Straws in the Wind: Markets in Higher Education

The government's recently published White Paper on higher education reforms in England, bringing in higher fees from AY 2012-13, relaxing some of the formerly very tight recruitment constraints, and lots of other lesser changes, is starting to make some institutions think more competitively, as if they see themselves as inhabiting a market-type economy - as indeed they do!

This change in attitude has to be welcomed, in my view, because it might encourage HE institutions to deliver better services to their students - increasingly seen as their 'customers', whether one likes that or nor - and perhaps even to their staff, who need proper incentives in order to deliver what institutions want.

High-flying students with AAB or better at A-level (or equivalent other qualifications) will no longer be subject to number controls, so universities will be able to take as many of these students as they can attract. Lots of people tried to get into universities for AY 2011-12, to win places before the new fee regime comes into operation; and demographic changes mean that the age group eligible to enter university will anyway be down by about 10% for 2012. Hence the competition between universities to attract the best students will be pretty tough in a year's time, and a few institutions have already announced scholarship schemes offering discounted fees - not means-tested - to entrants with top grades.

This is not unusual in the US, since institutional reputations are often linked to the quality of student they can attract. But it is new for the UK. As one might have guessed, no special deals have yet been offered by the top ranking institutions, since they already attract plenty of high quality students, though they might be thinking about it. Rather, plans have been announced by middle-ranking institutions seeking both to protect their student numbers and to rise up the rankings. It will be most interesting to see how this competition plays out, once we have seen it operating for two-three years.

And for university staff there are increasing rumblings from various institutions thinking about leaving the national pay arrangements and setting pay locally. Imperial College London has already left the national system, and Exeter and Durham are apparently among those currently considering following suit. This could have several effects.

First, local pay levels could come to reflect the local or regional living costs better than they currently do.

Second, institutions will be able to do more, pay-wise, to attract and retain the very best staff than the current national pay-spine allows. However, one should not overdo this point, as senior administrative staff and professors have had more flexible pay for years, often based on measures of their performance. So leaving the national scale only affects less senior staff, and even there there was always scope for institutions to offer a few more points on the scale to secure a particular person. Hence this may be less of a change than it appears.

Third, institutions charging high fees and succeeding in attracting plenty of good students will be able to afford to pay more to all their staff, and some will probably choose to do so - something that staff would welcome after three years of severe pay restraint. However, the campus unions worry that local deals will put management in a stronger relative position, and that universities might demand measurably higher productivity as a quid pro quo for higher wages. This is possibly true, but at the end of the day good staff can vote with their feet and move elsewhere if they don't like their working conditions. This will surely place some constraint on institutions' ability to over-exploit their staff, one hopes.

At the moment, these points are just 'straws in the wind', but they could herald the start of some major changes in English higher education. Some of what is happening will also pose difficult challenges for those of us based in Scottish universities, and for now we have no clear way forward. We're still waiting for funding decisions from the Scottish Government for 2012-13.

More on Scottish universities and their funding

Little-by-little, the debate on Scottish universities - including about their purpose and their funding - is coming out into the open, and about time too. Until the last few days the leading political parties in Scotland have all come out against any form of fees in Scottish universities, whether up front or payable after graduation; the only honourable exception to this picture is provided by the Scottish Conservatives, who do favour fees, but they are not exactly expected to be forming the next Scottish government after the May elections.

However, just about anyone who can manage primary school arithmetic can surely see that the funding sums for the Scottish universities just don't add up. Without fees or some other, as yet unknown, source of extra funding, Scotland's higher education sector faces a looming funding 'black hole', probably of the order of £100 to £200 million per year, with some estimates coming out even higher than this. These numbers are big enough to spell trouble ahead for the sector, with job cuts almost inevitable, and increasing difficulty in maintaining (let alone improving) teaching standards and working conditions. In the competitive world we live in, leading academics will be lured away to greener pastures elsewhere, either down in England or further afield; and institutions will find it harder to attract the best students. Not a happy prospect.

This is the background to two articles published in the Scotsman newspaper earlier this week.

The first was written by Stewart Sutherland (Scotsman, 12/4/11), and he argues that the universities need clearer goals and a clearer sense of purpose to enable them to move on from the breakneck expansion of the past two-three decades, supported only by the woolly idea that 'university education is a good thing.' What do we expect of our universities in Scotland, how large should the system be, and how should it be funded? These vital questions have been ducked for far too long, so Lord Sutherland - a former Principal of Edinburgh University - is quite right to raise them. Coherent answers are long overdue!

It seems to me, though, that he might be on rather shakier ground when he proposes that those parts of the system from which most public money is being withdrawn - notably in the arts and humanities, and in the social sciences - should simply be privatised to free them from government regulation. In principle this is a nice idea, but I am sceptical as to how it might work in practice. This is because the Funding Council will still control a large chunk of the public funding going to each university, and this fact will make it all too easy for institutions to be 'leaned on' to make them do what the Council wants even in unfunded areas of activity. I just don't believe that such an opportunity to exercise some control would be resisted.

The second article was by John McTernan (Scotsman, 13/4/11). He rightly decries the politicians' denial of any sort of Scottish university funding crisis and is clearly very concerned over the prospect of what he calls an academic brain drain from Scotland - the best academics moving away in response to better conditions elsewhere. Here I think he is right, though the process of decline will not be a rapid one. Indeed that's part of the problem, as it's very likely way beyond the likely time horizon of our politicians. So who cares?.............

Where I would take issue with Mr McTernan is over the following statement from his article, 'A pure market solution is not right, equality is an outcome that should be sought.' This is surely nonsense. The first part is a red herring. For we never get 'pure market solutions' in the real world, as they are always constrained by institutions, customs, regulations and the like. The second part just cannot be right. It's certainly a good idea to offer people equality of opportunity, to the maximal extent possible, and we should design institutions and policies with that in mind. But to aim for equality of outcomes would be socially inefficient - and taken literally it is not even a very meaningful goal. For surely we don't intend that, for instance, everyone should go as far as a PhD; and neither would we like a situation in which no one got a PhD degree. When thinking about equality, therefore, it is important to use our terms rather carefully.

So at last, how the universities in Scotland should operate and be funded is finally coming out into open discussion. With luck, once we get past the May elections, even our Scottish politicians might start to have some more sensible thoughts. I'm always an optimist.................