Sunday, 7 November 2010

The University Market

Back before the election in May 2010, I commented how it appeared that the Conservative Party had very little stated policy.  Wrongly I thought that this was because basically they were not far in policy terms from the Labour Party, especially in its Blair Party incarnation up to 2008.  I was wrong in this.  It is now clear that the Conservatives were planning an extreme New Right version of Thatcherism and knew that if they were open about that fact it would lose them votes.  Given that they did not win a majority anyway, in terms of electoral strategy they were right in terms of making electoral gains to keep quiet about their real intentions.  What I, and other commentators tended to overlook, was that there was policy out there being stated not only in the right-wing media but even in more liberal output.  None of the speculations were as harsh as the policy that has in fact been introduced, but if you look back at what was being discussed while Gordon Brown was prime minister, you see the desires of commentators, and, by implication, influential people behind them, that encouraged the kind of policies were are now seeing enacted.

Two trends I did pick up on and comment on, though did not really understand how they would form the basis of future government policy, certainly in the way we have seen it were: the desire for the return of the 'whip of unemployment' - and also the desire to have a far greater demarcation in university education, so that the privileges the already privileged are gaining were not lost among the fact that more people from ordinary backgrounds were getting degrees -  That second posting was prompted by comments in 'The Guardian' which though it gave its support to the Liberal Democrats during the election was hardly a supporter of the harsh monetarist, small state policies that the coaliton involving the Liberal Democrats has introduced.

Universities have always been a challenging issue for political parties.  Higher education until the 1990s remained the preserve of an elite, with in the 1980s, only 6% of 18-year olds getting to it.  Before 1992 there were two classes in higher education: universities which were funded by the central state and polytechnics, in the UK more vocationally focused and funded by local authorities; these were seen as 'second class' despite the good courses many of them ran, many of which contributed far more to the economy than university degrees.  Even with this small percentage with the population rise and the desire to cut public spending the grants to students were reduced and removed and loans were introduced in 1990, though at this stage they were not to pay fees which were still paid for by the state, they were to give money to live on.  Universities were expanding but not at a massive rate and so generally could balance income and expenditure.

In 1992 polytechnics and many other institutions were allowed to become 'new' universities.  This upset many people (it still does) who felt that the elitist nature of universities was being watered down.  Coming from a smaller scale, more industry-focused background many former polytechnics were actually better equipped to deal with the growing 'market place' of higher education than the more established universities that had been used to students automatically turning up.  Many of the new universities moved quickly into research which is what had distinguished universities previously, and in certain areas became very leading in this respect.  However, they were more alert to the fact that the students were effectively their 'customers' and whilst they may have had less space than universities they actually paid attention to what students wanted in a way that the older universities had often been neglectful of.

The big change came in 1997 with the government of Tony Blair coming to power with the slogan 'Education, education. education'.  The goal of that government was that 50% of 18-year olds would go to university.  One driver for this was how low our level of graduates was compared to other states in the EU and competitors across the world.  The high level of pupils leaving school with no qualifications was another factor but received less attention.  The post-1992 universities had grown and now grew even faster as many of the students from 'non-traditional' backgrounds often went to their local university and on to courses that could offer them a better chance of a job than studying English at a traditional university.  The increase was incredible and I now find that universities that friends of mine went to in the 1980s now take four or five times as many students than they did 25 years ago, though often jammed into much the same space.  Expanding universities so quickly, with all the new demands for computer facilities and students not tolerating the kind of accommodation we put up with, meant that universities found it hard to sustain the growth.  It seems most of it was funded not through taking more UK students (or even students from elsewhere in the EU who by law could not be charged more than British students) but taking students from Asia and to a lesser extent the Americas and Africa.  The big supplier of students is China.  Students from outside the EU pay fees three times higher than what English students pay.  Here it is important to note 'English' students because when tuition fees were introduced for students in 2006/7 they did not come to Scotland for Scottish students studying there and there were reduced rates in Wales and Northern Ireland, already a differentiated 'market' was appearing.

The market in 'international students' as they are called is not infinite and with China building more universities and other EU universities teaching courses in English, plus continued competition from the USA and Australia, only briefly dented by their difficulty with foreigners following the 11th September 2001 attacks, UK universities can no longer rely on these students as a 'cash cow'.  Also these students only want to study particular courses, especially in business rather than the full extent of the curriculum.  Talking to one lecturer they said that on some business and management courses the classes are 90-95% Chinese students now.  Universities have expanded faster than their revenue base has done.  Some have balanced this well, some badly, and, of course, the current sharp cuts in public spending, cutting the grant universities get for teaching by 40%.  Apparently from 2012 only science, engineering, mathematics and foreign language degree courses will receive funding, other subject areas will have to generate their own income.

