Release our business schools from the dead hand of state regulation

THE UK’s centrally-planned universities could do with a shake-up. One way to do this is to begin the privatisation of higher education in those areas most suitable for it – particularly business education.

Higher education has many purposes. But the most important is the preparation of young people to enter the world of work, and this purpose should be pursued most determinedly in business schools. The UK has more than 100 university-based business schools, teaching around 15 per cent of higher education students. When the first were set up in the 1960s, there was a debate about whether they should be free-standing, or lodged in traditional universities. This debate should be revisited.

Business schools should be encouraged to break from universities to encourage a greater emphasis on preparation for employment, more effective learning, and cost savings.

At one level, university-based schools appear to be a success: they bring in substantial income from UK-based foreign students and from overseas partnerships. But this is not enough. Schools are too detached from business, and arguably overly concerned with theory rather than practice. Staff have inadequate private sector experience, and are often much keener on personal research projects than on working with businesses.

Many students have little or no contact with the business world, particularly since internships have gone into decline. Schools teach too little, and students don’t rate even this teaching highly. Innovation is rarer than it ought to be, and there are few sanctions for poor or ineffective teachers.

It’s no wonder that employers continue to report dissatisfaction with many of the business students they interview. This may be related to low admission standards, as vice-chancellors demand that business schools expand their intake to cross-subsidise other subjects.

Indeed, the over-charging of business students, to keep arts and humanities departments open, is a national scandal. In the case of overseas students, who sometimes get a very raw deal indeed, there’s often a perverse income transfer from poor individuals, who have borrowed from friends and family, to far richer people.

It’s time for change. The location of business schools within a university culture of excessive regulation and a medieval calendar does nothing to promote excellence. As public-funding for teaching business undergraduates disappears, and the cost of education falls increasingly on students, there is less reason to stay in the sector. Let universities sell their business schools off.

But to whom? It could be to not-for-profit corporations, charities or chambers of commerce. But such institutions lack capital and are unlikely to be able to run large schools effectively. In the longer term, for-profit schools, like the successful BPP Business School, which can award its own degrees to a high standard at half the cost of conventional university schools, seem more promising.

The government doesn’t own universities and can’t compel them to sell off their schools. But it can explain how it wants the sector to develop. It can make it clear that there’ll be no more public funding for business teaching. It can allow universities to keep the proceeds of the sale of their schools. The rest of the higher education sector will profit from this innovative example, and it may be that other parts of universities could seek to follow in due course – law schools are promising candidates.

I would also look to reductions in the huge burden of student loans. Business schools should create a new private student loan system in conjunction with the financial sector. Direct links between business schools and banks could also reduce the moral hazard inherent in the present undergraduate loan system – where universities are insufficiently penalised for recruiting weak students and producing unemployable graduates. Schools should share the financial risk involved in recruiting students who may not be fully committed. This would be a strong inducement to improve selection.

After a promising start, the government seems to have run out of ideas on higher education. It should return to first principles and think again about what needs to be done in our university system, and what can better be done by the private sector. Business schools are the place to start.

Professor Len Shackleton is professor of economics at the University of Buckingham.

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