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TEF & fee increases

For many, the Higher Education Green Paper‘s central component will be the proposals to link the Teaching Excellence Framework to the ability to set undergraduate tution fees from Home/EU students above £9000 per annum.

What detail there is appears on pages 29 to 30 of the document. Here are the relevant paragraphs:

We propose that fee cap and fee loan cap uplifts will apply at an institutional level for reasons of simplicity, lower bureaucracy and to provide an incentive for an institution to maintain and improve all its courses. After the first year (see “Starting the TEF: Years one and two in Chapter 1), and over time, we would expect fees to increasingly differentiate according to the TEF level awarded.

We anticipate that Government would set a maximum fee cap to correspond to each TEF award level, i.e. a maximum fee an institution can charge if it is assessed as level 1, level 2 etc. The Government would not pre-set a formula for this fee uplift, but would set the uplift each year, maintaining the current model of basic and higher amounts, and not exceeding real terms increases. Institutions would be able to charge fees up to the maximum of their current TEF level fee cap. This would be regardless of their TEF performance in previous cycles, so institutions will not be able to ‘bank’ increases gained if they performed better on the TEF in previous years. We do not envisage the fees charged to individual students changing during their course.

I find the second paragraph extremely difficult to unpack. It is not clear that it bears careful reading as it has the hallmarks of being compressed from a longer original explication. But this is the basis for Question 9 on the consultation:

Do you agree with the proposed approach to incentives for the different types of provider?

In “Year 1”, 2017/18, the maximum tuition fee cap would increase in line with inflation for those HEI’s that have a satisfactory Quality Assurance report. After that, the government is proposing to bring in the additional ‘TEF award levels’. The question is: what incentives does the government believe will be put in place by these extra levels?

A BIS spokesperson told me:

The Teaching Excellence Framework would allow those universities who offer high quality teaching  to increase their tuition fees in line with an annual fee cap up to but not beyond inflation. Among the proposals, one possibility is to link the levels of TEF attained by institutions to different fee levels within the inflationary cap.  These proposals form part of a consultation on reforms to the higher education landscape, which runs until 15 January 2016. (my emphasis)

That is, after 2017/18 it appears that only the highest TEF award level available would attract a “full” inflationary increase, while other levels would attract fractions of that as increases.

I cannot see that this is sufficient incentive for established universities to change their approach (if any such change is needed). Such tiny increases in tuition fees mean that universities have a much stronger incentive to recruit additional students than to concentrate on scoring well on ‘contact hours’ and ‘small group work’ (two potential TEF measures).

And if you work in HE, then pay bargaining is going to be a dismal business for the foreseeable. As I noted for wonkhe, the OBR has repeatedly stressed that university teaching income needs indexing to average earnings, not (fractions of) Consumer Price Index, the likely measure of inflation.

At present, CPI is negative – minus 0.1%. Ironically, next month sees 2012’s tuition fee increases drop out of the CPI measure. That means 0.22 percentage points of ‘upwards pressure’ will be removed making it less likely that CPI will be back above zero for a while.

Students in Debt event at Goldsmiths – Thursday 12 November

Goldsmiths Political Economy Research Centre is hosting an event on Thursday around student debt.

This afternoon event seeks to educate students about the fee-loan regime in order to politicise debt and discuss of how we can resist indebtedness among students. Bringing in experts, we ask: what are income-contingent loans, who profits from your debt, how does the experience of having debt affect student wellbeing and life chances, and in what ways do fear of debt and the types of loans that are sold to students perpetuate inequalities? We also hear from activists on how debt can be resisted and how we can move from the idea of individual responsibility to collective action.

2-3pm Teach-in The Economics of Generation Debt

Ben Tippet – Rethinking Economics

Johnna Montgomerie – PERC, Goldsmiths

3pm-4pm Roundtable on Resistance 

Tim Hall – University of East London

Andrew McGettigan –Author the Great University Gamble

Calum Cant – National Campaign Against Fees and Cuts


St James Hatcham Church – New Cross, London

Free registation and further information can be found here

Great University Gamble – a plug

I published the Great University Gamble: money, markets and the future of Higher Education in April 2013 with Pluto Press.

