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Universities in Crisis … only more so

  • 4 May 2020
  • By Jefferson Frank and Norman Gowar

This blog was kindly contributed by Jefferson Frank, Professor of Economics, Royal Holloway, and Norman Gowar, Emeritus Professor of Mathematics, University of London. (Jefferson Frank can be contacted here.)

In January 2019, we published English Universities in Crisis: markets without competition. Our analysis showed the market failure from the threefold increase in fees (in 2012) and uncapping of student numbers (announced in 2013). When uncapping was announced, Nick Hillman (HEPI report 69) raised some of the issues likely to arise. Commentators from Australia warned of a likely ‘marketing explosion’.

Universities adopted hugely expensive building and marketing strategies to take the profit available from student loan financed fees and student rents. A mindless pursuit of student numbers led to a prisoner’s dilemma where many universities were in financial difficulties before the pandemic struck. The pandemic has given an extra twist of the tourniquet with huge debt and increased overheads leaving little room for manoeuvre. In response, UUK has made a claim on significant additional public funds. The UUK proposal includes the restoration of individual university student number caps [Editor’s Note: Newly accepted by the Government]. At first sight, this seems similar to one of the main proposals in our book, and others have come around in some ways to our way of thinking.

We do not favour just throwing money at the problem, since it is our students that will be shouldering the additional public debt. Even the immediate response should contain fundamental reform and conditions. Commentators are increasingly noticing that lecturer numbers have not risen commensurately with the growth in student numbers, ‘reducing the quality of education’. There has been high inflation in vice-chancellor pay and in degree results, an expected circa 50 per cent non-repayment of student debts and a failure of widening participation in the most prestigious universities, something Chris Skidmore has previously discussed.

The UUK proposals largely freeze in place the current allocations of students across universities. But, in the uncapped numbers environment since 2012, the Russell Group has been an extremely effective marketing device. These universities have grown massively at the expense of others.

This has been abetted by the grade inflation in degree classifications, described widely in the press. If a First from a non-Russell Group university is no longer a signal of extraordinary achievement and hard work, then the student is better off getting the Russell Group signal on their degree certificate no matter that there has also been grade inflation there. Some students are no longer choosing the best degree and university for their interests but chasing the Russell Group label. Further, if only Russell Group degrees have standing, the value of the qualification is based primarily on educational experience and advantages prior to going to university. It is getting the place, even more than the studies at university, that is most important. Finally, the Russell Group universities (with the exception of Oxbridge, which have not grown its undergraduate numbers) have expanded well beyond the levels that are in their own interests.

Our proposal was to restore student number caps at 2012 levels but to let each university admit widening participation students without a cap. We proposed the restoration of means testing, which would as a by-product make it easy to identify the students from less advantaged backgrounds. This would shift competition away from student numbers at all costs to getting the best students a university could attract, and create huge incentives to find those students in less privileged neighbourhoods and schools. We show in our book how a combination of means testing and a reform of the current fee system can be achieved at no extra cost to the public purse.

Giving universities this incentive would eliminate at a fell swoop the need for the functions initially assigned to OFFA (the Office for Fair Access, now incorporated into the Office for Students), and the associated bureaucracy within universities. More generally, the Government has responded to the market failures of high fees and uncapped numbers (the ‘demand driven’ system) by regulation and micro-management despite its professed aversion to red tape. An unintended consequence of marketisation has been the increase in size and influence of university administrations in order to cope with these regulatory demands. Dorothy Bishop has argued against the continuation of the Teaching Excellence Framework and the Research Excellence Framework, the latter because of mission creep. It is ironic that a Government that claims to favour entrepreneurship has instead set up a system that has led to bloated bureaucracies. Where are the universities that have adopted independent and imaginative approaches to the challenges and opportunities of the digital age, to continued globalisation (where the pandemic has revealed the profound implications) and to the climate emergency?

We have, simply by looking at inefficiencies in the regulatory structure, found the way universities can make major cost savings in the current crisis. The simple reality of university expenditure is that significant savings cannot come on the academic side. Academic salaries have made up a declining proportion of university expenditure, at about 30% of total expenditure.

Source: HESA Finance Records, in English Universities in Crisis

By not hiring enough new lecturers, and by casualisation of the new workforce, universities have already squeezed every last penny from the academic staff and from PhD students and post-doctoral researchers. At the same time, students face crowded lecture theatres and libraries and larger seminar and tutorial groups. In exchange for huge debts, they have a poorer experience than their predecessors. The NUS lists some of these issues in explaining its support for striking lecturers in the 2019/20 academic year.

The likely student number reductions from overseas students staying away in 2020/21 will move most universities back to a more efficient level of enrolment. But this only works if the student-staff ratio goes down. Any new money going to universities to keep them afloat through the pandemic should therefore be directed at maintaining the size of the research and teaching staff. It should take on the form of incentives to hire new lecturers and to expand PhD programmes to ensure the future strength of the system. Students graduating in 2020 will find a job market that is at least partially in shut-down. New money should therefore also go to supporting them in postgraduate programmes.

While we think that new money needs to be tied to increased efficiency, in our view this takes the form of maintaining academic staff. The next generation of academics is vital for the future of the country. What we do not support is the tying of funding to reorganisations and mergers within the sector. Universities have grown too large, partially based upon a fallacy that there are ‘economies of scale’. In fact, the leading US universities, with exceptional financial strengths, have chosen to contain their size. For example, Princeton has about 5,000 undergraduates and 8,000 students in total, and even Harvard has about 20,000 in total. This is an indication of the most efficient size and scale for universities.

In the same way, there are myths about the degrees of highest value. These have not so much to do with subject, but with rigour and the maintenance of standards. Top quality degrees are just as likely to be found in subjects that are currently out of favour, such as the humanities, and not in the subjects du jour. It is notable that Germany, led by a woman quantum chemist, has included academics from the humanities in her team to advise on the pandemic and she seems to have done pretty well.

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