The Guardian view on university financing: the making of a market mess

The wrong-headed and misguided policy of creating a market in higher education services in England has been a hallmark of modern-day Conservatism. The thinking was that consumers of such services were 18-year-olds who would purchase courses that would help them to secure well-paid jobs in institutions refreshed by self-interest. Tuition fees were trebled to a maximum £9,000 a year in 2012 – so that universities could use the income to cover large cuts to the direct public funding of teaching. The then higher education minister claimed that “unleashing the forces of consumerism is the best single way we’ve got of restoring high academic standards”.

The price of that consumerism is that students now leave university with almost £51,000 of debt. For poorer students the burden is even higher. This load is carried by twentysomethings who enter a job market where wage growth is at its lowest for two centuries. Many will never pay off the loan; a perversity that means taxpayers will end up footing the bill. No wonder that the star of last year’s election was Jeremy Corbyn’s manifesto commitment to abolish tuition fees. Today Theresa May essentially bought Mr Corbyn’s argument but not his conclusion. She accepted that England now had “one of the most expensive systems of university tuition in the world” but argued that scrapping fees was not the answer. Instead, she said the problem was one of value for money, that “the level of fees charged do not relate to the cost or quality of the course”. Mrs May’s statement amounts to doubling down on consumerism.

The problem with trying to turn universities into institutions that compete for students is that they cannot all be right in their aspirations. Today each university is encouraged to borrow and spend capital on expectations that uncapped student numbers and research revenue will rise. Universities that get their sums wrong run the risk of failing, perhaps even going bust. The new regulator, the Office for Students (OfS), sees this is as no bad thing: in a competition for survival, the strong win, while the weak fail.

What the Conservative party is offering is just an accelerated form of a winner-takes-all marketisation where top performers increasingly capture all the rewards while the rest are left with crumbs. That manifests itself in the wage structure that has emerged in universities where vice-chancellors sit on panels that award themselves big pay rises while most academics are on some form of casual contract. There is a justifiable feeling that the best universities pay lip service to delivering public benefits. While the numbers of non-white university students rise, Oxbridge colleges were accused last year of fostering “social apartheid” after it emerged that 16 of them did not admit a single black A-level pupil in 2015.

The reliance on individuals financing universities diverts attention from the social benefits of an educated population. This is ideological. The year before the coalition government pushed through its reforms there was evidence that the UK public, not individuals, profited most from higher education investments but students shouldered most of the cost. The OECD suggested the rate of return from tertiary education in the UK to the public was at least 50% higher than the rate of return to the individual. Had such an analysis been undertaken in 2011 it would have undermined ministerial claims that students should pay more because they benefit most. Instead, ministers pushed ahead with an agenda of cuts and marketisation with little heed to how gains were shared. These policies broke the common commitment to higher education. It’s time to repair it.