The book was originally conceived as a primer to the Higher Education Bill planned for 2012. That primary legislation never materialised owing to Coalition politics, but Friday’s Green Paper has returned to those original ideas, with the addition of the much-discussed Teaching Excellence Framework.

I am making the Preface and Introduction of Great University Gamble available below as pdfs. I believe my overarching framework for interpreting the legislative moves planned is still valid.

I think it’s important to ask two questiosn.

  • Who has most to benefit from any reputational gain through TEF?
  • Is the TEF a permanent policy idea or a transitional mechanism designed to disrupt what is perceived monopoly provision dominated by ‘producer interests’?

The Introduction below sets out a framework for understanding the various and complex processes grouped under ‘privatisation’:

1. Marketisation or external privatisation, whereby new operations with different corporate forms are allowed to enter the state system to increase competition. This might be seen as dissolving the distinction between separate public and private sectors.
2. Commodification – the presentation of higher education as solely a private benefit to the individual consumer; even as a financial asset where the return on investment is seen in higher earnings upon graduation.
3. Independence from regulation – private providers accessing the student loan book are not bound by numbers controls and do not have to comply with reporting or monitoring requirements nor widen participation initiatives.
4. Internal privatisation – the changes to revenue streams within institutions so that for example, direct public funding is replaced by private tuition fee income.
We could add to this list:
5. The outsourcing of jobs and activities to the private sector and management consultants, which has become widespread in England.
6. Changes to the corporate form and governance structures of universities.
7. The entry of private capital and investment into the sector through buyout and joint ventures with established institutions.

I believe the real significance of the Green Paper may turn out to lie in numbers 6 and 7. We don’t even have a term as yet for the transformation of a charity into a for-profit entity.


Preface Great University Gamble

McGettigan_great university gamble Introduction

Buy book here

A short overview of the book written in 2014 is available on the LSE Impact blog. In particular, that updates the estimates on how the government values projected student loan repayments.

More detail on that and how this affects the revelant departmental budgets is available in my recent pamphlet for HEPI.

HE Green Paper – today’s the day

The government released Fulfilling our Potential: Teaching Excellence, Social Mobility and Student Choice today. This is its consultative ‘Green Paper’ setting out in broad terms its plans for English higher education. The consultation closes on 15 January and will inform what looks likely to be a Higher Education Bill in 2015.

The Green Paper is dense and runs to over 100 pages. It’s not an easy read.

I have already covered two aspects of it for wonkhe, where you can find full coverage including takes on the Teaching Excellence Framework and the implications for research.

One piece on new plans for further market liberalisation by making it easier for startups to achieve degree awarding powers and the university title.

The second an overview of ten things that have generally been missing from mainstream media. In particular, that askes questions about the government’s plans for the charitable status and interpretations of the public interest if universities seek to convert to for-profit corporate forms.

These are themes that dominated my 2013 book, The Great University Gamble. In many ways, this Green Paper returns to the business left unfinished by the Coalition after it decided not to proceed with primary legislation in 2012.

A more theoretical overview of what’s going on is available at Goldsmith’s Political Economy Research Centre in my piece, ‘The Treasury View of HE: variable human capital’.

In general, my immediate take on the Green Paper is that it is fundamentally incoherent. The incentives on offer for universities are not substantial enough to drive the changes in teaching sought by the government, while the government has failed to make the case as to why making it easier to become a university should boost quality across the sector.

I made the off-the-cuff comment in one of the articles above that the new timescales for titles and powers matched those sought by private equity investors (returns within 5 to 7 years). Perhaps there’s more truth in that than I thought orignally.

Policy Exchange’s accounting errors

Wonkhe has corrected a comment piece that appeared earlier today on its site that originally confused surpluses and reserves.

