, the incoming Greek government revealed that the national accounts had not been presented correctly (this is putting it kindly!), revealing a much larger deficit than previously reported, and larger accumulated debt. This was the real start of the present troubles, attention shifting from banks to countries, and the financial markets starting to differentiate more between the debt of different countries in the zone. But Eurozone policymakers have not proved able to come up with a solution that lasts for long.

4. The problem is partly one of diagnosis, in that Eurozone policymakers have treated the crisis for Greece as one of liquidity, hence requiring temporary injections of cash while the country makes needed changes to various domestic policies; rather than one of solvency, requiring some form of default to get the country's debt back down to manageable and sustainable levels.

5. The liquidity approach has not worked, so belatedly, policymakers are realising that there is indeed a solvency issue for Greece. However, a formal default is a bit awkward within the Eurozone, partly because default for Greece might well make the financial markets very nervous about other members of the zone, as has already been happening with Ireland, Portugal, and now Italy and Spain; and also because under current rules, the European Central Bank could no longer officially accept Greek debt as collateral for lending to the Greek banks (though I think this is a technical rule that could be changed). So Eurozone members are trying to find new ways of helping Greece that do not amount to a technical default, but which acknowledge the situation. Our leaders are busy tying themselves in knots as a result, not a pretty sight! Will they find a solution later this week? We shall see.

6. The other problem for Greece is that it has become uncompetitive, and can't easily adjust within the Eurozone. It needs to get costs down so its exports can do better, but like most countries finds it hard to get folk to agree to wage cuts. Devaluation might provide a less painful route if its impact were not immediately offset by domestic wage increases, but in any case this is not an option while Greece remains in the Eurozone.

7. For the moment, therefore, Greece is being offered a period of severe austerity - public spending cuts and tax rises - which is so far not working and which is proving a political nightmare. And the country lacks the means to devalue to restore competitiveness, or the resources to stimulate renewed economic growth. So what is to be done?

8. At the EU level, I expect there will be some sort of package offered this week. But it might well be more of the same, more austerity, tougher conditions, not much prospect of growth. For the Greeks themselves, it must no longer seem so crazy to think of leaving the Eurozone, introduce a new currency (the new Drachma?), default on debts, and go it alone. This is a tough option, too, but it might seem increasingly appealing to many Greeks.

US dollar
The immediate problem here is that the US has a legally set limit on the accumulated public debt, and if no action is taken very soon, that limit is likely to be breached in early August 2011. Politicians of both parties, together with President Obama, are trying to find a resolution to this difficulty, but rather than simply raising the legal limit they are arguing about mixes of spending cuts and tax increases that would also bring the current government budget deficit under control. Sooner or later the deficit does need to be dealt with, of course, but it seems to me that need not be the immediate priority, and need not be linked to the legal debt limit. That aside, I would offer the following points on the US situation:

1. It's not smart to have a legal limit on a country's debt at all, no other countries that I know of have such a limit. Perhaps in the US it's a constitutional requirement, but in that event I would be rushing to get the constitution amended. If there has to be a limit, why not just multiply it by ten so no one has to think about it for a few decades, if ever! In a sense the current crisis is a purely artificial, technical one, since the US clearly has the economic capacity to service a much larger debt. The country does not face a liquidity crisis and is a million miles from being insolvent.

2. The US federal government currently has the lowest tax take of any advanced country, around 15-16 % of GDP. But its spending is about 25% of GDP, hence the current deficit of around 10% of GDP. With such low tax rates, it's got to be easy to balance the books with quite modest tax hikes - but many leading US politicians are dead against such an obvious solution. If taxes were already high, that would be understandable, but they're not.

3. Point 2 means that if the US gets to a formal default, federal spending has to fall - instantly, because the country won't be legally able to borrow - to be in line with tax revenues. Thus federal spending would have to fall by 40% overnight, and if the government decided to use some revenues to service existing debt, federal spending on services to the American people will fall even more, say by 50%. That would not be politically popular even if the problem only lasted a few days. It raises the question, who would be blamed by the voters? My heart sinks when I see the silly and dangerous games about this that US politicians are currently playing.

