Why it is time for UK Universities plc

Allister Heath
HIGHER education ought to be one of Britain’s flagship industries. On the face of it, the UK’s universities are already doing well, educating large numbers of overseas students and in most cases charging them high fees, generating vast amounts of export earnings for the UK. Many are expanding, with the University of Nottingham operating a campus in Ningbo, China, for example; the likes of the London School of Economics or the London Business School have largely liberated themselves from government strictures and become successful global institutions, competing for the best students and research dollars. Cambridge has spawned (and invested in) a raft of science-driven firms. Others operate consultancies.

Yet the sector as a whole is in trouble. The £3,290 in fees the government allows them to charge UK students ensures that virtually every university loses money on every British student they accept, which makes no sense, especially given that graduates earn around £100,000 more over a lifetime than people who didn’t go to university. Those who choose higher-paying professions such as business, finance, medicine or the law do even better. Much of the higher education sector is too dependent on taxpayer money and has become ossified; too much of what passes for research is of limited real value; the culture of most institutions is too monolithic and detached from that of the rest of society; there are still insufficient links with business; many courses and institutions offer limited, if any tangible benefit, to their students; as a result of that, and because of other massive failings in the UK education system, there are too many students and too few young people entering other kinds of training, such as apprenticeships.

Two main changes are needed. The demand-side must be shaken up: most students need to contribute more, incentivising them to perform a better cost-benefit analysis and choose proper courses, boosting resources for universities, reducing the burden on taxpayers and changing universities’ incentives. It is vital that poorer students are not left behind: on top of the loans systems, more bursaries are needed for the brightest youngsters.

The supply-side must also change drastically: the higher education sector needs to become much more like other industries, more responsive to consumer demand and more business-like. For-profit companies need to enter the market, which is currently controlled by charities. More innovation and experimentation is needed – with soaring costs, the option of shorter, compact degrees is required, as well as more distance and e-learning. Every practice needs to be questioned.

The coalition will fortunately not be imposing a graduate super-tax on students who go into higher-paying jobs, the option favoured by Vince Cable. This would have been a disaster, promoting an even greater brain drain. Ministers may support instead variable interest rates on student loans so that high-earning graduates can be charged more on their borrowing.

The package is likely also to include lifting the cap on fees to at least £7,000. Lord Browne’s review of student finance, out this week, is likely to recommend removing the cap altogether, a sensible strategy that will prove one step too far for the coalition. Yet real reform does at last seem to be on the cards; for the sake of what ought to be a great British industry, let us hope the government has the guts to be truly radical.