The comment piece was there to promote a new report from Policy Exchange calling for resources to be diverted from English HE to FE. Their case hinges on the level of reserves seen on average across the university sector.

Unfortunately Policy Exchange are just fundamentally confused about accounting.

The question to ask, therefore, is not “would cuts be harmful”, but “where would cuts be least harmful in the context in which we find ourselves”. The answer is that when looking at the post 19 education and training system as a coherent whole, the HE element is significantly better funded than its FE counterpart, has substantial cash reserves which could be better utilised than sitting in banks, and has made insufficient progress on efficiency savings to date when set against either FE or any other public service. This then is the case for a reallocation of resources away from HE to protect FE.
Higher, Further, Faster, More p.11

The evidence used to back this claim comes from Hefce’s most recent annual report on the Financial Health of the sector. Policy Exchange cite a figure of 48% for reserves.

55. Discretionary reserves at the end of 2013-14 totalled £12,292 million, after taking into account the impact of the financial reporting standard on retirement benefits (FRS17). This reporting standard, which requires pension scheme surpluses or deficits to be included in the balance sheet (but not yet those of multi-employer schemes such as the Universities Superannuation Scheme (USS)), makes comparisons with previous years more difficult. Without FRS17, reserves totalled £16,472 million, equivalent to 64.4 per cent of total income.
56. Total reported pension scheme deficits (excluding those relating to multi-employer schemes) increased by £678 million to £4,180 million in 2013-14, reducing reserves to 48.0 per cent of income.

The full Policy Exchange report includes this Figure from Hefce’s report.

click to enlarge

discretionary reserves

Unfortunately, as a Hefce footnote makes clear: ‘discretionary reserves’ are not ‘cash reserves’.

Discretionary reserves are equal to expendable endowments plus general reserves from the balance sheet.

And general reserves is a measure achieved by comparing all assets – not just cash, but also properties for example –  to all liabilities. It isn’t cash reserves either (cash would normally be classed under ‘current assets’)!

JNCHES’s guide to university financial reports (a recommended read!) puts it this way:

[Look at] your assets and liabilities at the end of the financial year – the difference is called your ‘equity’ and will be referred to in accounts as your Reserves.
Think of it like a private house. Usually, the outstanding mortgage will be less than the value of the house, so you’ll have a positive equity. It can be the other way round and that can be a serious problem for an individual or an institution. For substantial organisations like HEIs, balance sheets need to accommodate a variety of transactions with rather technical labels, but the essence of the statement remains – assets less liabilities equals reserves. …

However big your reserves are, they’re not the same as cash. To convert reserves into cash, you’ll have to sell assets. Don’t assume those assets will sell for the amount showing on the balance sheet.

Others have complained about the misrepresentation of these HE statistics.

But they’ve missed the fundamental error made by Policy Exchange – they mistook reserves for cash!

And in doing so, peddled some dangerous nonsense.

Queen’s University Belfast documentary


The final two episodes of this documentary on Queen’s are now available on i-player

Originally posted on Critical Education:

A film crew was at Queen’s University Belfast over the course of academic year 2014/15.

The first episode of the resulting three-part documentary was broadcast last night and is available on BBC iplayer.

It gives an interesting insight into the budgetary issues facing Northern Ireland’s universities and the new management initiatives at the university.

(Disclosure: I may make an appearance in future episodes outlining why England’s fee-loan regime is not the solution it might appear to be.)

View original

Response to Student loan repayment threshold consultation

The government is proposing to freeze the student loan repayment threshold for five years from 2016. This will result in a retrospective price hike for current students and this year’s graduates.

The consultation closes on Wednesday. Please take the opportunity to submit your views.

I submitted mine today. It can be accessed through this link: Response to Student Loan Repayment Threshold Consultation McGettigan

Here are the Introduction and General Comments. For the full detail see the document above.

Read more…


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