University finance, and Labour’s legacy

By James Valentine

Let’s remember, it all started under Labour. Lord Browne’s student finance review takes as its starting point the concept of a “market” in higher education. The capped tuition fee introduced by Labour was a compromise brokered by Alan Johnson between those who sought such a market and a much wider constituency of those who felt that it was time for graduates to start making their own financial contribution.

An excruciating section of Tony Blair’s autobiography describes how he was at the time approached by a group of vice chancellors representing the most prestigious universities. The case they made out was that certain of these institutions were practically broke and would go to the dogs unless more money was found quickly.

A deferential and credulous Blair apparently swallowed their arguments hook, line and sinker. There is no evidence that countervailing arguments were seriously considered or that he ever said, as he would have done to other special interest groups, “you would say that, wouldn’t you”. From then on, the battle lines were set to persuade the party to change the student finance system.

This was an argument that was entirely “producer” lead. Whereas with schools and hospitals Labour commendably put the interests of pupils and patients first, as regards universities the prestige and wealth of the institution was put ahead of the needs of students.

That’s not to say of course that universities don’t need more cash for research, or that scientific research isn’t expensive, or that such research isn’t of strategic importance for the economy. And it’s equally true that universities need to compete internationally.

But the idea of a pound for pound link between finance and academic achievement is wide of the mark. The experience of the USA shows that the richer institutions waste inordinate amounts of money on administration, PR and lavish facilities. In the UK, the effects are already being seen in institutions like UCL that have upped the pay of dozens of top academics and yet it was only recently that they were shamed into paying their cleaners a living wage.

On the students’ side, for a market to work, participants need to assess services on the basis of value for money and choose accordingly but there is reason to believe that this won’t work for higher education. The ability to go to a top dollar university will itself be an object of prestige regardless of the standard of courses carried out. It will be a so-called “positional good” in that value will be mostly a function of its ranking in desirability by others.

Although Lord Browne sets out measures to help lower-income students, the more the fees are skewed the more attractive they will be to students with money behind them and hence, as now, the competition will be intense and less well-off students will be squeezed out. The UK’s large private school system will always accentuate this tendency.

The coalition is presenting these options if they are a response to the economic situation but what we’re faced with is a long-term, ideological change which could affect young people for a generation. The hypocrisy of the Lib Dems, who cling to the “deficit” argument as an excuse, is especially objectionable in this light. It’s good in my view that Ed Miliband has set out a new direction of travel. He is in a good position to lead the debate in the country and hopefully to mitigate the effects of legislation in parliament.