Many readers of Prospect will have views about the future of Britain's universities based on memories of their days at college, perhaps half a generation ago. Those views, and public opinion in general, matter: higher education (HE) is a big political issue. We are now experiencing a lull after the storm of the debates about tuition fees two years ago. But during this parliament the arguments will hot up again—about fees, about the access of people from less advantaged backgrounds to HE, about HE's scale and purpose, and about the role of the state in relation to universities.
Those whose views are determined by their own memories are likely to form a misleading picture of the university scene. In 1990, less than 20 per cent of young people were in HE. By 2005, this had risen to over 30 per cent. The number of students with family backgrounds in the lower social classes has increased substantially, although their proportion of the total has fallen, along with the decline in their proportion in the general student-age group in the population. An important factor here has been the rising participation of mature (over 25) and part-time students. The student body in British universities is now much more diverse in background, age and mode of study than it was only 15 years ago. It is also more diverse in ethnic and national background. There has been a sharp increase in the number of postgraduates, especially of students at master's level: their numbers increased by over 40 per cent between 1995 and 2002. Many of the new postgraduates are from overseas, from China, Germany, and eastern Europe among other places. Indeed, there is a record number of overseas students at every level—and the professoriat has also become increasingly international, with the "brain gain" substantially exceeding the brain drain.
Of all these changes, probably the most significant, and least discussed, is the expansion of higher level vocational studies. It is driving the increasing integration between further education colleges and universities, both the former polytechnics and the old civic universities. The more research-intensive Russell group of 19 universities is also affected by this trend, as demand for its postgraduate courses rises. And while the number of students on vocational courses grows, the design of even the most traditional courses increasingly reflects employers' interest in general transferable skills—IT, teamwork, leadership, presentation.
This is a response to fundamental processes of economic and technical change. Work-based training remains vital, which is why government still subsidises modern apprenticeships. But globalisation is shifting much basic manufacturing away from countries like Britain, where labour costs are relatively high. At the same time, waves of technical innovation are transforming every sector of the advanced economies. The model for vocational training can no longer be the industrial apprenticeship, imparting skills to last a working lifetime. It has to be understood more as a general training of intellectual and personal aptitudes, to prepare for working lives that will involve many changes of activity.
There is an important contrast here between the German and the American models. German industrial prowess has been founded on strong work-based apprenticeship training, involving high levels of co-operation between industry and technical training institutes. German universities have not been involved in this: they have stuck to their traditional role of promoting theoretical studies in the humanities and sciences. The US, on the other hand, has built its modern high-productivity service and industrial economy on the back of mass participation in HE, where many students follow vocational courses. Today, although Germany's skills are still top of the class, and America, like Britain, has too many unskilled people, the German model is finding it increasingly difficult to cope with the speed of change in advanced economies—while the US model is flourishing because of its superior flexibility and capacity for innovation. In the 1960s and 1970s, Britain tried, unsuccessfully, to follow the German pattern of apprentice-based vocational training. Now it finds itself leading Europe in the application of the American HE-based approach.
This is not easy. To make a success of it, Britain must learn to do things that have a long history in the US but that fit uncomfortably with British social traditions—which are in many ways closer to those of Germany. British business has to grasp its vital stake in the success of British HE, and learn how to get more involved without being seen as an intruder. Students themselves have to grasp the potential of university-based vocational study. And British universities have to learn how to operate on a scale and with participation rates and a degree of diversity in the student body unimaginable barely 15 years ago. They used to have to keep their eyes fixed mainly on Whitehall. Now they must also keep in touch with business boardrooms, paying students and competition from abroad.
About 80 per cent of the British workforce of 2020 is already at work now, in 2006. In other words, if we are to secure a more productive economy, we must not only improve provision for the 20 per cent of new entrants into the labour market over the next 15 years. We will also have to find ways of engaging the 80 per cent already at work in updating their skills, or developing new ones. This will take British HE even further away from cherished, but obsolete, ideas about what the university is for.
As recently as the 1950s, when the "plate glass" universities were planned by the Macmillan government, there was a single ruling model for British (or English) HE, based on the Oxbridge pattern. The worthiness of the provincial or civic universities, like Bristol or Manchester, was admitted—but the future was thought to lie with universities like the new Sussex, dubbed "Balliol-by-the-sea." This monopoly began to be challenged in the 1960s, when Anthony Crosland introduced the polytechnics and Harold Wilson's Open University became the world pioneer of distance learning at the higher level.
