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Can the HE sector just carry on as it is now?

  • 31 January 2023
  • By Nick Hillman

Today’s HEPI blog is the text of a speech by Nick Hillman, Director of HEPI, to a joint meeting of the Senate and Council at Lancaster University.

It is a great pleasure to be back at Lancaster University. I have visited many times before of course, perhaps most notably for a debate hosted by some of your students in which I defended the current tuition fee system against the (then) Labour politician Chris Williamson. My side of the debate went down to a crushing defeat, but the event was followed by further (good-natured) argument in a local pub, showing lively student-promoted free speech in action. I note the tuition-fee system has lasted for another eight years since that debate occurred – so perhaps my side of the debate lost the battle but won the war?

My last visit to this University, however, though not my last visit to Lancaster, came at the very start of 2021/22, when I spoke to a senior management strategy meeting. At the time, we were all hoping things were about to revert to normal after the impact of COVID and the end of lockdown, though we had yet to hear of Omicron and we were not out of the woods yet. It was a fascinating session because it was the first time that a number of your senior managers had been in a room together, and yet Lancaster University – like higher education institutions more generally – had continued to thrive during the worst of the pandemic.

Before I get into the meat of my talk, let me urge you to take a look at the HEPI website to see what we do, assuming you are not already familiar with our work. On there, you will see a new blog entry by one of your own Professors, Paul Ashwin, Head of Department here for Educational Research. Paul’s piece is a takedown of a controversial new book about the demise of grammar schools and we have separately run a flattering review of the same book by a grammar school teacher – showing yet again that HEPI’s purpose is to stimulate debate as a way of improving policy rather than lobbying for any one position or another.

You have given me a lengthy list of issues to cover. Doing them all justice is especially hard given the point we are at in the political cycle: since last Tuesday, the next general election must be less than two years away. But it is not yet considered so close that we have any real idea what the official Opposition, which has a large and sustained poll lead, would actually do if they were to take power.

Back to the future

I hope you will let me begin with some history. Exactly 34 years ago, in January 1989, the Secretary of State for Education, Kenneth Baker, travelled to this University to deliver one of the most important speeches by any Secretary of State for Education since the Second World War – although, as the Cambridge historian Peter Mandler has observed, the speech is ‘not as famous as it should be’. Your Chair of Council, the Rt Hon Alistair Burt, was I understand Kenneth Baker’s Parliamentary Private Secretary at the time. The full text of what Baker said that day has generally been very hard to get hold of, though I am pleased to say you can find it on the HEPI website along with other hard-to-find and important historical documents on higher education policy.

In his speech, Baker started by looking at higher education over the previous quarter of a century, since 1964, noting that the number of universities had grown from around 30 to over 50 while the number of students had risen from 300,000 to nearly one million. He then turned to what he expected to happen in the next 25 years, or well into the 2010s. Some of his predictions, such as large increases in higher education participation among ethnic minority families, occurred; others fared less well, such as his view that the UK would embrace ‘increasing integration into Western Europe’.

Baker’s speech here is most significant, however, for setting a target to double the proportion of young people accessing higher education from around 15 per cent to 30 per cent. Remember, this was a full decade before Tony Blair’s set his 50 per cent target.

the staple for our universities remains a three-year, full-time, degree course, framed with the interests of a bright 18 year old in mind

Kenneth Baker, Lancaster university, january 1989

Baker did not envisage this expansion occurring on the same model as in the past; indeed, he complained about a lack of innovation in our sector: ‘the staple for our universities remains a three-year, full-time, degree course, framed with the interests of a bright 18 year old in mind.’ And then he said the time had come for the UK – this was before the current Scottish Parliament, Welsh Assembly or Stormont had been established – to choose between two clear choices:

  1. Either a European model of higher education characterised by ‘an increasingly state funded and therefore state organised “system” of higher education.’ This would mean, he said, ‘the structure of mass higher education will tend to be increasingly nationalised, under pressure to stretch public funding as far as it will go. The effect will be to offer a limited variety of institutional structures and missions, providing a range of broadly similar experiences to all, and producing a range of similar outcomes for all.’ [My emphasis]
  2. Or a United States model of higher education in which ‘A great variety of universities and colleges offer a wide range of academic, vocational and recreational programmes of study, serving a wide range of individual needs and aspirations.’ Baker flagged ‘the modular nature of many of the programmes, allowing progress and credit accumulation towards a terminal qualification’ and noted ‘modes of study are flexible, with much interchange between periods of full-time and part-time study.’ [Again, the emphasis is mine.]

