They forgot to pay

Date: 2015-10-07; view: 380.

Labour and Tory governments of the past four decades have agreed that higher education should no longer be enjoyed only by a small elite, but should be available to the masses. Ac­cordingly, successive governments raised the proportion of teenagers going to university from 5% in 1960 to 35% now. But they failed to fund this expansion properly. Instead, in order to ensure that more students went through the machine at little extra cost, the government took more and more control of stu­dent numbers, the universities' income per student and thus the quality of education the universities could provide. So, at a time when nationalised industries were being privatised to al­low them to raise more capital and respond to market signals, the universities were subjected to a system of centralised state management that allowed them to do neither. The conse­quences have been dreadful.

Labour has failed to stop the rot. Student numbers, which levelled off briefly, are rising again, and Tony Blair wants 50% of 18-30-year-olds to get some higher education. The regular­ity with which the government promises, and then delays, its funding review, demonstrates that it regards the current sys­tem, and the alternatives, as equally dreadful.

The central question for a government trying to reform uni­versity funding is whether the taxpayer should bear most of the costs (as in Britain and elsewhere in Europe) or whether the individual should (as happens in America and, to some ex­tent, in Australia). Placing the burden on taxpayers as a whole would be reasonable if it could be demonstrated that the benefits from one person's university education were felt mostly by society as a whole, rather than by the individual. But that does not seem to be the case. While the social benefits from higher education are debatable, the individual benefits are clear. Getting a degree makes you richer. According to the OECD, in Britain, university graduates earn around 17% more, on average, than non-graduates.

The answer is to cut universities loose from the state. Let them charge fees, as American universities do, and let the stu­dents pay. As well as shifting the cost burden from taxpayers to individuals, this solution would have three added benefits. First, it would help determine how many people should be go­ing to university: Mr Blair's 50% seems to be drawn out of a hat, and some of those who think about education policy, such as Alison Wolf, professor of education at London Univer­sity, doubt that his ambition makes economic sense. Second, it would bring more money into universities: America spends 2.3% of GDP on higher education, compared with 1.1% in Brit­ain, and most of Europe's universities are in similar straits. Third, it would allow universities to manage themselves: the uniformity which Britain's centralised funding system encour­ages - with former polytechnics trying to be mini-Oxbridges­ - could give way to something more like California's system, where higher education ranges from short, cheap, vocational courses to a full-blown academic degree, and where universi­ties and colleges have the freedom and incentive to specialise.

But the minimal (£1,100 this year, or $1,700) means - tested fees which the government introduced in 1998 were not pop­ular, and the idea of raising them to anything like the levels needed to cover the cost of a student (£10,500 a year, says Im­perial College) has aroused still more hostility. There are con­cerns, especially on the left of the Labour Party, that higher fees would discourage poor people from going to university. Rich kids' parents would pay, and poor children would find it difficult to borrow from banks to cover the costs of their ter­tiary education.

Access for all is an important issue; but a fees-based system can accommodate it. Australia introduced a state-run loans scheme to cover much of the cost of a degree. Graduates pay their loans back only if they earn reasonably high incomes, so students need not be put off by the fear of what happens if they don't get a good job. Since the new system was intro­duced in 1989, the social make-up of Australia's student base has not changed, which suggests that if carefully managed, fees need not put off the poor.

But aside from Labour's ideological worries about fees, raising them poses a political problem. Britain's middle classes are used to getting a free university education. Parents fear their children's pleas, especially when it may be pointed out that Sophie's mummy and daddy aren't mean enough to make her take out a horrid loan. And Labour fears the middle classes, who brought it to power, and who are getting increas­ingly grumpy as the tax burden rises.

No government enjoys making people pay for what they once got free of charge. But if Mr Blair does not opt for fees his grandchildren will not thank him. Institutions are easier to de­stroy than they are to build.