I have no doubt there is an expectation that I shall build an economic argument for increased fees, and so I shall; but I shall also build an argument based on equity, which may surprise some of you. What I won’t do is prejudge the outcome of the commission reviewing fees next year, or speculate on what level fees should be – rather I will analyse how universities should be paid for.
We hear all the time that the UK is a knowledge economy and that our future is as a country that provides added value through high intellectual skills. It is also clear that higher education will be the predominant supplier of individuals with those skills and thus the main route to well remunerated employment. Yet whilst openly acknowledging this, we seem to believe we can do it on the cheap. In the latest OECD table of the percentage of GDP spent on tertiary education, the UK was 21st out of 30 at 1.1% with the United States first with 2.9%. The UK Government has acknowledged the historic lack of investment and has channelled more taxpayers’ money to the sector, but more income is still needed.
Such a request for additional income is not just an idle whinge or the sector simply behaving like baby birds with their beaks wide open. Let me exemplify this with the University of Bristol. Over the next five years, we are budgeted to spend £300 million on new and refurbished buildings. This includes £40 million on the Physics building; new Maths and Biosciences buildings for around £90 million; and, for at least another £90 million, a new students’ union building and a new flagship library and learning space. About a third of our annual spend on such projects will be met from capital grants, a third from cash generated from operations and a third from borrowing. What is clear is that this is only the beginning – we will need to make equivalent investment year on year for the foreseeable future, which means that we will need to generate more cash from operations and the ability to service more borrowing.
All of the investments I have identified will hugely increase the quality of the student experience – in fact, such direct investment in meeting students’ needs accounts for the majority of our commitment. Furthermore, we have estimated we need to spend an additional £150 million on improving the student residential estate. The annual investments we are and will be making are similar to those made in North American universities – they are simply what you have to do if you want to provide a world-class university giving a world-class student experience. So we need additional income to sustain such investment as well as for other imperatives, such as competitive salaries for our globally mobile staff – the very staff who teach our students so well.
Where will such additional income come from? Well it certainly will not come from the much-trumpeted commercialisation of intellectual property and technology. Even in the most successful universities in the United States, income from this source is less than 2% of total income and often substantially less than 1%. It is also unpredictable – so much so that I can find no US university that actually budgets for it. Philanthropy has been forwarded as another major source of additional income. The evidence from the United States is clear – philanthropy will add value and help achieve excellence, but it does not support core business. Furthermore, my report for the Government on Increasing Voluntary Giving to Higher Education stressed that we had to create an ‘asking’ culture before we could test whether there was a ‘giving’ culture. That test remains to be done; my intuition is that we will see philanthropic income rise, but not to levels anywhere near those in the United States, where philanthropy is seen as a prime duty of citizenship and civil society.
So if commercialisation and philanthropy aren’t going to solve this, we are left with only two main sources of income: society in the guise of the taxpayer and the consumer in the guise of the student. Let’s state some hard truths about taxes – we are a comparatively low-taxed society and we like it that way. For the last 20 years, we have returned between 33 and 37% of GDP as fiscal income – and that is remarkably consistent over longer periods. Fourteen European countries return more than that, with many way above 40% and Sweden topping the list at 50.4%. Furthermore, we have shown that we do not want to pay high tax rates. Our top tax rate is 40%; for European OECD countries, this is 16th out of 22. France’s top tax rate is 56%; Germany’s is 45%. History has shown that most of us will not vote at elections for parties that promise increased social goods through higher taxation.
Two more important points: higher taxes are already on the way, with fiscal return from GDP expected to exceed 39% in 2012; and we have made it clear that if we pay higher taxes or redistribute more tax to education, we want it to go to the universal goods of primary and secondary education and not to higher education, which is an experience that millions do not have. The reality is that society is not willing to pay for better higher education at the level that we need for the investments I have described.
There is also a very strong argument that the taxpayer shouldn’t pay any more. There is a truth here that dare not speak its name. As a mere medic, I understand that fair taxation means that as you get richer, you pay more taxes to provide the social goods that support the less well advantaged in society. The current position in higher education is that it is not a universal good and that the majority, who don’t go to university and tend to be poorer, see part of their taxes go to boost higher education support for a more advantaged minority who will become even more economically advantaged by going into higher education – the very opposite of equity from my point of view. Let’s make the taxpayer give the advantaged even more advantage!
So if charging higher fees is the only game in town, how do we ensure that we do not stop individuals from disadvantaged backgrounds coming to university? The first point is that it is not fees that are stopping such people. Attainment in secondary education is the principal problem. If you analyse participation rates against levels of attainment, then 90% of those with 25 points or more at A-level go to university – whatever social group they come from – and that is true for all levels of attainment. The shocking statistic is that 56% of pupils in state schools do not achieve five GCSEs at A* to C level including English and Maths – that is, 56% do not achieve the minimum requirement to go to any university. Furthermore, of the 30,000 18-year-olds achieving three Grade As at A-level, less than 200 qualified for free school meals – a well-accepted measure of social disadvantage. The real need is to educate all of our young people properly and so broaden their opportunities, not to dwell obsessively on debt aversion.
Finally, the additional income from fees can be used to support students from disadvantaged backgrounds. We have calculated, with our students’ union, that it costs about £8,000 per year to live as a student at Bristol. They have agreed that £2,000 of that can be found through part-time work, leaving £6,000 to be covered. If your family income is £25,000 or below, you can get the maximum Government and Bristol grant and bursary support (not loans), which amount to £5,045. If you have taken part in the Access to Bristol Scheme, the figure increases to £8,115. And this does not take account of the Government maintenance loan of £3,365. £25,000 is well above the median income for 2007/08; in other words, over 50% of individuals would qualify for this support. Huge debt is not necessary.
Remember the title of this debate: “The only viable future. . . .”. My viable future has a UK Higher Education sector that is universally valued, very high quality, a truly transforming experience, accessible to all who can benefit from it and a jewel in the UK’s economic and cultural crown; not struggling, under-funded and forced to adopt a “stack ‘em high and sell ‘em cheap” approach. To realise this vision, universities need more money, additional fee income is the only realistic option, it is equitable, and will ensure adequate support so that the disadvantaged do not incur large amounts of debt.