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might be on rather shakier ground when he proposes that those parts of the system from which most public money is being withdrawn - notably in the arts and humanities, and in the social sciences - should simply be privatised to free them from government regulation.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.................

The 'market' for university places

The debate on higher education funding in Scotland remains in a mess, with the major political parties claiming that student fees - in any shape or form - are simply not on the agenda for Scotland, while University Principals are becoming increasingly strident in their opposition to this view, and rightly so, I believe. It seems that we shall have to await the formation of the next Scottish Government (following the May elections to the Scottish Parliament), in order to discover what the higher education policy in Scotland is really going to look like.

Meanwhile, the situation in England is evolving rapidly. By now, over two dozen universities have announced what fees they will charge for home/EU undergraduates from academic year 2012/13. Contrary to what the Government was expecting, most have so far opted to set their fee at £9000 per student per year, i.e. at the maximum level permitted by the recent legislation. Many more still have to decide, but it now looks as though far more universities than expected will charge the maximum fee. When asked to justify these decisions, institutions tend to cite their very high costs, their need to replace the money which is being cut from their block grants over the next few years, and their academic quality.

All of these arguments have some merit, but taken together they start to raise some interesting questions about the likely workings of the 'market' for undergraduate places at English universities. As an economist, I naturally tend to think of this in terms of a supply curve (for each potential level of fee, how many undergraduate places will, in aggregate, be offered by the universities?), a demand curve (for each possible level of fee, how many potential students will be seeking a university place?), and an equilibrium price (the fee level at which demand and supply are equalised). In practice, any sensible analysis of the higher education market can't be quite this simple, as there are some other important factors to take into account, such as:

(a) Most universities don't just accept any student with the basic minimum qualifications for university entry who is willing to pay the fee. Instead, each institution has its own view of the student quality threshold that it requires, and these entry standards vary a good deal between institutions.

(b) In a similar way, entry standards also vary by discipline, both within any given institution and across institutions. Historically, institutions have often tended to think of themselves as having a fixed supply of places that they need to fill (which is largely true in the short run), and entry standards for different disciplines have adjusted to enable the available places to be more or less filled (subject to whatever minimum standard is deemed appropriate for each discipline or degree programme).

(c) Although permitted to charge different fees for different subjects, only a couple of the universities that have announced their fees for 2012 have elected to do so. Most set a single fee, nearly all at the maximum permitted level.

(d) Whatever fee levels are set by the universities, individual UK students will pay nothing up front. Instead they will incur student debt on which a modest interest rate will be levied, repayments only starting once a student has graduated and is earning over £21,000 per annum; the repayment will then be at the rate of 9% of income in excess of this £21,000 threshold. Any debt outstanding after 30 years will be written off. Thus students are to be funded through income contingent loans, so the fees charged by universities should not feel like a 'price' in the normal sense.

What all this means for the evolving market for university places in England is not yet clear, and may not be for some time. What I would expect is that some of the institutions setting the highest fees will have little or no difficulty filling all their places. Others, however, may discover that the price elasticity of demand is not zero - in other words, they will find that demand for places is indeed responsive to the fees being charged. Such institutions will either struggle to fill places right across the board, or they will find that demand is sufficient in some subject areas, deficient in others.

Hence in the first few years of the new system, I would expect quite a few institutions to re-think their fee strategies, either lowering the general level or lowering the fee in certain subject areas. At the same time, the new market environment might well compel some institutions to undertake restructuring by eliminating 'unprofitable' degree programmes from their offerings - this is already happening, of course, but it will likely be accelerated. Institutions will also try to make themselves more attractive to potential students, partly through marketing programmes, partly through improving the services offered to students, and perhaps also through efforts to build reputation - such as supporting high quality research or developing diverse foreign links. At the extreme, there might even be one or two institutions that simply cannot cope in the new conditions, and they might either merge with financially stronger universities or close down altogether.

So, the English universities are certainly living in interesting and challenging times, and I wish them well. I also wonder when the Scottish higher education system will start to catch up with England in terms of its financing arrangements. For the current opposition to fees, and the claim that government funding will enable Scottish universities to keep up with their English counterparts, are simply not credible. Something will have to give, eventually.

Who decides what topics we should research?

This is a simple question with a simple answer. The researcher should decide what topics he/she wishes to research. End of story!

However, the world we live in is not a simple place, with the result that my simple idealistic idea seems to work less and less well. As an example of this, the last few days have seen some highly entertaining squabbling in the press (Guardian Education and Times Higher Education, both in the last week) over claims that the Arts and Humanities Research Council (AHRC) has been heavily leaned on by the Government. Allegedly, in order to avoid massive cuts to its research budget (possibly as much as £100 million), AHRC has been 'persuaded' to designate research on the so called 'Big Society' - the Government's big idea - as one of their top priorities. Understandably, this has given rise to a great deal of sound and fury, with at least one leading academic resigning from the AHRC Council in protest.

In the past, there was supposedly a bit more separation between Government and researchers, in that while Government provided the funds, the Research Councils were able to select the projects to be funded without Government interference - this was the so called Haldane principle. To be fair, this never worked perfectly, but it probably helped to preserve researcher autonomy to have this arms-length principle in place. Now it seems to have been abandoned (the Government says 'modified').

In practice, despite the current controversy, real change on the ground may well be less than Ministers might like. Why is this?

First, lots of existing and prospective AHRC research may already fall under the 'Big Society' umbrella, or could easily do so with a little creative re-labelling. Likewise, people submitting applications for research funding can 'bend' what they propose to make it sound like 'Big Society' research, and everyone will be happy. The AHRC itself has stated that in discussing research with Government it is important to use 'language that policymakers understand', and their use of the Government's terminology is in line with that viewpoint.

Second, it seems to me that neither Government nor AHRC nor the researcher community really has the faintest idea what 'Big Society' research ought to look like, or even what the term itself actually means. That being so, almost anything can be deemed to belong to the 'Big Society' agenda, and no doubt will be. This might sound a bit sneaky or even dishonest, but it's not really. For part of the research programme, surely, will be precisely to define what the Big Society is or could be, so at least initially it's perfectly legitimate to allow the notion to be interpreted quite flexibly.

Third, after a time Government attention will shift elsewhere. Either Ministers will decide they know enough about the Big Society or they might conclude that it's not such a great idea after all. Or more likely, they will simply latch onto some other idea and focus on that for a while. Meanwhile, AHRC will no longer find itself under such an awkward spotlight, and can go on supporting whatever good research appeals to it.

The wider issue that this current controversy highlights has to do with how far researchers can or should be fully independent of Government influence. This has always been a tricky issue, despite the Haldane principle, especially in areas where proposed research might be applied or link into policy concerns. Government always has the option, either directly or through the Research Councils, of funding research in certain areas of topical interest, and researchers can then choose whether or not to apply for a tranche of such programme funding. This is common practice and seems to work well - and I have been a beneficiary of the process when the ESRC in the 1990s ran programmes to support research on the transition economies of Eastern Europe. One can question whether such directed funding is the best way to get good research done, but at least here the individual researchers are free to decide whether to apply or not - no one compels them to do so. And these programmes have always run alongside responsive mode funding, in which researchers can propose to do any research they like, and they get funded if their proposal is considered sufficiently promising and original.

Given this sort of model, the latest AHRC squabble seems more like a storm in a teacup, and doesn't seem to go too far down the road of compromising researcher autonomy or independence. Researchers can still largely choose what they want to study, either individually or as part of a team, and that is as it should be.