Is Labour developing a coherent higher education policy?
Miliband has just announced a proposed reduction of the tuition fee cap, down from £9,000 pa to £6,000. His spinning of this headline-fodder omits some key details.
Anyone familiar with the mechanics of the proposed loan scheme is aware that such a reduction makes little difference to graduate repayments, which are far more affected by interest rates and repayment terms. (Although I have some disagreements with Martin Lewis about the details of his student loans calculator, it is very nicely designed and illustrates the general workings of the scheme we’ll see from 2012/13.)
The lower fee cap will however reduce Exchequer exposure on the ballooning portfolio of outstanding loan debt (estimated on official figures to reach £191 billion by 2046), as it will reduce annual outlay and thirty-year write-off costs.
Although this is nowhere spelled out, I presume Miliband is proposing to maintain funding levels for universities by restoring teaching grant. It is this which has to be ‘fully-costed’.
“The money for Labour’s policy will come from reversing a corporation tax cut for banks pre-announced by the chancellor, George Osborne, in March – from 28% in 2010-11 to 23% in 2014-15 – and by asking graduates earning over £65,000 a year to pay higher interest rates on their loans.”
Liberal Democrats courted students on the abolition of tuition fees. Labour may be misguided if they think this reduction in the tuition fee cap will be a vote winner.
They may be better advised to concentrate on a different element. Restoring the teaching grant to all subjects would stymie the privatisation of the English university system.
There would no longer be a ‘level playing field’ to facilitate the entry of for-profit providers, since they are not eligible to receive teaching grants. With the consequence that traditional degree level teaching would remain competitively priced. Any race towards the degree shops, or ‘mills’, seen elsewhere would be held up.
Now out in print and online, Part Two of the Research Fortnight series, The Third Revolution.
It covers the obscure history of university bond issues in England and looks at the scope for more of them given the changes to bank lending and university funding.
It is currently available to those stuyding or working at subscribing institutions. Ask tour administrators for a login code if you can’t get it.
Otherwise it should be freely available as of next week.
Education Investor runs a news story today about fives potential cases of private equity involvement in established English universities and even acquisitions. This was the focus of the final part of the initial article in Research Fortnight’s series, The Third Revolution.
It is how such equity investment would circumvent charity and university law that is most interesting. Eversheds, the legal firm in the article, have produced a research paper on new legal structures with which every student and academic should be familiar. It outlines one structure that would enable a for-profit to turn the existing charitable university into a subsidiary.
Note that Eversheds expects some deals to conclude shortly but that they won’t come to public attention for a few months. Is it your university?
From the article:
“Glynne Stanfield [of Eversheds] said that some universities who have been hit by big cuts to central funding grants were now turning to new sources of capital in a bid to remain competitive.“He argued that universities accepting private equity investment wouldn’t necessarily have to give up state grants, provided that the investor made a profit from operations that weren’t directly funded by public money. Sources of profit could therefore include a university’s research commercialisation projects, revenues from overseas campuses and from selling access to the institution’s degree awarding powers in the private sector, he said.”
Research Fortnight have now made available my article on Middlesex University.
A talk by me on Friday 14 October at Senate House, London.
It’s for the Marxism in Culture group .
Under cover of austerity and deficit reduction, the government is engineering a new market in HE. How does a government accounting convention create a pricing mechanism? What new financial derivatives will mediate the sale of the student loan portfolio? Which legal forms will universities choose so as to better access private finance? Andrew McGettigan discusses the dark side of the recent white paper.
All seminars start at 5.30pm, and are held in the Wolfson Room (unless otherwise stated) at the Institute of Historical Research in Senate House, Malet St, London WC1E 7HU.
In the context of higher education, the use of ‘private’ and ‘privatisation’ can indicate distinct though mostly complementary aspects of finance and corporate form:
- Private benefit or public good. Higher education is presented in the government’s white paper as primarily a human capital investment that benefits the private individual insofar as it enables that individual to boost future earnings. Universities are then judged by how well they provide training that increases graduate earnings profiles. There is no discussion of the public benefits of higher education. Even Milton Friedman, whose ‘The Role of Government in Education’ provides the conceptual framework for the loan scheme, saw the need for direct funding of higher education that promoted citizenship and leadership.
