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As and when the Conservative Party ever returns to office, there is at least one lesson it should learn from Bridget Phillipson. One of the first things the new Education Secretary did upon taking up her post was dismiss the Lord Wharton, the head of the Office for Students (OFS).
It is very difficult to imagine many Tory ministers doing the same upon finding a Labour peer in charge of an important regulator, and that is the single biggest reason the Conservatives have been so chronically useless at public appointments over the past 14 years. Worth filing Phillipson’s example away for future reference.
Anyway, the OFS is in the news this morning because the Government has tasked it with finding ways to “save universities from bankruptcy”, according to the Times. What isn’t obvious is how the regulator can actually do this.
Naturally, what the sector wants is a bailout. Apparently a new report from Public First, commissioned by the University of Warwick, calls for “a £2.5 billion transformation fund to provide state-backed loans to universities that made a “compelling case” for restructuring to prevent bankruptcy”.
But Labour doesn’t have cash to splash – not whilst the Chancellor is getting ready to claim the public finances are in an even worse state than she feared to justify new tax raids – so there seems little likelihood of that. Phillipson has, so far, ruled out any extra taxpayer support:
“Universities are autonomous and there are expectations around how they manage their budgets and I would expect them to do that without seeking any calls on the taxpayer.”
In itself, that might be sensible enough. Whilst some institutions may be staring down the barrel of an acute crisis, the fundamental problem with university finances is chronic and structural. A combination of frozen fees and cost inflation means that, according to research from the Russell Group, universities now make a loss on the average home student, even in less resource-intensive disciplines such as the humanities.
This is compounded by the fact that the current student loan regime is practically set up to maximise demand for degrees; university places are sold to 18-year-olds in a market with no price signals, and faced with a glut of graduates employers have no disincentive not to whack a degree requirement on jobs that might not actually need one. At every stage, the point where higher education is paid for is divorced from any point where any actual value in it might be realised.
Labour is correct, in light of the above, to be very wary of any calls for public money; unless the structural roots of the problem are addressed, it would simply prove a bottomless pit. But that leaves the question of what Phillipson expects the OFS to do instead.
A general hike in tuition fees, ideally followed by index-linking them, would solve the basic problem of universities losing money on home students. But it seems extremely unlikely, both because it would be intensely unpopular and because it would do terrible things to the already-dubious data on the graduate premium.
Likewise, there is no chatter about a root-and-branch overhaul of the fees regime, be that a cold-eyed look at which degrees are worth public support (i.e. not all of them, as now) or something like levying a graduate tax on employers, many of whom currently bank the putative benefits of higher education whilst letting the taxpayer and their own younger workers pick up the tab.
Sources I’ve spoken to at the regulator expect the most likely first course of action to be the turning of a blind eye, halting the previous government’s efforts to crack down on low-quality degrees. But if Phillipson is really determined not to spend any public money, and the Government is not prepared to see at least some institutions go under, it seems probable that Labour will revert to the go-to method for propping up the sector: even more international students.
Recall the way that lobbying from the Department for Education successfully hobbled James Cleverly’s attempt, whilst Home Secretary, to do something about the graduate visa. The Migration Advisory Committee (MAS) has never liked it, and still doesn’t, yet the Conservative Government nonetheless found a way to pose the question in such a way as to get it to recommend no changes to the status quo.
Labour, despite Sir Keir Starmer’s tough rhetoric during the election, does not even share the Tories’ instinct for lower immigration, nor their scepticism about the actual value of parts of the tertiary education sector. If an ever-laxer international student regime is the easiest way to stave off bankruptcies in the short term, there currently seems little reason to doubt the Government will take it – especially because universities have become a Rube-Goldberg device for laundering regional subsidies as economic activity.
Yet as we’ve explored before (see above-linked piece), in the long term this approach causes problems, not least of which is continually importing a population the size of Glasgow (and rising) into this country’s chronic housing crisis. In smaller university towns such as York, the sheer volume of students is directly fuelling the local shortage.
Then there’s the fact that too lax an approach to student visas simply turns the sector into a back door through the immigration system, as Neil O’Brien described the ‘Deliveroo Visa Scandal’.
Worst of all, it means propping up a system which increasingly fails to offer any clear benefit to many British students, even whilst sucking more and more of them onto a debt-powered treadmill that delays their earning life by three years or more, just to get starter jobs to which employers, facing a glut of over-qualified graduates, can tack a degree requirement without consequence.
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