Unsurprisingly, given the flavour of Government he represented, Baker plumped firmly for the second of these two models – for ‘diversification and differentiation’ – and rejected the former, which he characterised as an ‘abstract intellectual construct, the grand design’ and therefore out-of-kilter with ‘our national genius’.

Baker concluded that income diversification, with more money from private sources, would deliver ‘much greater differentiation and diversity, and correspondingly greater institutional autonomy and flexibility.’ As part of this, he noted the Government of which he was a part was about to introduce the first modern student loans – in what was to be Margaret Thatcher’s last significant social policy reform – thereby making use of graduates’ future earnings as a new funding source alongside support from the generality of taxpayers.

Differentiation and diversification – or homogenisation

Baker’s successors in all three parties that have been in power at Westminster since 1989 have sought to follow the path of differentiation and diversification.

  • For example, Labour backed teaching-only universities, promoted Foundation Degrees and spoke up for ‘contestability’ in public funding of higher education.
  • Conservative Ministers in office after 2010, such as Jo Johnson, wanted to see a thousand flowers bloom – that is a key reason why the latter set up the Office for Students.

But ‘the level playing field’ that was promised for institutions which do things differently cannot work well if the steps up to reach the playing field are inaccessible, hard to find or too steep. Today, there are far fewer institutions on the Office for Students’ Register than there were meant to be.

That is why, HEPI has been running a series of pieces over the past few weeks on how hard it is to innovate in our sector.

  • It was kicked off in December 2022 by HEPI Trustee Mary Curnock Cook and Professor Sir Malcolm Grant, former President of UCL, who jointly complained the current ‘quality assurance approaches used for larger traditional universities are not appropriate for new, small providers.’
  • Last week, the Vice-Chancellor of Sheffield Hallam and others, agreed about the problem but argued the causes were broader: ‘The English higher education system is locked’ into its current model, he wrote, ‘by its funding, accountability framework, performance indicators and cultural conditioning. We are all the poorer for it. It will take determined and sustained change to embrace diversity and innovation.’

I think that is correct: change is much more likely to come through reforms to the world in which institutions operate than through begging vice-chancellors to do things in letters sent out from Whitehall. Universities may sometimes seem slow to change and resistant to orders from outside but they are responsive to incentives.

Universities may sometimes seem slow to change and resistant to orders from outside but they are responsive to incentives.

So while in some respects we have travelled down the path sketched out by Baker here in Lancaster 34 years ago (for example in terms of expansion, the growth in female participation and some diversification of income), we have not seen the differentiation in types of provision that was hoped for. Most young students are full-time; part-time and mature learners are less common than in the past; and most young full-time students live away from home in the traditional boarding school model.

As a result, English universities have remained somewhere between the European and American models that Baker sketched out all those years ago. Now, however – as Dave Phoenix, Vice-Chancellor of London South Bank University, wrote on the HEPI blog the other day – English universities stand on the brink of being pushed entirely into the first category of full nationalisation. There is a risk that the Office for National Statistics will feel duty bound to reclassify universities as part of the public sector, as they have already recently done with FE colleges.

If that were to happen and, say, your world-class researchers here at Lancaster were to be classified as public sector employees and your ability to borrow from private sources were to be severely curtailed, we really would have left the idea of autonomy far behind. As David Willetts has put it, if universities are reclassified by the ONS as part of the public sector:

Then ministers could indeed tell universities who to interview and ban Confucius Institutes and sack Vice chancellors – as a Tory MP on the Education Select Committee called for recently.

The MP in question is now the Minister for Skills, Apprenticeships and Higher Education.

Your first two questions to me were about innovation and evolution and this is perhaps all a long-winded way of saying you would be a brave institution to shift too far from the 3+1 degree / Master’s model, at least without seeing major reforms to the framework in which you operate first.

