The financial health of the HE sector

Grant Thornton presumably published this study primarily for marketing purposes. It serves to keep their name in front of potential clients. Whether it is a great advertisement, I rather doubt.

For a start there are some startling errors (GT claim the sector employs just 130,000 people, which would be less than 1,000 per university. HESA has a rather more believable figure of 387,430). Secondly there's the rather grab-bag assortment of contents: a bit about 2009-10 accounts, a bit about the impact of the new fee and repayment system on the  'representative' graduates, a bit of handwaving about the future of the sector, and a very vague sketch of how universities could outsource everything except the academics. The devil would be in the detail if only there was any detail there.

In which the regulators of English HE do not appear to advantage

In principle, I am sympathetic to the plight of the quangocrat. I was one myself once, and it isn't always easy to balance the interests of your many stakeholders. I've posted before about my appreciation for the precisely-tuned prose which results when these matters are handled with sufficient delicacy.

In the case of OFFA, it is vital to remember that OFFA was created for the single and sole purpose of providing political cover for fee increases. It has no powers whatsoever to compel any university to widen access or admit fairly. The two powers the Director does have are to refuse an Access Agreement or to administer small fines. The one is to extreme to be used, the other too petty to bother talking about.

Judging the debate on Labour's £6,000 fee

On the once-bitten-twice-shy principle, this blog has policy of not linking to anything written by Tim Leunig. Here, then is a link to the THE reporting disagreements between Leunig and Labour about whether the £6,000 fee policy is progressive or not. If you want to read the CentreForum analysis itself, then I direct you to Google.

Leunig's analysis is a bit of a hatchet job - in fact it reads like a rather rushed hatchet job. For instance he reports that the winners are disproportionately old which is absurd in a cohort study - both winners and losers will be the same age. What he means is that the winners will collect their winnings late in the life course because the effect of lower fees cashes out in an earlier end to repayments, not in lower repayments. He also reports that the Government is the main gainer from the proposal (because the amount of loan written off after 30 years is, on average, less), whilst simultaneously claiming that the Government will be paying out £3,000 more per student upfront (which, if I calculated correctly yesterday, isn't true). These can't both be correct statements, and in fact since the Government's 'expenditure' is the RAB charge assessed at the time the loan is made, then any write-off at the end of 30 years isn't even a paper transaction as far as Government is concerned.

Meanwhile Gareth Thomas in the THE refers to a House of Commons study which I can't find (I think this is the appropriate link, but there's nothing there) which finds 16% savings for the lowest earners. I have no idea where these come from, so for all my scepticism about Leunig I think it is too early to call this against him. Despite the title of my post, I'm not going to reach a judgement on the debate yet - if ever.

My judgement on the policy, though, is increasingly negative. It looks as if it will reduce spending on HE (at least relative to the 2012 baseline, if not the 2011 baseline) without bringing any significant benefit to students or graduates (since debts will remain extraordinarily high if everyone is charging £6k). However that judgement is subject to change if I can substantiate this 16% saving for the poorest graduates. We'll see.

Degree Awarding Powers

I was speaking yesterday to a colleague who works in quality assurance, and she reacted with scepticism to my view, often expressed on this blog, that the White Paper will make little difference to private providers and in particular is not resulting in new private providers entering the sector.

On further discussion, I understood that her view was that many existing providers will no longer need universities to validate their provision. As for UKBA purposes they have to be overseen by QAA anyway, they might as well go the whole hog and get their own degree awarding powers. This will have a big impact on her work, and a non-trivial impact our mutual employer's validation income.

On reflection, I think what i have published on this blog agrees with this view, but has tended to trivialise it as an issue. My thoughts have been far more focused on the impact of Core/Margin, because that is closer to my own professional area - Planning. Of course these providers for the most part already exist, but people such as BITE or LSBF becoming degree awarding institutions in their own right is not a completely trivial matter, and I have not given this issue enough prominence in the past.

The £6,000 fee cap

A few thoughts about the £6,000 fees cap policy announced by Labour over the weekend, and already covered in depth here, here, here and many other places.

Firstly, the policy is 'fully costed' at £750 million to be sourced from higher corporate taxes and higher repayments by very wealthy graduates. I think institutions will find this disappointing. According to OFFA (who ought to know) the average post-waiver fee is currently £8,161. Cutting this to £6,000 will save the taxpayer the RAB charge (about £650 per student). The £750 million then needs to be split across all 1,226,950 FT Home and EU undergraduate students to make about £611 more. £6,000+£611+£648=£7,259 so, even with a generous rounding margin, this isn't enough to restore the fee income institutions are hoping for. It may be enough to restore historic funding levels.

Secondly I follow William Cullerne Brown in seeing this as likely to be one stage on the journey towards a formal abandonment of the graduate tax policy. Pure graduate taxes are, in my view, unworkable in English HE which is why politicians tend to move away from them as they approach power. However I can't find any clear statement about the future of the student number cap. John Denham is quoted as wanting to move away from the 'pernicious' core/margin model, but doesn't specify what he is moving towards - an end to numbers control, or just an end to moving the numbers about? From an institutional perspective, the numbers cap issue is really the more important one.

Since Ed Miliband has already indicated that this policy will be changed before the next election, it isn't likely to have much direct impact on anything. In one sense, as a concrete step bringing Labour policy closer to current Government policy, it should reduce uncertainty for institutions. I'm not sure that's how it will feel for us on the ground.

Comparing English and American HE

I’ve posted before about the Education Trust’s survey of US Universities that found only a tiny number of institutions with low fees, decent graduation rates, and above-average proportions of poor students. In this post I’ve excerpted a key graph from that report, and produced a companion graph of English universities by cost, graduation rate and proportion of students from lower socio-economic groups. The data definitions don’t tally up precisely (for which see below), but this provides, I think, three really powerful and interesting messages.

Venture Capital

In comments on this post, Andrew McGettigan points me to an Education Investor story about venture capital.

Speaking to EducationInvestor, Glynne Stanfield, partner at law firm Eversheds, said he was aware of five instances where “big private equity firms” are looking at buying part or even all of a UK university.

 

I have to confess this makes no sense whatsoever to me. Best as I understand venture capitalists, they seek to buy or invest in businesses which can be aggressively grown in value and then sold on. Quietly taking a steady profit on a steady business is not really the VC line (or so I thought), so buying a university in heavily-regulated England makes no sense to me.

I suspect some overselling by EI. The currently-ubiquitous Matt Robb makes more sense when he says:

there are “legally acceptable routes by which universities and investors can enter into partnerships that retain the best of both worlds”

Partnership around research commercialisation - where there is high risk and a potential IPO or sale to allow the VC to cash out in the medium term makes sense and if we see anything emerge I suspect it will be this.