The Observer view on the cost of university education

https://www.theguardian.com/commentisfree/2016/aug/13/observer-view-on-cost-of-university-education

Version 0 of 1.

As the annual clearing process for university places gets under way, universities are investing in ever-more innovative ways of marketing to students, reflecting an increasingly competitive market now government has lifted caps on student numbers, allowing universities to recruit as many students as they like. But given that the headline price of degrees has tripled in recent years, there is inevitably more scrutiny of their value.

Some might argue we should leave this judgment to the market; the fact that growing numbers of students feel it is an investment worth making tells us all we need to know. It’s also a difficult judgment to make in a nuanced way; it would be ridiculous to imply a degree’s only value lies in its earnings-boosting potential.

But it’s becoming increasingly important to ask hard questions about value for money. Universities enjoyed a significant 28% increase in average per-undergraduate funding as a result of the increase in the tuition fee cap to £9,000 and they have successfully lobbied for the cap to rise even further.

University funding has grown healthily just as funding for further education colleges has been slashed, per-pupil school funding is falling and the NHS is struggling to find efficiency savings. Universities may not be public institutions in the same ways as schools and hospitals, but they receive a significant chunk of public funding and should be asked to account for what they deliver from a value-for-money perspective.

Moreover, in recent months, stark variations in the graduate premium – the amount graduates earn compared to non-graduates – have become more evident. The Institute for Fiscal Studies has found that graduates of some subjects, such as the creative arts, do not appear to earn any more on average than non-graduates. Average earnings for male graduates of 23 universities were actually lower than for non-graduates.

It is too simplistic to look at headline earnings in isolation, but this is surely information young people taking on significant amounts of debt have a right to access when they’re making decisions. This is particularly when six in 10 graduates find themselves in jobs that don’t require a degree and fewer than four in 10 students think their degrees represent good value for money.

There are two potential responses. The first is to argue we have too many young people going to university. This is crazy when Britain must create more high-skills jobs to compete and a reduction in undergraduate numbers would almost certainly come at the expense of poorer students, particularly with the abolition of maintenance grants.

The right response is surely to ask how we can better improve the match between the skills young people develop through their degrees and those needed by the labour market, and whether degrees can be delivered more efficiently.

This is particularly important given that the big funding increase awarded to universities was a policy mishap. The government misjudged the impact of its fee reforms; it thought the average fee would be about £6,000 a year rather the £8,600 it jumped to. Higher-than-expected fees mean the government has to fund bigger subsidised loans to cover those fees (although this funding does not count towards the deficit in the government’s accounting rules). So the reforms ended up saving barely anything for taxpayers, but costing students much more, leaving universities the beneficiaries.

The government has not asked universities to do anything significant in exchange for this windfall in perpetuity. Not in terms of improving transparency about what money gets spent on or what is included in the teaching offer. Universities have resisted attempts to improve transparency, even lobbying for exclusions from FOI legislation. Nor are they open to being held to account for the quality of the academic experience or their efforts to widen participation and improve retention.

The university sector is not thirsty for cash in the same ways as schools or the NHS; as highlighted by Policy Exchange, the sector has discretionary reserves equal to 48% of its annual operating income. University vice-chancellors enjoy very healthy levels of take-home pay.

So it was a mistake for the government to give way so easily on increases to the fee cap. It should be allowing inflation to reduce the real value of the fee cap over time to the level it originally predicted fees would settle on. University funding should not be allowed to rise while the rest of the education budget is being squeezed. It’s a wrong-headed and regressive way to allocate education spending.