Over the past 40 years, these developments have been accompanied by a ground bass of polemic in defence of liberal learning, academic values and the notion of university study for its own sake. Cardinal Newman's 1850s lectures on "the idea of a university" have been much cited, if little read (nobody seems to notice, for instance, that he put vocational study, for the priesthood, in the centre of the university picture, and wanted to divorce research from teaching).
From today's perspective it seems obvious that there can and should be no single model of what "the university" is about, and that the future lies in the rich diversity of HE we see across the Atlantic. Britain needs strong local centres of sub-degree learning and training, like the American community colleges—and this is the way further education colleges are developing. We need universities, such as the former polys, with a strong vocational mission, focused on teaching and training but with research capacity plugged into local and regional economies. And we also need world-class research intensive universities with a strong academic orientation of the traditional kind.
World-class universities are critically important. Their laboratories make a major contribution to the development of the sciences that fuel technical innovation, and they are also indispensable in the formation of scientific and technical elites. As in the past, when, as Thomas Gaisford put it, the study of Greek led to "positions of considerable emolument," so in the future: advanced study of the humanities and social sciences can promote the capacity to absorb intellectual innovation. The market for the talented and gifted is the most dynamic in the world—and this is a market in which universities are a crucial factor. World-class HE is not only necessary to equip national elites for competition at the global level, it is also a powerful tool for the recruitment of talent from abroad. The great American universities are beacons attracting the most talented people to the US from all over the world. Their British equivalents need to be able to continue to do the same. In Germany, a big effort is being made to recapture the magnetic pull that the country's elite universities used to exert.
Diversity in universities means having a wide range of institutions, serving different needs and performing different functions. It also means greater social diversity. More heat than light has been generated by the recent debate about increasing the participation of people from disadvantaged backgrounds. The office for fair access (OFFA) can contribute to a better informed debate about the obstacles; it will be no surprise if this debate concludes that the real challenge is to raise the intellectual aspirations of secondary schools.
US experience shows that the route upwards for the talented who have been failed by the school system lies in part-time study as a mature student, often on a vocational course. Doing more to help such students will be much more useful than obsessing about college interviews at Oxford and Cambridge.
Over the next decade, the demographics which have been favouring the universities will turn against them. The number of British young people will start to fall. At the same time, demand from overseas students is likely to slacken as universities in countries such as Germany and China improve their offer. As reforms in our schools work through it might be possible to increase participation rates above the current target of 50 per cent by 2010—and the demand for lifelong learning can be expanded. But the competition for students will be intense, both within Britain and overseas. Competition for research funding—already more than half the grant-in-aid from government—will also intensify, especially if business research investment increases to US levels.
This requires big changes in university governance. So far this has been most dramatic in the former polys, with their slimmed-down executive boards and powerful vice-chancellors. Every university has been finding that there is a need for stronger strategic direction, and for the more meaningful involvement of "lay" people from outside—including at the top level, as in the US. The strains resulting from a stronger managerial approach have been well publicised at Oxford, less so at Cambridge—but they exist in every university. Worthy traditions of academic self-government, and less worthy traditions of introversion and committee-bound indecision, are everywhere being challenged.
The pay, morale and recruitment of the professoriat are serious problems. The treasury is a monopsonistic (sole buyer) employer, and dons have a weak bargaining position—so their relative remuneration has fallen significantly (something the AUT strike action in pursuit of a 23 per cent pay claim is trying, in vain, to halt). In many important areas, staff are having to be imported. The remedies lie in diversifying the funding of HE and making pay rates more discretionary.
Another big issue is how to sustain one of the historic strengths of British HE—its emphasis on high-quality teaching. In many institutions there is a risk of being swamped by increased numbers. Academic weaknesses in secondary schools and the A-level system mean that appropriate levels of knowledge and competence cannot be taken for granted among new students. Especially in the research-intensive universities, incentives to research rather than teach are leading to the growing differentiation of these activities. These trends may be unavoidable, but they must be watched.
Because British HE has been a kind of nationalised industry since at least the 1950s, all of this poses challenges not only to the universities but also to the government and to politicians. In HE—as in healthcare—the effect of putting the treasury in charge of funding has been to deliver a smaller share of GDP than would have been generated by individuals making their own decisions. Thus the US, with its mixture of private and public funding, spends more than twice as much of its GDP on HE than Britain does—2.6 per cent compared with 1.1 per cent. Government in Britain needs to ask how it can relax its grasp on the purse-strings, not whether it should do so.