4. Last, if the US does get to a position of default, the international reputation of the country will sink like a stone and huge damage will be done to the sense of trust and reliability associated with US assets in world financial circles. More concretely, because US creditors will not have the same trust in the US as they have had hitherto, they will assign a non-zero probability of default to US assets in the future. Hence the cost of servicing the existing sovereign debt - and any future increases in it - will rise. It seems to me that some leading US politicians are nowhere near as scared as they ought to be about prospect of a default!

5. On the other hand, while it does nothing for the legal debt limit, a spell of inflation at 4-6% per annum, say for five years, would do wonders for the real debt burden. The debt-to-GDP ratio would fall perceptibly (by at least 25%, even if there is little or no real economic growth) and worries about the debt would subside quite fast. This is a feasible policy for the US since all its debt is denominated in its own currency, though it is not a policy the Fed would officially advocate, I imagine.

6. Likewise, getting economic growth going at a decent rate, say 3-4% per annum, let's say, would equally ameliorate the perceived debt burden after a few years. Hence there is good reason to think about policies that could start to stimulate growth.

7. The worst case, therefore is when we get no growth and no inflation, for then the debt burden remains high and will be seen as a constraint on lots of good things the government might like to do. Meanwhile, however, let us hope that the US politicians manage to step back from the brink and reach an agreement of some sort to avoid any sort of damaging default.

So, we have two interesting and rather different stories, both pointing to the danger of quite a major financial crisis rather soon. It's time for some serious finger crossing right now, and let us hope that political leaders on both side of the pond will find a sensible and workable way through the problems outlined above.

Monday, 4 July 2011

Yet another university ranking scheme - do we need one?

One might have guessed that the EU would not be able to leave well alone. We already have the Times Higher Education world university rankings, as well as the QS university rankings and the less well known Academic Ranking of World Universities (ARWU). So why do we need yet another system?

Apparently the EU thinks we do, and has established a series of pilot projects to explore how it might work, what indicators could be used, and to evaluate how reliable and meaningful the resulting ranking of institutions would be. In its present, pilot version, the new system would be called U-Multirank, and its website can be found here.

From the interim reports produced by U-Multirank, it's easy to pick holes over matters of detail, such as the over-reliance on bibliometric measures, including citation indexes, to assess research, largely reflecting the sort of debate that has been going on in the UK in connection with our RAE and now REF (Research Excellence Framework) evaluation systems. This is a difficult area, so it's not surprising to encounter familiar problems here.

Far more importantly, from reading material on the new website for U-Multirank, I was left feeling quite unsure whether the EU has any idea what a university does, or what the purpose of such institutions is in our modern society.

To show what I mean, here is the objective of the U-Multirank project:

The objective of the project is to develop a feasible transparency instrument that can contribute to enhancing the transparency of institutional and programmatic diversity of European higher education in a global context and test its feasibility. The general intention is to create a transparency instrument that will have a global outreach, potentially covering higher education institutions of all continents.

I must confess that I'm finding it really hard going to make any sense of this at all. To be blunt, I have no idea what it means!

From the reports available on the website, one can infer something more coherent than this, since lists of indicators have been produced, a sample of universities has been surveyed in various countries, and so on. So in practice the position is much better than the above vague and general objective. That said, given the diversity across Europe, including in higher education, it is to be expected that the proposed indicators would also cover a broad field, as indeed they do. And they include university 'constituencies' such as the students, users of research, users of graduates (employers), etc. This all seems quite reasonable, but for me the overall result lacked focus and left me with a very woolly and loose notion of what the EU thinks our universities are about. It's actually quite hard to disagree with much in the available U-Multirank reports, and that surely suggests that they are not telling us much.

Sadly, therefore, this does not seem to me a promising path either to improve the competitive position of European universities, or to strengthen Europe's position in the world economy.

