Cut fees, and uni­ver­si­ties will be­come vas­sals of the state

The Guardian - Journal - - Opinion - Si­mon Jenk­ins

Mean­while, back at the ranch – or in this case the cam­pus – the mice are run­ning riot. Ig­nored by Brexit, Britain’s uni­ver­si­ties are fac­ing fi­nan­cial melt­down. I pre­dict that within a decade they will be­come in­sti­tu­tions wholly owned by the state, their aca­demic au­ton­omy un­recog­nis­able. A few weeks ago, three uni­ver­si­ties were re­ported to be on the brink of bank­ruptcy. Univer­sity debt has soared by £12bn in the past decade. The back­ing for these loans is sup­pos­edly the bal­loon­ing scale of stu­dent fees, which David Cameron al­most tripled to £9,000 in 2012 in Eng­land, and the re­moval of the cap on stu­dent num­bers. Fees, rather than grants, now com­prise the vast bulk of all univer­sity in­come for teach­ing un­der­grad­u­ates.

The fee rise was an open cheque. Uni­ver­si­ties slammed on the ac­cel­er­a­tor and drove fees for vir­tu­ally all cour­ses up to the £9,000 cap. They made unconditional of­fers and hurled money at pro­vid­ing lifestyle value. The chief draw to stu­dents was the smart res­i­dences now tow­er­ing over cities, many fi­nanced from over­seas tax havens. Du­bi­ously pro­duc­tive masters de­grees were heav­ily mar­keted, and ap­pli­cants were ad­mit­ted from abroad with few ques­tions asked. More than four in 10 post­grad­u­ate stu­dents in Britain are now from out­side the Euro­pean Union. Many uni­ver­si­ties are lit­tle more than global fin­ish­ing schools.

Uni­ver­si­ties have been able to bor­row to fi­nance this cap­i­tal ex­pan­sion against the in­come they get from fees. But since the govern­ment pays these fees up­front, and barely half of stu­dent loans are ex­pected to be re­paid, the guar­an­tor is ef­fec­tively the Trea­sury. This re­sult­ing stu­dent debt has reached a stag­ger­ing £100bn, and is pre­dicted to rise by 2042 to £200bn, and on some es­ti­mates to as much as £1tn.

The govern­ment has tried des­per­ately to treat this stu­dent debt moun­tain as an as­set with a fu­ture in­come stream. But when it tried to sell a loans par­cel in the money mar­ket, it got just half their face value. The Of­fice for Na­tional Sta­tis­tics changed the way stu­dent loans are treated in the govern­ment’s books last month, slam­ming an an­nual £12bn on to pub­lic ex­pen­di­ture and wip­ing out Philip Ham­mond’s bud­getary “im­prove­ment” overnight.

Cameron’s for­mer uni­ver­si­ties min­is­ter, Lord Wil­letts, must rank with Charles Ponzi among the wizards of debt. There is, of course, a dif­fer­ence. Ponzi made snake-oil prom­ises to dumb in­vestors, who took the even­tual hit. The univer­sity snake oil – higher ed­u­ca­tion for half the na­tion – was sold to dumb min­is­ters for po­lit­i­cal glory, in the knowl­edge they dared not refuse. The Ponzi pyra­mid was built on the as­sump­tion that ever-grow­ing num­bers of stu­dents would take out – and re­pay – ever more loans.

That pyra­mid is col­laps­ing. The num­ber of stu­dents at UK uni­ver­si­ties has fallen since 2012. EU re­search funds will likely van­ish with Brexit, which could also do more dam­age to stu­dent num­bers. An im­mi­nent re­view of univer­sity fi­nance by Philip Au­gar is ru­moured to ad­vise a fee cut to £6,500. This will be de­spite the Rus­sell Group want­ing the cap on fees to be raised or abol­ished, so they can go on dig­ging for state gold.

Such a re­duc­tion would be an admission that Cameron’s fee rise was not a money-sav­ing, but a mon­eyspend­ing de­vice. Cut­ting fees would save the tax­payer bil­lions in un­re­paid loans, but it would dev­as­tate uni­ver­si­ties. Dozens may go bank­rupt, oth­ers would be forced to merge, and stu­dent num­bers would plum­met. The higher ed­u­ca­tion bub­ble would burst.

Ex­cept, we know this will not hap­pen. Uni­ver­si­ties will plead that they are “too good to fail”. The in­de­fin­able mys­tique of three years of aca­demic im­mer­sion must re­main be­yond chal­lenge or ac­count­abil­ity. Last year the then uni­ver­si­ties min­is­ter, Sam Gy­imah, bur­bled about it “not be­ing the govern­ment’s job to bail out uni­ver­si­ties when they make reck­less de­ci­sions”. Sir Michael Bar­ber, head of the Of­fice for Stu­dents, may even say his job is “to pro­tect stu­dents, not uni­ver­si­ties”. But pull the other one.

The uni­ver­si­ties will rea­son­ably re­tort that they were se­duced into moral haz­ard for min­is­ters’ po­lit­i­cal gain.

The com­mons ed­u­ca­tion com­mit­tee last month high­lighted a grow­ing scep­ti­cism among young peo­ple about the value of uni­ver­si­ties. Only half of re­cent grad­u­ates were found to be in grad­u­ate-grade jobs. Its chair, Robert Hal­fon, de­scribed it as a “blunt re­al­ity … that too many uni­ver­si­ties were not pro­vid­ing value for money”. Not only was higher ed­u­ca­tion mis-sold, it was done at the ex­pense of in­dus­try pleas for more fur­ther and tech­ni­cal ed­u­ca­tion, where bud­gets have been butchered. Tony Blair push­ing half the age group into pukka uni­ver­si­ties must be the most ex­trav­a­gant mis­take in the his­tory of do­mes­tic pol­icy.

Since govern­ments never ad­mit mis­takes, there can be only one out­come to this. Ox­ford and Cam­bridge, with en­dow­ments far and be­yond those of all other

135 uni­ver­si­ties, should and will go pri­vate – and free them­selves from White­hall di­ver­sity bores. Loans will be­come grants, or at least be switched to a grad­u­ate tax. The govern­ment will fi­nance uni­ver­si­ties di­rectly, and bail out fail­ing in­sti­tu­tions by some means or other.

There will be a price. Au­ton­o­mous aca­demic in­sti­tu­tions will be told how many stu­dents to take, for how long and on what cour­ses. They will be told how much they may re­search. They will be vas­sals of the state. They will go from be­ing the fat cats of na­tion­alised ed­u­ca­tion to be­ing its pau­pers.


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