A report published today (24 September) by the Higher Education Policy Institute (HEPI) concludes that the benefits claimed for vouchers as a mechanism for funding higher education are almost certainly unavailable and the problems to which vouchers would give rise are serious and make it highly unlikely - as well as undesirable - that a voucher system will be implemented.

With the government's promised review of tuition fees fast approaching, there has been renewed interest in the use of vouchers as a mechanism for channelling government funds to higher education institutions. Under a voucher arrangement, instead of paying grants direct to institutions, the government would provide a voucher to students who would carry them to the institution of their choice (provided the institution was willing to accept them), and the government would then reimburse the university the value of the voucher. Advantages that are claimed for such a system are that it would make universities more sensitive to the wishes of students (the customer), that it will encourage universities to be more efficient, and that it would drive up quality. Incidental benefits claimed include that it would widen participation as students respond to the greater choice that such vouchers would provide (on the assumption that a voucher could be used at private and possibly overseas as well as public universities).

However, based on a detailed study of both the theoretical issues surrounding vouchers as a funding mechanism as well as the very limited experience of the use of vouchers elsewhere in the world (the State of Colorado is the only jurisdiction where vouchers have been used as the principal mechanism for funding universities), the HEPI report concludes that:

• Far from widening participation the introduction of vouchers may narrow it, particularly if universities are free to supplement the value of the voucher with supplementary fees;
• They will provide incentives to universities to stop providing more expensive subjects and seek to minimise the expenditure they incur relative to the value of the voucher;
• They will potentially reduce the amount of public funds available to public institutions, as funding is spread to private universities as well;
• By losing its role in the direct funding of universities the government will lose its most powerful tool to ensure that the HE sector is responsive to national needs and priorities.

Commenting on the HEPI Report, Bahram Bekhradnia, Director of HEPI and co-author of the report, argues:

"These potential hazards are so great as to have persuaded the State of Colorado to introduce modifications to a straightforward voucher scheme in the form of a ‘fee for service' that enables the State to negotiate with universities to provide additional funding for additional ‘services' but which in fact also enable the State to recognise that some universities are justifiably more expensive than others; and also a performance funding element which enables the state to provide funding to universities for meeting negotiated performance targets (the performance in question reflecting national priorities). Most tellingly, the review of its experience with the voucher scheme that the State of Colorado commissioned concluded that the scheme had been a failure in almost all respects.

"The funding system in England already contains most of the features of a voucher scheme - principally that universities are only funded in respect of students whom they recruit, and also that students may present themselves at whatever university is willing to accept them, and that the Government is obliged to fund the university in respect of such students not only by providing a grant but also by paying the tuition fee that the university charges, which it subsequently recoups from the student through the taxation system. But by retaining grant funding the government is able to retain some degree of influence over HE policy, and the more troublesome effects of voucher schemes are avoided."