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How Universities and Governments interact: the scope and limits of regulation and influence

  • 16 October 2024
  • By Anton Muscatelli

This HEPI blog was kindly authored by Professor Sir Anton Muscatelli, Principal and Vice-Chancellor of the University of Glasgow.

In a recent blog from the Labour Party Conference, HEPI Director Nick Hillman set out an interesting set of questions about the relationship between Universities and the new UK Government:

As the rain gradually ruined my suit, I tried to work out whether the university sector is right to adopt this mission-based language. The missions are pretty attractive to people of all political persuasions and are undoubtedly aimed at tackling the country’s ills. But should a sector that is chock full of independent and autonomous institutions so readily adopt such politically charged language?

Nick then went on to contrast this to some of the reactions in the sector after the ‘big society’ moment when the Coalition Government made some announcement regarding funding:

…And why the silence from all those people who, after the Coalition came to power, ran to the newspapers to complain it was ‘gross’ and ‘grotesque’ for academia to engage with the latest political priorities?

There are always interesting ‘moments’ in the relationship between incoming governments and universities. Some of them are about funding, but most of them are not. It’s about the more subtle issue of how the sector aligns with the government’s policy priorities.

In Scotland, we had similar moments, especially after the 2011 Scottish Parliamentary elections. This led to two major developments. There were changes in the composition of university governing bodies through the Higher Education Governance (Scotland) Act 2016. The injection of additional public funding to universities to partially match the increase in funding due to the introduction of tuition fees in England and the rest of the UK also led to the introduction of a new accountability mechanism. This was through ‘Outcome Agreements’, which the Scottish Funding Council negotiated with each institution. These are about to end (in 2023-24) in their current form and will be replaced by an Outcomes Framework and Assurance Model

As an economist, I have an interest in how governments use institutions to regulate various aspects of their activity or that of autonomous bodies that fulfil key functions in society (e.g. central banking; the Office for Budget Responsibilities and fiscal rules).  

There are strong analogies here with higher education, where the influence which governments exert on universities typically maps onto a spectrum which spans between, at one end, formal methods of regulation and control (de iure) and, at the other end, informal influence or moral suasion (de facto). These actions and influences are not without consequence: the Scottish post-16 reforms after 2011 exerted so much de iure control over the Further Education sector in Scotland that it led to the re-classification of Colleges as public bodies, with consequent limits on their autonomy to manage their finances. Universities however retained their autonomy.

So can we draw any conclusions about this literature in political economy or institutional economics for the points which Nick makes in his blog about universities?

First, a key point is that de iure (formal regulation) is more likely to be a response if the government and the sector do not know or understand each other well yet. Uncertainty is not helpful to good relations. New governments which come to power after many years of opposition are more likely to resort to formal levers if they feel that implementing key policy objectives will be difficult without some formal control.

In this context where the sector and the government don’t know each other well it should not be surprising that signalling should take place. An intent to indicate collaboration with government is a way of avoiding the use of more formal regulation. Likewise, governments indicating a break with previous policies unpopular with the sector are a way to reduce uncertainty and open up positive dialogue. The rhetoric around embracing missions and ‘the end of culture wars’ should be seen in this light. Indeed, the UUK Blueprint is a concerted attempt to inform and build relationships with a new government.

Second, the range between de iure and de facto actions is a spectrum. Outcome agreements and the Higher Education Governance Act in Scotland (which were both de iure measures) did not, I would argue, lead to a dramatic change in the direction of travel of universities. Nor did it lead to a loss of autonomy. It was borne out of a common interest between government and the sector around additional funding and achieving greater widening access. Indeed, the sector itself used the early outcome agreements to highlight its contributions to society.

Finally, the overall economic environment impacts on the scope and the effectiveness of the regulatory regime. In general, tight fiscal positions will tempt governments into tighter control of spending lines to achieve policy objectives. Financial challenges will push universities closer to government. In this sense 2024 is very different from 2011, and you would expect a closer dialogue between the sector and the current government, as both seek to address their own challenges. We know from recent economic evidence how important Universities are in generating local economic growth, and also that historical presence by universities is also linked to stronger pro-democratic attitudes.

There is a bigger incentive than ever for the two parties to work closely together. This need not impact on the autonomy of universities, providing that both parties recognise how important institutional autonomy has been to the global success of UK higher education.

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