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How much should taxpayers contribute to your higher education? (And why it may not be the proportion you think)

  • 29 January 2020
  • By Nick Hillman

This is the third in a series of three HEPI blogs this week on value. The other two are available here and here.

It is often said that higher education has big benefits for individuals and for society, so it should be financed by taxpayers sufficient to cover the public benefits.

This has been summarised in the Times Higher as follows: 

For the most part, students, like policymakers, are preoccupied with the question of who benefits from a university education, and whether these benefits can be quantified in any meaningful way, or translated into a “fair” ratio of public to private funding.

An old HEPI report, which argues the UK should learn from Australia, concludes:

Evidence would suggest that a 50:50 balance of public: private contribution may achieve something close to optimum economic efficiency.

The many changes to student funding in England over the past 20-odd years have created a system in which it is thought that taxpayers cover around 45% of the costs and students / graduates around 55%. Of course, this is a guess incorporating some heroic assumptions: you cannot know for certain until we know how well graduates will do financially in coming decades, plus we don’t know if the repayment terms will be changed again.

However, if public funding should reflect the scale of public benefits, then we possibly have it about right, at close to 50:50 – though some might say we should slightly rebalance the burden towards taxpayers a bit, so that they pay a little more than half rather than a little under half.

Yet, intriguingly, despite calling for big changes to student funding, the Augar panel did not envisage a shift in the proportions paid from public and private sources. Their review called for a shift in public funding from loans to grants. But they still envisaged taxpayers picking up half the tab and students / graduates picking up the other half.

We continue to wait for an official response to the Augar report, which now looks set to happen three years after the review was announced and as part of the long-delayed spending review.

Incredibly, students who were enrolling as freshers just as the review was announced in Theresa May’s party conference speech in October 2017 may have graduated by the time the Government actually says what it thinks.

And as the wheels in Whitehall and Westminster grind slowly on, we should consider this: the overall idea that working out the split between public and private benefits and then charging taxpayers accordingly is unlikely to convince many people in the corridors of power.

In short, it is not as strong an argument as we in the higher education sector tend to think it is. And we should be wary about using it in the run up to the spending review.

The argument can seem overly insular and naïve, as well as unpersuasive, to public funders for three reasons.

  1. First, it ignores the almost limitless demands of taxpayers – which will be uppermost in the minds of policymakers as we approach the spending review. Some of these might be educational (like early years’ provision or primary school class sizes) and others might have little direct link to education (like A&E waiting lists and better transport infrastructure). Whether they actually want to or not, many students and graduates seem willing to pay more than half of the costs of their higher education, given the proportion of school leavers moving on to higher education has gone up despite the increases in cost. Asking them to continue doing paying (or even to pay more through higher fees or tougher repayment terms) frees up resources for other things in education and elsewhere, including items which are generally deemed more urgent priorities by voters.
  2. Secondly, we don’t apply the argument that public funding should reflect the ratio of public and private benefits to other areas of public policy. We don’t generally say, for example, that many of the benefits of healthcare are personal and thus seek to charge individuals accordingly for them – indeed, we don’t even try to recover the costs from progressive income-contingent repayments. Nor on the other hand, do we tend to argue that because some benefits of, say, private schooling are public (think of all those extra Olympic medals, Oscars and Nobel Prizes that we win), then the state should fill independent school coffers. (Although I look forward to hearing if this claim is made at today’s HMC / IDPE / AGBIS conference on independent school bursaries.)
  3. Thirdly, arguing that public funding should reflect public benefit plays into the hands of those policymakers who want to defund courses that look like they have particularly low financial returns – deemed ‘low quality courses’ in the 2019 Tory manifesto. If we argue public funding of courses should match the public value of those courses, then we also have to accept that public funding should be low when the public value is low.

This is not an argument for less public funding of higher education. I have often written of:

Each of these items on its own has a cost of billions of pounds and, together, they would eventually cost taxpayers tens of billions. I have also written about the possibility of there being much more generous public funding of higher education if and when it moves from being a mass pursuit to a near-universal one.

This blog is, instead, a warning that, if we think the old arguments on the public benefits of higher education will win the battle for more public funding in the months ahead, then we are likely to be sorely disappointed.

So we may well find we need some better arguments.


  1. I think that if we want an educated and knowledgeable community then we need to support that financially as taxpayers. I want to have bright people who can resolve societal issues, global challenges and think for themselves. The only way to have this is to support Education throughout the community; and definitely diversify our education system by properly supporting our participants from underrepresented communities.
    We are no longer a manufacturing industrial society, we need critical and creative thinkers
    ( and an Education system which supports this rather than a neo-liberal project)

  2. conor king says:

    I find the theory of a private public split unimpressive – the assessments of what is public and private benefit seem more driven by the assessor’s view of the world than anything more objective.

    Then the actual measure is so arcane in practice that it is hard not to think that the assumptions going into the models are as important, if not more important, to the outcome than the actual data.

    The funding argument is a pragmatic one. Governments fund schooling to ensure everyone goes – and lets parents pay where they want to gain some other advantage (real or just group illusion thus real to the group).

    HE sits at the edge – some things are pretty much adult education for the interest of the person and they pay. The school issue is more and more dominant: we want all to do it, simplest way is to provide it and then recover most of the cost through taxation.

  3. Matt Sisson says:

    I agree with Conor that the whole notion of assessing public / private benefits and therefore allocating public / private costs is over-egged. The ‘Government’ slice of the costs is made up of taxpayers, many of which also went to university.

    Similarly, you may not ever go to university, nor ever ‘pay’ for it, yet find yourself needing receiving a free liver transplant delivered by university-trained doctors and cared for by university-trained nurses. How to cost it?

    It seems to me that wherever you settle on the public / private split is simply the point at which you decide to stop questioning it.

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