Cui Bonis? – The missing Social Perspective on Tuition Fees

By Jeevun Sandher

After the initial shock, horror and disgust at the latest decision on tuition fees, something struck me as singularly depressing. It was not the conclusions of the Browne report. Nor was it the government’s subsequent legislative proposal. No, by far the most depressing aspect of the recent developments in the university funding saga was the narrow-minded and mistaken methodology employed by both Lord Browne and the coalition government.

The purpose of this article is not to rehash old arguments about the problems and mistakes in raising tuition fees. That is a well-covered area, with a lot of insightful and detailed analysis on the subject. Instead, the aim is to show that the Browne/coalition view is not merely mistaken; it is also internally inconsistent.

In trying to decide how higher education should be funded, the entire system was viewed as being, primarily, a market relationship between the consumer (students) and the provider (universities) which would compete on costs (fees) and products (degrees) with some help from the government to help the consumer buy the product (with some, very limited, recognition that, otherwise, there would be under-investment and under consumption.) However, the key externality (the benefits to society) was not given adequate consideration and so an unfair proportion of payment of tuition fees is placed upon the student.

The Browne report did, initially and very briefly, list some of the benefits to society from higher education but then (bizzarely) does not choose to include this in how it should be funded. All it does is to note that the private benefit is higher than the public benefit (although recent research suggests the public benefit is underestimated due to its pecuniary bias) and so students should make some direct contribution to their education. This is a conclusion that many people – all major political parties, the NUS and myself – agree with. Where many people disagree (myself included) is the amount that students should contribute and the amount that society should contribute.

Browne suggested that student contributions should be uncapped; the government suggested that it should be set at a maximum of £9,000 and ideally around £6,000. The main rationale for both was that students stood to gain from their degree, that university funding was in crisis (due to, in part, public spending cuts) and urgent investment was needed. Students should, therefore, make a greater contribution – in recognition of the benefits they received, the strain on the public purse and in order to ensure the quality of the ‘product.’

But what of the gain to society? Why was the benefit to society not considered and the associated ‘cost’ that all of society should pay for this benefit afforded to all of us by graduates? The perverse logic in claiming that public spending cuts are taking place and so that individuals should rack up private debt, instead of the public paying for their fair share, is not just sickening but self-defeating. Cameron claimed before the election that “Every child born in Britain this year will be staggering along under Gordon Brown’s debt – £17,000 each to be precise, which will take them decades to pay off.” Under the new proposals, graduates will leave university with about £30,000 worth of debt. For a coalition obsessed with debt reduction, this is highly hypocritical and simply wrong. It is time for the coalition to put down the “Herbert Hoover guide to Economic Policy” and to start reading Keynes and Krugman.

There are many, varied benefits to society from higher education, which fall (roughly) into three main categories – economic, social and intrinsic.

The main public economic benefits of university education are the increased taxes, increased social insurance payments and reduced social transfers of graduates. In the UK, the net public benefit stands at around £95,138 over an individual’s lifetime according to the most recent OECD report (Education at a glance, 2010.) There is also a spill-over effect, whereby graduates earn more, are more productive and thus contribute more to economic growth. That economic growth is in society’s interest is, perhaps, something of a self-evident truth. The main social benefits of higher education include (but this is by no means an exhaustive list) – improved health, improved interpersonal trust, increased civic participation, increased charity giving, increased political interest as well as lower crime rates. University education helps to make the society we live in to be a more pleasant place for all and a higher participation rate benefits us all.

Finally, there are the intrinsic benefits to higher education. Higher education should be seen as a mark of progress within a society as well as a main component of human development. This cannot be “proven” through logical or empirical means but is a value that most of us hold as being a prima facie truth.

It is, frankly, impossible to fully quantify the public benefits of higher education. What is possible, however, is to show that there are many, important social benefits that come along with higher education. Higher education does not exist in a vacuum between students and universities, between consumers and producers, but has wide and varied repercussions throughout the society in which we live.

Now, this is not to doubt that the Browne/coalition plans do give an implicit recognition to the wider benefits to society in their recommendations. After all, there will be some public funding which would suggest that society does have a role to play, or a price to pay, in the provision of higher education. But an implicit assumption is not the same as explicit, detailed analysis. It is simply unfair to ask students to pay for, what could be, the vast proportion (or even the whole of cost of their degree in the case of some humanities) while the rest of society gets off having to pay for their fair share. It represents, in economics jargon, a failure to “internalise the externality” and would lead (under the free market rationale) to under-participation and under investment.

Whether or not higher education should operate as a market between students and universities is debatable. What is not debatable is that if one is applying a free-market rationale to university funding, those that benefit from it should be made to pay for that benefit.

Ultimately, both Lord Browne and the coalition, in apportioning costs between graduates and the taxpayer, fail to consider the key question – Cui Bonis? Who benefits?