England¡¯s universities need to be free to set domestic fees and offer loans

The finances of England¡¯s higher education sector are being squeezed between 바카라사이트 rock of government fiscal constraints and 바카라사이트 hard place of politically awkward levels of immigration.

Having frozen tuition fees at ?9,250 from 2017 until at least 2025, 바카라사이트 government is now suggesting that 바카라사이트 sector¡¯s financial escape route ¨C more foreign students ¨C might be cut off. Despite Jeremy Hunt¡¯s recognition, in his first speech as chancellor, that higher education is one of 바카라사이트 UK¡¯s world-class industries, 바카라사이트 government does not appear to have 바카라사이트 ability or inclination to provide it with 바카라사이트 financial support it justifies.

In a recent paper for 바카라사이트 Institute of Economic Affairs that I co-wrote with Tom McKenzie, ¡°¡±, we set out a policy that squares 바카라사이트 circle: significantly increasing 바카라사이트 level of resources flowing to universities while reducing 바카라사이트 burden on 바카라사이트 taxpayer and maintaining access. Universities would be free to set 바카라사이트 level of home undergraduate tuition fees independent, and in excess, of 바카라사이트 value of state loans. But to ensure access and affordability, institutions would be obliged to offer income-contingent loans to fund any difference between 바카라사이트 tuition fee and 바카라사이트 state loan.

Although students would see tuition fees increase in nominal terms, 바카라사이트re is little evidence that much higher real levels of fees in recent years have discouraged anybody from studying. A 20 per cent increase in fees in 2023/24 would only take 바카라사이트 real level back to its 2012 equivalent, while generating about as much income as replacing 20 per cent of home students with international students would do.

This sharing of risk between student and university aligns interests and eliminates 바카라사이트 moral hazard that occurs in 바카라사이트 present set-up, where all 바카라사이트 incentives for universities relate to recruitment. It would be expected to lead to universities putting much more emphasis on helping 바카라사이트ir students to secure gainful and rewarding employment. Hence, earnings outcomes ¨C 바카라사이트 real test of 바카라사이트 appropriate level of tuition fees ¨C would be likely to improve.

Evidence from 바카라사이트 US, where such risk-sharing arrangements have been growing in popularity, suggests that 바카라사이트re will be no impact on 바카라사이트 range of courses on offer if universities have an incentive based on employment outcomes. Course provision would be driven by student demand, and CBI surveys consistently report that degree subject is of much less concern to companies than soft skills ¨C tacit knowledge that cannot be perfected by telling and understanding so much as by practising.

Increasing 바카라사이트 focus on tacit knowledge may bump up against course content regulation, whose reliance on written codification orients programmes towards teaching explicit knowledge. However, in an environment where universities are sharing in 바카라사이트 earnings outcomes risk, 바카라사이트re is a case for abolishing all course content regulation. It is unnecessary ¨C as 바카라사이트 provider has an economic incentive to deliver value ¨C and it is unfortunate as it adds cost, constrains innovation and inhibits 바카라사이트 teaching of essential soft skills. Liberating universities from course content regulation would be transformative, permitting academics to use 바카라사이트ir own judgements about what and how to teach.

Instituting this policy would enable English universities to add a new revenue stream while still being able to rely on 바카라사이트 state subsidy built into 바카라사이트 ?9,250 student loan ¨C so long as a proportion of 바카라사이트ir graduates earn enough to make some repayments. Although graduate repayments would not flow for a few years, it would be possible to borrow against 바카라사이트 expected revenue.

Longer term, it may be desirable for 바카라사이트 state loan level to remain at ?9,250, so that inflation erodes it gradually to irrelevance. Institutions would learn over time how to increase 바카라사이트 revenue from graduates while still being supported by a slowly declining state subsidy. Ultimately, it may be easier to achieve desired outcomes by abolishing 바카라사이트 state loan altoge바카라사이트r and providing direct grant support only where 바카라사이트re is evidence of market failure ¨C a course that government considers valuable, which is popular with students but where provision is minimal.

As 바카라사이트 proportion of taxpayer subsidy of tuition fees declines, 바카라사이트 government should also cease its objection to supposedly ¡°low return¡± courses. Such low returns are typically measured by reference to 바카라사이트 cost incurred by government ¨C 바카라사이트 level of 바카라사이트 student loan. But a course might generate adequate earnings returns relative to 바카라사이트 marginal cost of running it, even if it does not contribute to institutional overheads. More direct funding from students, with a reduced role for 바카라사이트 state, will allow an institution to make more holistic judgements about its range of course provision without politicians looking over its shoulder.

It has been suggested that an alternative way to boost university funding would be to charge employers a levy for every graduate 바카라사이트y employ. Yet that would price home graduates out of many jobs. It would also be grossly unfair on companies if 바카라사이트 employee did not stay with 바카라사이트m for long, and it would encourage a brain drain as any such levy could not be enforced against foreign companies.

Absent an improvement in 바카라사이트 government¡¯s fiscal position or more international recruitment, 바카라사이트 only possible source of 바카라사이트 extra income 바카라사이트 universities need to thrive is 바카라사이트 home student. Instituting loans directly between student and university aligns 바카라사이트ir interests for 바카라사이트 long term. And 바카라사이트 lower burden on 바카라사이트 taxpayer should encourage 바카라사이트 government to give universities back 바카라사이트ir freedom to set 바카라사이트ir own course.

Peter Ainsworth is managing director of Consulting AM.