Up until last week universities were limited in what they could charge UK students.  This limit has been raised to £9000 (€10,600; US$14,400) per year, i.e. £27,000 for a three year course. Effectively this brings the charge to UK students in line with what international students were charged.  In fact some so-called 'premium' courses especially in business have had exemptions and been charging such high fees already for everyone.  Students will be loaned this money and will only have to pay it when they start earning £21,000 per year.  Given that unemployment of recent graduates is around 25% at present, many of them are not going to be repaying for many years to come.  The so-called graduate 'premium' of earning more because you have a degree only really applies to sectors like banking in which most people can become rich.  Remember these days that nurses have to have degrees and yet the starting salary for them is just on £21,000, which is around £10,000 lower than the national average salary.   Now, with the current fees, most universities charge the maximum, they need the money.  However, there is an expectation that with the £9000 some universities will charge less, the implication being that those 'lesser' universities so perceived last year will become cheaper universities; they will attract poorer people to do cheaper courses and leave the 'proper' universities to the wealthy and privileged it is clear that a lot of commentators feel should be the only people to go to university.  As Margaret Thatcher said about studying Anglo-Saxon in the 1980s, I believe at the University of Oxford, 'what a luxury'.  A 'good' degree from an 'elite' university is now going to become something the wealthy can indulge in.  By the back door, the polytechnic segregation has been re-introduced.

We cannot avoid the fact that if we want universities as large as we have them now money must come from somewhere.  This current government is unwilling to provide it.  I favour a graduate tax, but this was ruled out a couple of months ago by the government, one which is averse to anything called a tax.  In many ways, however, the tax is effectively a private one as students will pay back the money with 'real' interest rates.  Up until August 2010, student loans were repaid at a nominal interest rate, which with recent low rates had actually fallen to a negative interest rate of -0.4% on loans taken out before 1998, which meant that even if you made no repayments your loan decreased.  Now, however if you took the loan out before 1998 you pay 4.4% and if later, 1.5% unless the bank base rate rises which if it does the interest rate will rise to a maximum of 4.4%.  Before August the rate for these later loans was 0% which meant students just paid back the capital.  Now, even before the cap on fees was taken off and even before a more market-orientated interest rate was introduced the average undergraduate was leaving university with debts of £25,000.  There is a whole issue about how high rents, food and utilities are in the UK anyway, which obviously contributes a lot of what students spend.  Many supplement their state loans with bank loans, at commercial rates of interest.  Even if fees had not been permitted to rise, student debt levels would have risen.  Student debt has meant that people from social categories 4-7 (i.e. the old working class categories) going to university has not risen at all since 2002, the ongoing rise has been in middle class people and even they now are feeling the squeeze. 

The government is saying that universities charging more than £6000 per year on a course must put in steps to assist working class students to attend.  In fact they were compelled to do this from when fees were first introduced and most have a sliding scale of help, though this then annoys the middle class students just out of the support band and allegations of parents splitting up so their children can get funding.  There is no evidence that since 2002 such assistance has raised working class participation in universities, but perhaps the level has not fallen in the way it would have done if such university grants were in place.  One factor that is constantly overlooked is how people are actually averse to getting into such vast debt even if help is offered.  This tends to affect people from working class backgrounds more than other social groups and men more than women which is one reason why there are no 6 women studying at UK universities for every 4 men.  Knowing that you will have £27,000 of debt just for fees, let alone the debt for living costs which we can estimate is around £16,000 for three years (obviously depending where you are studying, which is why so many students stay at home with their parents now), you are looking at £43,000 of debt, which even on the magic £21,000 is more than two years' salary.  With the interest rate of just 1.5% and taking 10 years to clear the debt, just for the fees, you will pay £31,334 by the end, that is a lot to clear in 10 years, so we will most likely see people stretching it out over 25 years like a mortgage (perhaps meaning they cannot get a mortgage as well, taking the best educated people out of the market for buying houses) and this would cost you £39,175.  If the rate is 4.4% then it is over £41,000 over 10 years, again, note, just for the fees.  It will be very easy for students to rack up more than £100,000 of debt by the time they have paid it off, with even currently very low interest rates.