I see this challenge close up on the one hand as a governor of the local University where I live, Buckingham, which has always tried to do things differently but which has been finding life a little tough recently and, on the other hand, as a governor at my old University, the University of Manchester, which follows a more traditional path and is currently more successful than ever before, while standing of the cusp of celebrating its bicentenary (in 2024).

For me, the current situation has been put best by those wise heads at DataHE, who know more about sector trends than anyone I have met; I have heard them compare the traditional degree route to the main Pyramid Stage at Glastonbury and non-traditional routes to the Poetry Tent – worthy, important and life-affirming, but not to tastes of the majority of school leavers and not where a long-established provider is going to focus extra resources without having some very good reasons for doing so.

Perhaps the long-promised Lifelong Loan Entitlement will change things. The promise is that it will give adults of all ages new opportunities to reskill and upskill – although I note in passing that the barriers to learning for many less skilled people go far wider than not having easy access to a loan. Yet, as I said in a recent speech to the Sixth Form Colleges Association, we are halfway through the original timeline for the LLE but have not yet left the station.

It really has become urgent that we now see the outcomes of the consultations launched by the Department for Education a year ago, in February 2022, on the Lifelong Loan Entitlement, as well as on Minimum Entry Requirements and on the possibility of new student number caps. Big education reforms typically take a minimum of two years to implement and, as I said at the start, there is no longer two full years until the next general election.

Of course, even if my analysis is right, it does not mean the higher education sector should or will stand still. The demands from students are becoming greater, as we see each year in the HEPI / Advance HE Student Academic Experience Survey. To take one obvious example, they want to retain access to all the extra edtech rolled out during COVID while also having lots of in-person time. Yet resources are falling, staff are disillusioned to the point of taking another 18 days of industrial action and, in some places, surpluses have already become deficits.

The increasing demands from students are not going to lessen, in part because schools are changing fast, so new students arrive in higher education with different expectations to the past, and in part because, as the higher education net is cast more widely, new students will come from an even broader range of backgrounds.

Funding and international students

So constantly squeezing the unit of resource available for teaching each home undergraduate, as has happened since 2012, cannot be a forever policy. The impact of inflation has already reduced the average unit-of-resource for home students back to the levels it was at from the mid-1990s to the mid-2000s. It may once have been fiercely opposed by Conservatives, but the Government have unwittingly overseen the implementation of Ed Miliband’s policy at the 2015 general election of £6,000 tuition fees.

constantly squeezing the unit of resource available for teaching each home undergraduate, as has happened since 2012, cannot be a forever policy … the Government have unwittingly overseen the implementation of Ed Miliband’s policy at the 2015 general election of £6,000 tuition fees

Universities that can attract more international students than they already do are not on the sharp end in quite the same way as those that are almost entirely reliant on home students. So the number of places on offer to international students is likely to continue growing, assuming policymakers allow it. I wholeheartedly welcome the diversity, finances and soft power that international students bring, which is very evident in our work.

Yet constantly relying on international students to solve all our problems raises some important issues, including:

  1. displacing home students just as the number of 18 year olds takes off, which has the makings of a major political row;
  2. spreading international fee income more thinly to cover shortfalls in teaching as well as the long-standing shortfalls in research; and
  3. exposing universities not only to geopolitical shifts but also political whims.

On the last of these points, we have seen in the last few days how absurd the current position is. For years, universities have been told by those in power that they are over-reliant on China. So making use of the better post-study work rules in place since 2021 and keeping to the goals of the Government’s own International Education Strategy, they have worked hard and successfully to recruit more students from places like India and from Nigeria. In terms of new study visas, Indian students have now overtaken Chinese ones.

universities are damned if they do and damned if they don’t

Now this has occurred, the Home Office is threatening new rules, such as new restrictions on post-study work, that would reverse recent progress, making educational institutions more reliant on China once more. So universities are damned if they do and damned if they don’t. I think the way out of this mess would be for the Home Office to share policy responsibility for international students with other Government Departments that understand their importance to the UK – such as Education, International Trade, the Foreign, Commonwealth and Development Office and the Treasury – or for Number 10 to intervene. 

