Novel and radical policy ideas are a rare thing. But Johnny Rich’s new HEPI Policy note Fairer funding: the case for a graduate levy represents a truly sweeping overhaul of university financing which would change many of the fundamentals of how universities are incentivised. There are many details to be ironed out to implement a policy proposal of this magnitude, and a near infinite set of objections and defenses which are beyond the scope of this blog.

Instead I think it’s worth considering the wide view that underlies this piece, the incisive picture is his depiction of the stakeholders behind universities (through an extended metaphor involving horses pulling the cart of higher education). It made me consider the broader questions: who benefits from higher education? Whose needs does it serve?

We are used to conceptions of universities as serving the common public good –this idea underlies their position as recipients of taxpayer funding. We are also, increasingly, aware of the idea of higher education as a service provided to students. It offers student customers individual value based on their payment of student fees. In each case the purpose of higher education is interlinked with the source of funding.

This Policy Note offers an alternative conception of what higher education is for. It sees the true ‘customers’ of higher education not as students, but employers who want skilled graduate employees. This view of higher education’s role leads to a new conclusion – if the customer of higher education is employers, then it is employers who should pay for it. Johnny’s funding scheme would tie the finances of each university directly to the future earnings of its graduates – each institution’s financial solvency would depend on its graduates being successful in the labour market.

I’ll leave the details for the full report, but this idea – whatever technical problems it raises – holds a tantalising idea of what a university could be. I encourage you to read the report and engage with it on a conceptual level.

At its heart the policy ties the role universities to producing skilled, employable graduates in a fundamental way. What would universities look like under this funding scheme? They would be in business of predicting future labour market skills needs – a complex and risky business they might rather avoid. However, in our current system we essentially ask university applicants to play this role instead – as it is student demand that is the key driver of university courses in our current system. Is the wisdom of a typical school leaver really a superior mechanism for driving higher education?

Johnny argues that under his model we would see a diversity of approaches from the sector. It would, he argues, continue to teach arts subjects, but with a renewed emphasis on the transferable skills that these subjects give students, which are one of the few reliable skills demands in an ever changing economy. They would also continue to teach more vocationally focused degrees, but they would not be incentivised to do so unless the employment prospects were good. Johnny uses the example of Forensic Science degrees, where there are roughly 60 graduates to every vacancy, reflecting the disproportionate popularity of the subject among young people who grew up watching CSI. Under his system, universities would have a strong incentive to push these applicants towards Chemistry courses, rather than risk training them in a narrow profession which they are unlikely to get into.

Strangely for a solution focused report, my personal takeaway from the report is actually a series of questions:

  • If universities were fully focused on their graduate’s employability – what would they look like? How much would they have to change or not change?
  • Are employers getting a ‘free ride on the cart’ from higher education?
  • If employers were made to fund HE directly, then how would this change what higher education is?