People are going to be very critical of what they get for their money.  I have heard students on public transport pricing up individual lectures, and complaining while the snow was closing roads, that they needed a refund for the lectures cancelled when staff and students could not get in.  They will demand courses that will give them jobs.  This is what the government want.  They want ordinary people only to study a narrow range of vocational courses and places seen as 'cheap' or 'second rate' and leave the rest to the already wealthy.  It is clear universities will have to close many humanities subjects let alone things like art and even pure sciences such as astronomy.  If there is no clear occupation at the end of the degree it is going to be off the curriculum.  In addition, you will find the only people who become researchers in social sciences or astronomers are people from very rich backgrounds, just as was the case in the 18th century, the kind of society it seems apparent David Cameron wants to engineer.  Even in the Conservative Party he is turning back the clock from the culture of the days of Heath, Thatcher and Major in which hard working people from ordinary if not poor backgrounds could get on in the party, now you have to already be from the elite.

Some universities, probably led by the London School of Economics and the University of Cambridge, will become private.  It makes no sense for them to chase after the measly sums the state is giving them, with what they might see as restrictions when they might as well charge their students the same fees and get to have it all on their own terms.  Some UK universities are already struggling, in some towns lay offs have been in their hundreds.  People do not seem to realise that universities employing 5000 or more people are like large factories and when they close it ripples out through the local economy as expenditure in local shops, on rent and public transport, as well as a cheap supply of labour disappears.  Closing a university will take thousands of previously well-off people out of the local economy, plus all the tens of thousands (most universities now have over 20,000 students) of students.  I know many towns loathe students but they will miss the money they bring especially during this recession (or is it bad enough yet to call it a depression?)

These institutions will be absorbed by others or private companies or may simply collapse.  I imagine we will see mergers and ironically, those post-1992 universities who have had a more robust market model actually buying up parts of more established universities who have had a not as tight an economic model during the boom years.  At many universities students from outside the UK will become the majority as they already are in some subjects.  As unfunded courses are dropped and the focus is purely on the most profitable, those courses which already attract lots of foreign money will become dominant.  UK students will become a minority on many campuses.  There will also be lots of redundant academics swilling around in the economy, especially from arts, humanities, social sciences and pure sciences.  Given the commercial sector's aversion to anyone from an academic background, it is very likely you will have a lot of unemployable but highly educated people and what they will do as they fall into poverty is an interesting question, especially as the public sector where they might have previously found work also contracts. 

I envisage some imaginative students will leave the UK.  Apparently the University of Maastricht is happy to take students at equivalent to £1500 per year fees at present and teach them in English (knowing that most British people have no grasp of any language bar their own) and with lower living costs than the UK.  British university students are perhaps going to move into the position that Chinese and Indian students have held coming to Europe and the USA in the past.  Clever American universities would also tap into this market, if they need to.

In David Cameron's shockingly vigorous drive to make the UK a far more divided and elitist society, universities which, since the 1960s, have been seen as a way for ordinary people to advance themselves, are clearly going to come under attack.  The thing is, our competitors are still turning out more graduates than the UK and right across the subject spectrum not just in very limited areas.  It seems likely that in the future the government will find it difficult to find any British people qualified to advise it on the economy or social development let alone cultural issues, it will have to rely on Chinese people.  Students often stay around the university town they go to, Sheffield in particular has benefited from this.  The UK now will be exporting intelligent people to the Netherlands and other EU states many of whom will not come back.  I imagine many more will flee the UK to escape the huge debt burden on their heads.  As with so much of the current government's policy, this is being done for extreme ideological reasons, to smash meritocracy and return British society to the control of the privileged.  All the stuff about the deficit is just a front to cover such ardent ideology. 

I lived through a period of growing opportunity, with higher education a core element of that.  It is being killed off very quickly.  Before the next election we will see a fall in university students, the closure of some universities and a new elite, high-priced band of institutions, some of them private, and even these teaching a far narrower range of subjects than before.  Other institutions will be offering what are perceived as second or third rate degrees, still necessary to get a job whilst being disparaged, and coming at a huge financial cost to individuals who as a result will be unable to contribute to the economy.  The choice will be to join private business and scrape enough together to buy a house or study and rent for the rest of your life.  Both models favour the kind of society that the government wants: one in which landlords and banks make vast profits, even beyond their previous excesses, for the crumbs they provide to ordinary people.  It will be a society in which study will be reserved for the rich not the intelligent.  This will naturally mean that talent will go abroad and the UK economy will be weak compared to its rivals, but if the city merchant bankers can still make their profits, the government's view is that the rest of us should be humble and grateful for what we can scrape and have no right to protest about the lack of opportunity and penury the rising generation face.

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