A recording of my talk at Nottingham on Monday 7 October is now available as a soundcloud recording. Slides to follow shortly.
The new issue of London Review of Books has just gone online. Stefan Collini’s review of The Great University Gamble and Roger Brown’s Everything for Sale? can be read for free.
Yesterday the Office for National Statistics announced the inflation figures for September. The Consumer Price Index (CPI) remained at 2.7%. The significance of this for higher education is a bit obscure.
September’s CPI figure is normally used to determine the increase to state and public service pensions that will come into effect the following April. (The government broke this index-link for working age benefits last December).
The state pension is protected by what’s known as the ‘triple lock’. To quote from the most recent Economic and Fiscal Outlook produced by the Office for Budgetary Responsibility:
§4.14 The basic state pension is uprated in April each year in line with the ‘triple-lock’ guarantee and rises by the highest of average earnings growth, CPI inflation in the previous September and 2.5 per cent.
CPI at 2.7% is above both the baseline of 2.5 and current average earnings growth. It is likely therefore that it will be used when the increase is formalised in December. However, Iain Duncan Smith, the Secretary of State for Work and Pensions has ‘discretion over how to measure changes in the general level of prices’.
Why this is relevant to this blog is that this September figure includes for the first time the impact of higher tuition fees on inflation. In October, the ONS calculated the ‘upwards pressure’ on inflation due to education to be 0.32 percentage points stating:
‘The increase was due predominantly to a significant rise in undergraduate tuition fees, where the maximum annual tuition fees for new UK and EU students in England. … This year, overall tuition fees for the UK and EU students on undergraduate, postgraduate and part-time courses rose by 52.3%, compared with an increase of 4.7% a year ago.’
This effect was higher than anticipated by the OBR and it expects ‘these effects to continue to be felt over the next few years as new cohorts of students pay the higher fees’ (December’s EFO §3.83). Really an effect of this order is likely to be seen in next month’s figure and that calculated in a year’s time as universities will have three cohorts on the new full-time fee levels in Autumn 2014.
One could argue that the difference between pensions being increased by the baseline (2.5) rather than 2.7 per cent is attributable to the policy decision to lift the tuition fee cap. Given that annual expenditure on state pensions is in the region of £100billion – roughly £200million of outlay from the Department of Work and Pensions budget in 2014/15 will have been caused by higher fees.
One of the arguments advanced by the government in favour of the new fees regime was that it would save money from the higher education budget and by extension, the budget of Business, Innovation and Skills. The saving is thought to be in the region of £1billion per year from 2014/15 onwards.
What we can see is that matters are more complicated when we consider knock-on effects for other departmental budgets – the claimed departmental saving may be significantly eroded if we have two more years like this.
As noted, ministerial ‘discretion’ may see some neat footwork here. Iain Duncan Smith could concoct a measure, ‘CPIxT’, which factors out this tuition fee effect. And coming up with potential arguments to support such a move don’t need much thought.
However, there are further spillovers into the broader economy where other annual increases, such as rail fares and business rates, are linked to CPI and RPI and are therefore also affected by tuition fee increases. These have been documented and costed by London Economics in a pamphlet for million+.
They claim that the overall economic costs resulting from new higher fees may be 6.5 times greater than the departmental savings.
Along with Michael Bailey, the co-editor of Pluto’s The Assault on Universities, I will be speaking at a CDBU regional meeting organised for Saturday 19 October in Cambridge.
Time: 11am – 1pm
Venue: Lightfoot Room, Divinity School, St John’s College
London Metropolitan has withdrawn its case for judicial review against the UKBA decision to suspend its ability to sponsor overseas students. http://www.timeshighereducation.co.uk/news/london-met-stops-legal-action-against-the-government/2008082.article
I wasn’t in the Royal Courts of Justice on Friday for the preliminary hearing into London Metropolitan’s request for a judicial review into UK Border Agency’s decision to revoke London Met’s licence to act as visa sponsors for non-EU students. I have read the reports in The Guardian, Times Higher Education and the Laywer. I did however participate in Radio 4’s The Report and have now seen some senior level minutes from London Metropolitan.
I will try to summarise what I have gleaned from those sources, covering the court case first and the minutes second.
The Preliminary Hearing
First, Judge Irwin granted a judicial review but did not reinstate LMU’s highly trusted sponsor status. That decision will depend on the outcome of the full review: for the meantime, LMU cannot recruit non-EU students.
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The National Union of Students has just released a letter from David Willetts regarding the proposed sale of student loans. The president’s accompanying blog cites a ‘win’ for the NUS here as Willetts confirms that the government will not pursue Rothschild’s recommendation to alter the interest rate terms for existing borrowers so as to ensure a better price from any purchaser.
This claim of success is a little surprising given that such assurances had been given by both Willetts and his boss, Vince Cable, three months ago. (Though it should be noted that at the time we published our original story in The Guardian it took the government four days to remember that they had ‘comprehensively dismissed those proposals two years ago’.)
Any claims to success are also somewhat premature. The point to draw out of Willetts’s letter is that the government is considering freezing the repayment threshold for these ‘pre-2012 ICR loans’ after 2015. Similarly, the government has still not ‘made’ the promised regulations that would fix the repayment threshold for ‘post-2012 ICR loans’ – initially set at £21 000 for 2016/17 – will be raised in line with earnings each year subsequently.
