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Too good to fail by Ruth Thompson

  • 26 November 2014

In this guest blog, Ruth Thompson, co-chair of the Higher Education Commission’s recent inquiry into financial sustainability (and a member of the Hepi Advisory Board), discusses the group’s recent work.

On 24 November the Higher Education Commission launched the report of its latest inquiry, into the financial sustainability of English HE.

The inquiry heard from many experts and interested parties over nine months.

What the Commission found was an HE system that is not in crisis, nor at imminent risk of financial collapse. We didn’t hear students, graduates, Vice-Chancellors, business or taxpayers urging radical and immediate reform. On the contrary: there is a widespread belief that English HE has resilience and continues to serve the nation very well.

There’s a fair amount of consensus around the strengths of the current system and the principles underlying its funding arrangements. But there is also a large measure of agreement about the potential and real threats to financial sustainability.

People agree that the costs of teaching and learning should be shared between those who benefit. Differences arise because views diverge on what is the right balance between the state and the individual contribution. There is strong support for the further development of the existing diverse funding streams received by providers, whether through more entrepreneurial and international activity or philanthropy, and the present research funding arrangements work well. This attachment to mixed economy solutions recognises reality: as well as being places of education and exploration, universities are charitable businesses engaged across a broad front for public and private benefit.

Second, there is support for measures to address market failures that can impede the fulfilment of the Robbins vision, especially regarding potential students from disadvantaged backgrounds. Hence we found general support for the principle that HE should be free at the point of delivery.

Because the Higher Education Commission believes that English HE is a cornerstone of the country’s economic prospects as well as a civilised society, we want to see a thriving system: assured for the future, ready and equipped to match the best in the world. So we set our standard of financial sustainability quite high: thriving, not surviving.

It was this view that guided our examination of the potential threats. First and most obviously, there’s a threat to Government’s commitment to support higher education when public finances are under severe pressure. There are plenty of other priorities. Capital investment especially for teaching is now largely dependent on universities’ own borrowing and bond issues. Second, the ambitious decision to remove student number controls, which the Commission supports as a goal. But some of the precedents suggest the need for caution; this move may endanger institutions’ viability, put excessive pressure on Government funds, and risk damaging quality.

Third is the question of graduate indebtedness. Notwithstanding the safeguards and subsidies in the student loan finance system, the Commission was worried both about the impact of large debts on graduates and their aspirations, and the willingness of Governments to go on writing off very large (unknown) portions of debt into the future. Nobody knows what will happen on either front; students under the 2012 fees regime only start graduating next summer. Whether or not problems will arise may not be known for years. Finally, the Commission urged caution about relying too much on market mechanisms that students struggle to interpret to bring about the benefits claimed for them, and the limited impact of market opening to new providers. The question is whether the system is becoming more homogeneous instead of more diverse, when diversity contributes to sustainability.

The Commission did not propose one approach to funding. Our ambition was to provoke better informed discussion. So we made sixteen recommendations we believe are worth pursuing regardless of decisions on the big picture, where we came up with six possible models, all of which have drawbacks as well as advantages. But intractable as the subject is, decisions on the future direction are needed, because of the level of uncertainty created by the accumulation of risks and threats.







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