Andrew Oswald: Higher education, higher price

Lack of funding is crippling Britain's universities. It's time students paid to learn
Andrew Oswald

Imagine a client asks you for advice. His core product, on which the company name was built, has been losing money hand-over-fist for years. A new product line, unrelated to the old one, is up-and-coming and profitable. What, he asks, ought his firm to do? It doesn't take an MBA to work out that the client should face up to the future and close down the loss-making arm.

This, unfortunately, is exactly what is happening in British universities. The balance sheets of our 100 universities are a disaster that no commercial enterprise would tolerate. Twenty years of cuts in government funding mean that higher education is now heavily in the red - teaching students has become a continuously unprofitable business. Excluding a few entrepreneurial universities, the situation is dire. Vacancies are not being filled; buildings are not being maintained; staff are becoming second-rate; computers are embarrassingly old; there are holes in corridor carpets.

Universities now make their money by running conference facilities, selling T-shirts, and giving short courses for executives. But how can a university shut down its student teaching? Plainly, it can't. And therein lies Britain's conundrum: we are going to have to charge enormous fees to students or simply shut our universities.

In the 1980s, universities were given about £10,000 a year in real terms to educate an undergraduate. Since then, bit by bit, that has been cut. Again and again. Now universities are given £5,000 a year to teach a student. How many businesses in Britain could survive a halving of price per unit? None.

As soon as you see the arithmetic, it becomes obvious that competition with American universities will finish Britain off. By charging a real-istic amount, the top universities in the US receive £20,000 a year to educate each student.

Declining standards

The worst effects are to be found in the quality of the teaching staff. In certain disciplines, universities can no longer hire people with first-class honours degrees. Nobody in the top 20% of a graduating class now wants to work in a university. The reason is cash: a PhD in his or her mid thirties who applies for a lectureship at a British university is likely to be offered a salary of about £25,000. That may sound funny, but the results are anything but. You cannot run a university where the students are cleverer than the lecturers. It is like your local club pro telling Tiger Woods how to use a sand wedge.

There is a disaster unfolding in British higher education - for straightforward economic reasons. In 2001, it has gone beyond serious.

Why don't politicians recognise this and do something about it? The explanation is that to win votes they have instead to put taxpayers' money into hospitals and schools. When it comes to the crunch, funding universities is the last of their priorities.

It is time to follow the American example and charge high university fees. Naturally, students will organ-ise marches in London and write rude letters to politicians - in a democracy they are perfectly entitled to do so. But it is self-interest at work. They may dress it up as a moral crusade, but what they want is for other people to pay their bills.

Fees are also fair. It is not reasonable to expect Britain's lorry drivers and call-centre operators to stump up their taxes so that students can go to university. Students were born luckier, by and large. They have no right to take money from the taxpayers doing regular jobs. It is not a defence to say that students will go on to earn high wages and then pay plenty of tax back. Footballers, London cabbies and accountants also go on to earn decent wages and contribute to the taxman, but we do not pay for their training.

Elitism is another issue that is raised in this debate. Yet those who believe in improving access to university for people from poor homes should support fees. Charging a sensible amount to the students from well-off backgrounds would allow the taxpayers' money to be diverted to where it is needed - a giant scholarship fund available to those whose parents do not have enough money to send their children to university. At the moment, government funding goes predominantly to children from prosperous families.

Shut up and pay up

Because our universities are going bust, there is no alternative to fees if we want good higher education. I believe in education, went to a normal comprehensive school, would like to see more students from hard-up homes go to university, think that democracy is the best way for a country to be run, and will always stick up for students' right to protest about anything. But there is nothing justifiable about what Britain does at the moment.

The one third of the country who go to university are subsidised by the other two thirds who go into regular jobs. Those who gain from something should not expect others - especially others who are less fortunate - to pay their bills.

British universities are going bankrupt. An annual student fee of about £7,000, alongside a big scholarship fund, would be efficient and fair - the current system is neither. Either students pay up, or we must shut down university teaching. The country has to choose.

Andrew Oswald is professor of economics at the University of Warwick. Visit the author's website at www.oswald.co.uk

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