It is not clear whether the NUS considers such freezes to be changes to terms and conditions (student loan agreements are extremely vague in this regard …). I am keen to support the NUS’s pledge to ‘keep up the pressure to secure genuine protection for borrowers’ terms and conditions’, but the president cannot seem to admit that the government has no intention of fixing terms and conditions in law.
I’d also stress that the suggestion that terms would be ‘negotiated down prior to a sale’ is somewhat misleading. The 2008 Sale of Student Loans Act gives the government permission to sell without consent and without consultation. Changes to the interest rates on ‘pre-2012’ loans would require primary legislation akin to that which was used in 2011 to change the interest rates for the new loans issued to those starting since 2012. But changes to the repayment threshold and repayment rate do not.
Opposition to a sale needs to be organised on a broader basis than the NUS’s ‘moral’ position – any such sale to third parties will lose money in the long run. The government is still paying an annual subsidy to those who bought loans in 1998 and 1999– that liability is valued at £250m today and only expires in 2028. If any sale proceeds expect to be told the headline price, not the terms of the ‘synthetic hedge’ needed to woo a buyer.
I will be speaking at the University of Nottingham’s Centre for the Study of Social and Global Justice next week.
The talk will look at the charitable status of universities and the recent suggestions that this form could be ditched in favour of a for-profit status.
“Universities, Markets & the Public Good”
Time: 4pm
Venue: The Hemsley B7, University Park.
The UCU branch at Liverpool has organised a seminar series on ‘The Place of University in Society’ to take place in October.
Update: the venue for Wednesday’s talk is the Rendall Building (‘2’ on this map).
From the publicity:
These lectures are open to all who are concerned with the topics being discussed.
The programme [Venues and booking details to follow]
What is ‘The Great University Gamble’?, Wednesday, 2 October (5.30pm.)
Andrew McGettigan (author of The Great University Gamble: Money Markets and the Future of Higher Education, Verso 2013)
Universities: the neo-liberal agenda, Thursday, 10 October (5.30pm.)
Professor Robert Brecher (University of Brighton)
The Corporatisation of the University (live broadcast), Tuesday, 22 October (5pm.)
Professor Noam Chomsky (MIT)
Defending education: what are the unions for?, Thursday, 31 October (5.30pm.)
Liz Lawrence (UCU, national vice-president for HE); Professor John Holmwood (University of Nottingham) (founder of the Campaign for the Public…
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New College of the Humanities limited and its for-profit owner, Tertiary Education Services limited, have just published their first sets of annual accounts.
Perhaps unsurprisingly, these are abbreviated: each set comprises only a balance sheet for 30 November 2012 and a very short set of accompanying notes. The information available is therefore much less than with an established university or company where the shares are publicly traded.
What can be gleaned is that the parent, Tertiary Education Services, has run a deficit of £4.3million – turnover and expenditure are not disclosed – since its launch. It is supported by share issues that had raised £7.35million in investment by last November.
Its latest reported capital structure (August 2013) shows that 146 500 shares have been distributed, each with a nominal value of £1. Some of the shares were purchased at a £111 premium, which leads me to include that current investment has reached about £10million.
This is smaller than many might have anticipated. TES has not acquired any tangible fixed assets: altogether, these are only valued at £91 000 and cover office equipment, fixtures and fittings and the value placed on ‘improvements’ made to its leased property in Bedford Square. Instead, TES held nearly £3million in cash and has loaned money to New College of the Humanities, the subsidy responsible for teaching, to support losses there of £212 000 and separate liabilities amounting to £538 000.
The group structure is not charitable, unlike say public or independent schools that charge similar fees; the academic goal – creating an independent liberal arts college – depends on gaining degree awarding powers: the asset in which investors are now most interested (consider the £200million Montagu Private Equity paid for College of Law). Such venture philanthropy is therefore fundamentally ambiguous.
NCH only opened its doors in September 2012, which means that what figures have been published reveal little regarding its two operating months. The use of an accounting year that runs from December to November is awkward for an academic business with those £18 000 annual fees covered in three installments (September, January and April). Again, no turnover is disclosed.
Those whom NCH terms ‘Exhibitioners’ are charged only £7 000 per year, while ‘Scholars’ pay no fees: these students made up ‘30%’ of 2012’s total intake of 60. Here, I was surprised to see that only Scholars are exempt from an additional charge of £600-800 to cover the examination fees levied by the University of London (NCH is not a university and does not have its own degree awarding powers).
As to future strategy, NCH’s attempt to found a free school in Camden has been postponed and it is still unable to unable to sponsor international students from outside the EU. Its home students are ineligible for government student support (towards either fees or living costs).
However:
“The directors are confident that the envisaged student intake in the financial year 2013 will more than cover the operating costs of the college and result in a profit being realised in the 2013 financial year.”
Technically, owing to its constituting articles, any such profits must be retained by the subsidiary and cannot be passed on to the parent. Money moves out of the subsidiary in other ways: for example, fees for ‘services rendered’ such as administration and catering. These appear to comprise the entirely of TES’s income.
That is, a surplus for NCH is one thing, recovering the investment behind TES is another. The relevant accounts make no such positive prediction about the latter’s profitability: it is a ‘going concern’ owing to ‘current and anticipated bank facilities’.
I will be speaking alongside Bristol’s pro-vice-chancellor for Education, Judith Squires, at the university’s Inside Arts Festival on Monday 11 November.
“The future of arts and humanities in a marketised educational environment”
Time: 1pm
Venue: Reception Room, Wills Memorial Building, Queen’s Road, BS8 1RJ
Details on booking a place here
And I will be available to sign books at the end!
Critical Education 