Funding higher education: English reforms

1
Funding higher education English reforms

• Howard Glennerster

2
Fiscal constraints on welfare states

• Countries making a range of responses
• Extending normal working life
• Encouraging faster re entry to labour market
• Charging for services
• Getting more outputs from the same budgets
• Hiving off services to the private sector
• Raising more private contributions in ways that
  concentrate more state resources on the poor and
  encourage efficiency

3
UK HIGHER EDUCATION OLD STYLE

• One block of money agreed for five years covering
  research and teaching
• Numbers of students fixed for each subject in
  each institution. National salaries.
• Free tuition and grants to cover living costs
• But
• Only 4 of young people went to university
• 4 to train as teachers
• Rose in 1960s to 13 in all higher education
• No expansion then up to 1990s, despite rising
  demand doubling of private rates of return

4
1990s Expansion

• Intake rises from 13 to 30 of age group (now
  over 40)
• Real spending per student falls by a half
• Pupil teacher ratio from 101 to nearly 201
• Research funding split from teaching and cash
  concentrated on the top departments
• Grants to cover living expenses withdrawn and
  replaced by income contingent loans.
• Up front, low, uniform fees charged but graded
  by income of parents. (1,000 500 0)

5
Results

• Declining standards of teaching. Crowded
  buildings.
• Tiny extra revenue
• Main beneficiaries of the expansion the higher
  income groups in spending and future earnings
• Five times as much spent on richest 5th as lowest
  
• Five times as much on a student as on a school
  child over whole school life
• 80 of professional, 50 middle class and 15
  working class children to higher education
• No incentives for efficient choices between
  subjects

6
2006

• Concentration of research funding in top
  departments and universities (10 out of 80) 1.4
  billion
• Teaching grants per student following inspection
  4.3 billion
• Extra funding of tuition (30 of costs) and
  living expenses through fees paid after
  graduation through the tax system
• Reintroduction of maintenance grants and
  bursaries to cover fees for those from poor
  families

7
RAE

• Last RAE 2001
• University departments graded 1, 2, 3a, 3b, 4, 5,
  5 and later the best 5
• No money below 4.
• Each staff member returned gains a sum which
  varies by subject
• Money weights 41, 53 54
• Social policy 5 30,000 per staff per year

8
RAE 2008

• No grades but each department will have a
  profile based on grades given to 4 pieces of
  work per staff.
• 1 no more than national importance
• 2 international importance but not key reference
  point
• 3 widely cited key reference point
• 4 paradigm changing, central work in a field
• Research facilities, climate and plans will
  carry 20-25 extra.
• Cash will follow in an undisclosed way!

9
Graduate contribution (England only from 2006/7)

• Pro entry for lower income groups
• Up front fees gone
• Maintenance grants reintroduced for families up
  to and a bit over average household incomes (
• More generous income contingent loans for living
  expenses on top. (up from 12,000 to 20,000 max)
• To qualify to charge fees universities have to
  take steps to encourage wider entry and waive
  fees for students from lower income families.
• Fees (and maintenance loans) repaid after
  graduation through tax system. Not pay until
  incomes over 15,000 a year. Then 9 of extra.
  All debts wiped out after 25 years. (20,000
  income pays 450).
• Repayments rise with prices no interest charged

10
Results

• Significant increase in university income.
• Fees received immediately by universities,
  bridging finance by Student Loans Company.
• Variable fees by course and university increases
  efficient allocation of resources.
• Increase in student applications (7). Not in
  Scotland (2) or Wales or Northern Ireland- flat
  or reduction.
• Long term redistribution
• Graduate women repay 60 of fees over lifetime
  (20 for lowest decile)
• Men repay 70 (60 for lowest decile) (IFS model)
  

11
Improvements still to make

• Fee ceiling too low.
• Still interest free. Those with money borrow at a
  subsidised level. This subsidy counts as public
  expenditure in the national accounts. (Hungary
  and New Zealand schemes charge interest ).
• No reason to limit scheme to undergraduates.
  Extend to post graduates and non university post
  school education.

12
Objections?

• Governments will reduce their support in long
  run.
• Graduates already pay more taxes as incomes
  higher.
• People already have more spent on them than the
  average in services like health but we do not tax
  them more.
• Answers to all these.
• Norway, Sweden, Netherlands have income
  contingent loans for living expenses. Hungary,
  Australia and New Zealand recover fees through
  the tax system.
• England a model? (OECD 2004)

13
Why not a graduate tax?

• Revenue came for next government political costs
  for this one.
• No gain in university freedom to set prices and
  keep income. All income went to the finance
  ministry who kept control.
• No gain in efficiency as students faced no price
  signals and institutions no competition.