None of the main alternatives to the current funding model, such as abolishing tuition fees or moving to a graduate tax, would solve these conundrums. Put simply, the current model, which relies on repayments by the beneficiaries of higher education, enables more funding than other models and obviates the need for student number caps. Other parts of the UK, like Scotland and Northern Ireland prove that beyond doubt.

So call me unimaginative if you like, but I think the broad outlines of the funding system Tony Blair implemented and the Coalition built up are right and that is why they have sustained. People have been saying the system is broken and will not last for years, yet – by the time the next election is expected to happen – the fees and loans system we have will have lasted longer than the era of entirely free higher education when there were neither fees nor loans (1978/79 to 1989/90). But if it is to survive for the long term, we need to get back to maintaining the value of both maintenance support and fees in line with inflation – and I would also like to see the return of maintenance grants for the poorest students (which HEPI will have more to say on later this week), as those from the poorest households should not be expected to take on larger debts than those from somewhat better-off families.

People have been saying the system is broken and will not last for years, yet – by the time the next election is expected to happen – the fees and loans system we have will have outlived the era of entirely free higher education

I note en passant and perhaps a little mischievously that, whether or not you like the outlines of the student funding system we have, its acceptance has become something of a test case for whether a political party is ready for government: as Leader of the Opposition, both Michael Howard and Jeremy Corbyn hoped to make electoral hay by promising to abolish tuition fees, but neither reached Number 10. In his early days in charge, Keir Starmer promised the same but, with every passing interview, he seems to be nudging his party to a position where other issues take priority when it comes to public spending, such as childcare.

As part of this journey, we might expect a brief flirtation on the way with the idea of a graduate tax, as others like Gordon Brown and Vince Cable flirted with it in the past. Yet the arguments against are numerous and clear. They include:

  • imposing regressive repayments on graduates on lower salaries who are currently above the tax threshold but below the student loan repayment threshold;
  • a loss of institutional autonomy; and
  • a funding crisis in the gap before the income from the new tax starts flowing.

I have taken up most of my time and failed to get through your whole list of issues. But I hope you feel I have covered a range of funding, regulatory and political concerns facing us. Let me conclude with a bigger thought. The key objectives of this Government and any realistic alternative government are economic growth and levelling up.

It is exceptionally hard to deliver either without universities, which deliver the skills employers need, which reveal new insights that unlock productivity gains through their research and which are key civic players all over the country.


  1. Huw Morris says:

    Nick a great speech which appropriately sets recent developments in an historical and political context. The challenge as it seems to me, and as you are rightly encouraging, is to move away from the sector speaking to itself about institutional finance and student funding to consider the part higher education is playing and might play helping the people of the U.K. achieve their aspirations and needs.

    The U.K. currently has the second most expensive tertiary education system among OECD nations. The U.K. has slowing rates of social mobility and a lower rate of productivity by comparison with other G7 countries. The UK also has between 2.5 and 5 million people who are economically inactive and very significant skills shortages in a range of industries and occupations. It is not clear to me that maintaining the current funding system or moving to a graduate tax is part of the solution to the above. They are possible solutions to providing for more students having what their predecessors had in the past, but are they a solution to the challenge they will face in the future. It will be good to see HEPI continuing to encourage the debate about the current arrangements and other possible solutions which extend beyond the current system, a graduate tax or the so-called STEP approach. This could consider possible tertiary systems and arrangements that provide for greater levelling up, social mobility, local people taking back control and measures to get Britain working again.

  2. albert wright says:

    Nick, you claim that to deliver economic growth and leveling up “…it is exceptionally hard to deliver either without universities, which deliver the skills employers need…..” I disagree.

    Universities have failed to deliver “the skills employers need” over the last 10 years and more.

    Research by many of the organisations representing employers, including the CBI, IoD and Fsb, complain that graduates are often not “work ready”.

    Leading employers are moving away from using grades achieved by students in traditional degrees when recruiting graduate employees and increasingly using psychometric test results and other ways to identify useful talent.

    Degree Apprentices, however, have been well received and are in great demand.

    Companies like Google have developed their own qualifications for recruitment for many jobs because universities do not have the right courses for the skills they need.

    If our universities are so good, why have we not seen improvements in productivity and economic growth?

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