The Higher Education Business Model is Broken: Bridging the Gap to a New Model

• This blog was kindly authored by Professor Robert Dover, Interim Dean of the Faculty of Business, Law and Politics, University of Hull. Here he writes in a personal capacity.

Higher education is the hidden issue in the current UK general election campaign. One of the few references to the sector has come from the Conservative Party talking point about what they consider to be ‘low value’ or ‘Mickey Mouse’ degrees (despite Disney’s success in creating $183 billion of market capitalisation), whilst the Labour Party manifesto pledges to create a ‘secure future’ without additional details. A complicated picture around political salience accounts for some of the silence:

• International postgraduates have been conflated with migration;
• Trust in expertise has been eroded over the last decade;
• Parents are finding contributions to higher education more difficult and see it as part of their discretionary, rather than core spend;
• Students are increasingly finding cost-of-living pressures challenging and have begun to balance their obligations in a way that undercuts their studies;
• Industrial disputes have jarred with students and parents making it a difficult sell for governments to advocate for the sector;
• And the sector has sometimes found it difficult to land the message about the added value of university degrees and research.

But UK higher education has been a jewel in the crown of British exports, an important part of the UK’s soft power projection, the talent pipeline servicing the growth agendas of the two main political parties, and strong net contributors to the local economies they serve. This is – therefore – an important moment in which to safeguard the quality and value of the sector and its absence from the meaningful general election debate is concerning.  

The Queen Mary UCU list of mooted job reductions highlights the strain in the sector. It makes for stark reading. The figures on the site amount to over £500 million of savings and 2,728 job losses in the next academic session. These figures are likely under-estimates due to patchy recording. On these calculations over 1% of all academics in the UK will lose their jobs in the next academic session, with the real figure likely to rise to 2.5%, when all institutions report and change processes complete.  

So, how does the sector fix its financial model?

The domestic tuition fee in England has been capped at £9250 since 2017 (having been £9,000 since 2012). When inflation is taken into account, economists have calculated that the £9,250 fee now equates to an estimated £6,000 in real terms, meaning that domestic students are often taught at a loss to the universities. HEPI has produced a series of essays concerning the financial future of universities that I would recommend reading. It has been politically expedient to prevent the tuition fee from rising with inflation, particularly after the decimation of the Liberal Democrats at the 2015 election. Placing control over the fee cap into an arm’s length body – as energy costs are with OFGEM – would ameliorate some of the political risk of fees, which should now be capped at around £12,500 to match the inflationary change. Other suggestions, such as connecting fee increases to performance in TEF, or fundamentally changing the terms by which loans are repaid, have been mooted, but the removal of the direct decision from Parliament is an obvious route to reform.

Increasing the tuition fee to £12,500 solves some of the challenges in the teaching-related financial model of the sector, but leaves under-funded research income untouched. A more fundamental challenge, though, is the perception of a growing disconnect between classic style degrees and what ‘the market’ wants. The market, in this case, is employers (but do we engage enough to know?) and the commentariat: the majority of students still opt for 3- or 4-year degree programmes, though the absence of alternatives might prevent real choice.

The position of the 2016-2019 Government under Theresa May on degree apprenticeships might come to be seen as poorly implemented, and an early version of the future of degree programmes. In policing, for example, the degree apprenticeship has been undercut by troubled implementation by Police Forces, a political turn to traditional values, and a failure to land the message about why police officers with full context are more effective than those who learn exclusively on the job. Employers want graduates with work experience and prior professional development (PPD, rather than CPD), but the overhead and staffing required to generate, and manage these opportunities within degree programmes are far beyond what can be paid for using today’s tuition fees. The reform here could be a model that places more emphasis on mentoring and coaching students working within junior roles in businesses through a curated programme of professional learning. Some current routes into accountancy and legal professions are analogous to this.  

Changing the sector’s disposition towards international students, from fully hosting to one in which the student moves host institution annually (three times for undergraduates and twice for taught postgraduates) provides wider access to international markets, performs the soft-power function, and improves internationalisation. The same could apply in our domestic market between time in industry and moving institutions with recognised credits and jointly awarded degrees, to exploit pockets of expertise in each institution.

Such mobility and joint awarding would move the sector away from offering full-spectrum disciplinary provisions – which many are struggling to do – and foster the geographical clustering of research and teaching intensities. In turn, this redistribution and clustering of expertise would create greater value from the sector’s research and innovation base. In principle, this would allow for a more equitable geographical distribution of research money and the targeting of research into regions aligned to industrial focus.

Reforms like these require a different operating model, including changes to student finance and recognition. Degrees would take longer to achieve but would have greater practical effect, in addition to providing greater levels of (social) mobility. A small number of universities could take such initiatives without government action – via the mission groups – but to break from the paradigm without political cover is highly risky. Such a radical upheaval of higher education is best achieved via a Royal Commission: politically neutral but well suited to tackling an issue of this magnitude. In this way, our politicians could provide the space for radical reform, without having to risk too much at the ballot box.