But many British politicians still sincerely believe that HE must be exclusively funded by taxpayers on grounds of social equity. In the recent debates on increasing tuition fees to £3,000, this was the position of the Conservatives and the Liberal Democrats, as well as many Labour backbenchers. This ideological commitment will be challenged, however, by the public expenditure crunch that lies ahead. The welcome increase in government spending on the NHS and schools after 2002 is scheduled to level off from 2007—but it will not be easy to slow this express train. Meanwhile, tax receipts have been growing more slowly than projected. All the less politically salient activities of government, including HE, will be at risk of cuts.
So which is better—state-sponsored misery all round in the name of equity, or a further opening up of non-state funding for activities that are admittedly important, but whose priority is regarded as less pressing than others?
In the end this is also a challenge to society. For decades it suited the middle class that universities should be state-funded—which is why the Conservatives opposed tuition fees. (The reality of "free" HE is the transfer of money through the tax system from poorer taxpayers to the children of better-off taxpayers, enabling the next generation to continue to be better off.) HE in Britain—as elsewhere—is still dominated by the middle class. But recent history shows that HE can be opened up to all social classes, and that its importance for the future flourishing of our economy and society is growing.
Is Britain ready for a paradigm shift here? As this question becomes increasingly pressing, it is important to be clear about the alternatives. The still dominant paradigm of the postwar period holds that universities, like schools, are a state responsibility, to be funded collectively by taxpayers and delivered on a more or less planned basis. HE is thus commonly described by those who manage it as a "sector." This paradigm is as out of date here as it is in industry, with state-owned or planned steel, coal and electricity.
Is "privatisation" the alternative? This is a cry coming from both the left, which fears it, and from the right, which affects to desire it. But it is not a realistic option, as can be seen in the US, with its vast array of state-funded colleges and its great private universities nourished by federal funding of research and student loans. Nor is it even a desirable option: ever since they emerged in medieval Europe, universities have been too important to be treated as a private matter.
The real alternative to the prevailing statist paradigm for HE is not privatisation but partnership or stakeholding, along the lines of the US state university system. This combines large private endowments (bigger in some cases than those at Oxford and Cambridge) with public financial support from state and federal government, and substantial private fees paid by students drawing on loan finance backed by the state. Over the next couple of years Britain faces a decision whether to set off boldly down this road, or put off the choice for a later day. When the legislation introducing a maximum £3,000 tuition fee was passed in 2004, the government said it would review its effects in the current parliament: changes would be made only after the next general election, which will probably be in 2009.
This review is a critical opportunity. It will have to investigate the effects of higher fees on participation rates, especially on people from disadvantaged backgrounds. My prediction is that these will be negligible, and certainly not enough to justify making them the basis for the nation's funding strategy for HE. The review will then have to recognise that the £3,000 ceiling on fees is inadequate to cover the cost of tuition in many universities, even when combined with the state's per capita grant-in-aid: thus at the LSE British students are in effect subsidised by overseas students. It will have to note that the fee, which the government intended to be variable below the ceiling, is being charged at the maximum level at 94 per cent of institutions. It will then have to decide whether to recommend raising the ceiling.
There are two problems with raising fees above £3,000. The first—that fees at such levels will put off students from poorer backgrounds—is being met by grants from government and by bursary schemes run by the universities. The effectiveness of these arrangements is being independently validated by OFFA. If they work with fees at £3,000, there is no reason why they cannot work at higher levels.
The second problem, however, is more intractable. Under the present arrangements, those students who are required to pay the fee are entitled to a loan from the government's Student Loan Company at a zero real interest rate. This interest rate subsidy to mainly better-off families, which costs taxpayers at least £500m a year, is indefensible. But there is a deeper problem. Any increase in the fee will automatically result in an increase in public expenditure to fund the loan. Here is a practical suggestion. Those universities that wish to raise fees above the £3,000 ceiling should be invited to arrange private loan finance to students paying the higher level of fees. This will then be off the government's books. If the universities work together imaginatively—for example, collaborating to buy insurance against the risks of default—it should be possible to hold down the interest rate on these private loans.
British universities are, as they always have been, private legal entities. Over the past two decades, the share of their income from direct government grant has fallen from 44 per cent to 38 per cent. When it comes into effect, the £3,000 fee will reduce that level of dependence by another 2 per cent, with further reductions if the ceiling is abandoned.
A new and more dynamic pattern of HE is emerging in Britain, with a rich diversity of institutions meeting a wide variety of demand, and responding to incentives from many different directions—the government, business, students. But British universities have a long history of success, and with the understanding of government and the support of the wider society we can be confident that they will be strong enough to face the challenges ahead.