- The constitution of universities. English universities display a complicated and confusing history of legal structures. They are legally independent corporate institutions with charitable status (the majority are ‘exempt charities’). The pre-92 universities are chartered corporations, but the newer universities are statutory corporations often formed by separating them off from local education authority control under the terms of the 1988 Education Reform Act.
The ‘higher education corporations’ are quasi-public in that they do not have the full rights of ownership associated with independent companies. For instance, they are unable to dissolve themselves – only the relevant Secretary of State can make this decision.
This distinguishes them from the ‘companies limited by guarantee’ such as LSE, Greenwich and London Metropolitan (formed by the merger of two such companies – University of North London and London Guildhall).
By definition, a higher education corporation that, with the government’s approval, becomes a company limited by guarantee (the only alternative form available to it) is adopting a more private legal form. See the recent case of Leeds College of Music.
Companies limited by guarantee are also able to change to companies limited by share – though this would entail ditching their charitable status.
The white paper’s consultation on making changing legal status easier thrusts this further move into play. Paragraph 4.36 discusses the need to protect a university’s assets in changes of legal form, but given that the assets of a higher education corporation must always be reserved for charitable and educational purposes, the real sense of this proposal is to facilitate the buy-out or bail-out of a traditional university by a for-profit enterprise.
The magazine Third Sector told me on Friday that BIS had confirmed that this possibility was on the table as part of the consultation. - Income streams. Public money through research and teaching grants is one source of universities income. Private sources include tuition fees (home & overseas), industrial sponsorship, commercial operations etc. The reduction and removal of teaching grants and their replacement with higher tuition fees alters the balance between public and private money in favour of the latter. Under the terms of EU Public Procurement laws, many more UK universities will now be considered private companies as their income streams will in future cross the 50% barrier determining that categorisation.
For arts, humanities and social science undergraduate degrees all income will be private income from 2012. - Marketisation. References to privatisation can indicate to the new forms of competition between universities as they compete to recruit applicants and commit more resources accordingly.
- Independence. Often private is used simply to indicate independence from the regulatory framework of publicly supported higher education. The University of Buckingham is private in this sense – it did not receive public money in grants – but it is constituted as a charity. A number of reports about universities ‘going private’ refer to stepping out of regulatory burden associated with access to publicly supported loans and grants, rather than becoming potentially profit-making enterprises.
With the new regulatory framework proposed by the government, these distinctions between independent, private and for-profit become more nuanced.
Research Fortnight today published my first article in a new series on finance in English higher education. It’s on Middlesex University and looks at the current impediments to higher education corporations changing legal status – some would be interested so as to be better able to attract private finance.
It’s currently only available to subscribers but most universities do have institutional subscriptions which should enable you to view it.
Leeds College of Music was ‘dissolved’ on 1 August 2011 by a statutory instrument ‘made’ on 7 July 2011. Its assets, liabilities and undertakings were transferred to Leeds College of Music Limited – a company limited by guarantee formed in April. This company is wholly owned by Leeds City College, a further education college.
More details available here. A news item for Research Fortnight Today.
This represents creeping privatisation as LCM was a ‘higher education corporation’ (like the majority of post-92 higher education institutions) and hence was quasi-public compared to a company limited by guarantee.
Is this the first such dissolution of a higher education corporation?
And will it start a trend?
The ease with which the change became legislation offers a challenge to democratic oversight. Nor does it appear that staff or students had much input into this decision.
More later, once I get some more expert opinions of its significance.
ps It does seem as if this is the first such dissolution.
Not strictly about Higher Education, but this announcement that News Corporation is in talks with Tower Hamlets about setting up an Academy school should concern us all.
It now seems that press and media may be more regulated than schooling.
My exclusive for Research Fortnight Today:
Middlesex abandons plans for a campus in Delhi. Until the last week, it was still advertising courses there to start in October.
Critical Education 