Friday, 1 July 2011

All change in the higher education world

This week has been a fascinating one in the world of higher education in the UK, with lots of new developments.
  • Attracting most attention, probably, we had the publication of the Government's long-awaited - and delayed - White Paper on higher education, Students at the Heart of the System.
  • Then up here in Scotland, the Scottish education minister, Mike Russell announced that for English students studying at Scottish universities, institutions would be able to charge fees up to £9000 per annum from 2012-13, helping to fill the so called 'funding gap' opening up between Scottish and English universities.
  • Last, and in the short term least important, 42 senior academics resigned from the Arts and Humanities Research Council (AHRC) peer review college, in protest at the Council's inclusion of several references to the government's Big Society idea in its latest delivery plan.
Now, the White Paper and the AHRC developments will be covered in later posts, while today I shall simply remark on the funding decision announced by Mike Russell. The detailed implications of the fee announcement are not completely clear just yet. For instance I don't know whether the Scottish Funding Council (SFC) will play any role in influencing what fees individual Scottish institutions will be able to set for English students, or whether this will be wholly up to the universities themselves to decide. However, I suspect the latter.

Whatever the situation, I think that the sector now needs some major decisions to be taken quite rapidly, partly to shape institutions' own financial positions, partly to give guidance to potential applicants from England for 2012-13.

One obvious point, already highlighted in some press reporting, is that if Scottish universities opt to charge the maximum allowed fee, then a Scottish degree could cost an English student £36,000, since our degrees are normally awarded after a four year period of study. One might imagine that such a high cost would deter many students from coming up here to study, but we don't actually know a great deal about the responsiveness of student demand to 'price'. However, anticipating this factor, institutions could respond in two ways:

(a) They could set a lower fee, so that over four years the total cost was comparable with that for a three-year English degree; or

(b) We could see far wider use of the practice of allowing well qualified students to enter a Scottish university in the second year of their degree programme. As a result, the traditional Scottish four-year degree might be eroded quite rapidly, as Scottish students are bound to seek the same entry conditions as the English ones, surely. In that case, after a few years (5 to 10 years, I imagine), there might not be many students still wanting to do our four-year degrees, which will pose quite a challenge to universities currently set up to run such degrees. Interesting.....

The bizarre situation, of course, is that while English students can be charged high fees, as can non-EU overseas students, those coming from other EU member states would, under current rules, have to be offered the same 'free' higher education that Scottish students will continue to enjoy. I put 'free' in quotation marks to indicate that it's not really free - the Scottish government pays universities a fee to cover the costs of these EU students. The Scottish government is currently trying to persuade Brussels to change the rules that create this situation, but I'm not optimistic that they will succeed.

If the rules don't change, then Scotland should not be in any hurry to seek full independence if higher education funding were part of the argument. For then England would be a distinct EU member state, and English students could no longer be asked to pay fees unless Scottish students also did so.

Moreover, setting high fees for 'the English' might not prove very comfortable politically, since such discrimination - even though legally perfectly proper - might not make it easy for Scotland to present itself as a country with a good higher education system, welcoming students from all over the world. English students already pay a fee to study here, which makes them different from, say, students from Latvia, Hungary or France (i.e. other EU member states), but a much higher fee might not prove so easy to swallow. We shall have to wait and see. But think about it. Why would a well qualified English student spend £36,000 on a degree at Edinburgh, for instance, when for £27,000 they can get one from Oxford or Cambridge? It will be intriguing to see how the new 'market' for English undergraduates studying in Scotland unfolds, both in terms of quantity (numbers of students) and price (fee levels).

And after all this, the new fee decision at best only fills part of the 'funding gap' faced by the Scottish universities. Where will the rest of the money come from? Well, with the Scottish government firmly set on keeping higher education 'free' to Scottish (and, for the time being, other EU) students, we still await the 'uniquely Scottish solution' that will fill the gap.