Higher Education

Baroness Kennedy of Shaws Excerpts

Wednesday 9th April 2014 Lords Chamber

[Baroness Kennedy of The Shaws (Lab)]

My Lords, I declare my interests: I am the principal of Mansfield College, Oxford; I was the president of the School of Oriental and African Studies at London University; and, prior to that, I was the Chancellor of Oxford Brookes University. In the early 1990s, I sat on the National Commission on Education and was invited by the noble Baroness, Lady Shephard, when she was the Secretary of State for Education, to chair a committee that looked at further education. I have therefore had quite a lot of experience, cutting across the whole range of further and higher education. I am currently the president of a small foundation that provides bursaries for disadvantaged students travelling from further education into higher education, and am interested in further education as a second chance for many people to get into higher education. It is with that background that I stand before your Lordships today.

I agree with many noble Lords who have spoken about the hugely important role of higher education. Higher education changed my life. It is for that reason that I take such an interest in making sure that opportunities such as those I have had are available to as many others as possible. However, it is more than a private good. Yes, it can change our lives, but it is more than that. Others have spoken to the fact that it is a public good, a common good, which enriches the lives of this whole nation and everyone in it. It is therefore right that it should be supported from the public purse.

A consensus is rapidly consolidating that the supposedly sustainable funding model imposed just 18 months ago is already proving unsustainable. The noble Lord, Lord Bilimoria, introduced this aspect to our debate by pointing out that the raising of fees has not worked, and there are now many people unable to repay loans. The Treasury is therefore going to be out of pocket. The reason is that the assumptions on which this funding model was based are unsound. No robust theoretical justification for the model has ever been provided because the objections to it, in my view, are far too powerful. Nor has any sizeable body of empirical evidence been produced in support of the model.

If the Government or the Opposition are interested in serious research, I recommend that of Professor Howard Hotson, a fellow at St Anne’s College, Oxford, whose work is not only compelling but also rather difficult to refute. There is now a large body of readily available data showing that marketisation of higher education does not function in the way in which its advocates initially supposed. I remind your Lordships of the arguments that were presented to the nation for going down this road. The idea was that market competition would require universities to compete with each other to attract student customers, and that attracting student customers would require offering the best quality education possible at the most affordable price. Those universities which served the needs of students best would attract many customers and would expand and prosper; those universities which failed to do so would wither and die. The invisible hand of the market, we were told, would therefore reshape higher education in the interests of customers far better than any government state planners ever could. Thus we would unleash the power of the market and all would be well with the world.

Well, all I can say is that some aspects of our society are less conducive to crude market modelling. There are three preconditions for an efficient market. First, there has to be accurate information on the products for sale. That is quite difficult in higher education because, as we know, we still have not managed to find an adequate way—a metric, if you like—for measuring the quality of teaching. Such a thing has not yet been devised. It is therefore difficult to compare satisfactorily whether an institution is really successful at that or not. Secondly, it is important for a market to work well that there are stable and well grounded personal preferences in operation: that the person who is the customer has a clear preference. However, one of the fundamental purposes of higher education is to shape discretion and preference. Many students are therefore still coming to this market rather green. The capacity also has to be there to judge which of the products on offer will best suit the preferences. To go into a market, you have to consider whether you have what is necessary in this arena.

Other conditions of efficient markets are also lacking. In order for market competition to work efficiently, new providers must be able to enter the market easily. However, it is impossible in principle to create new universities which are of the same order as 800 year-old institutions. The top end of the academic hierarchy, which was described very well by my noble friend Lady Morris, gives prominence to those which are ancient. The conditions for efficient market competition simply do not exist, and cannot exist in principle. I will give an example. As noble Lords will know, I am a lawyer. It grieves me to look around at the many thousands of young people basically putting all their savings and debt into acquiring law degrees from universities all around the country and then applying for training contracts or to go into sets of Chambers. Inevitably, short cuts are taken by law firms in deciding who to take, and the shortcut they take is to look at that hierarchy of universities and basically not even consider those who have gone to universities of which they do not know, or which are considered to be in the third tier of the university status hierarchy.

The justification of marketisation creates gaping holes, and we now know that the mantra that marketising university funding will drive down prices and drive up standards was not true. The noble Lord, Lord Bilimoria, described that very well. I will consider for a moment the outcome of that bold experiment. It was an experiment, because it was not rooted in evidence. Before 1999, the United Kingdom, like most European countries, did not charge domestic students any fees at all. Many of us in this House were privileged to have been beneficiaries of that. In 1999, the £1,000 fee placed the UK roughly where the Netherlands is now—the Netherlands is coming into this, too, but at that low level. The tuition fees introduced in 2004 and capped at £3,000 were designed to provoke price competition but failed to do so. The average therefore shot up to the maximum, overtaking all the Commonwealth countries, to the position shown, where only Chile, the United States, Korea and Japan charge more than us.

The Browne review then took place. Again, I share the regrets expressed by the noble Baroness, Lady Deech, that it is unfortunate that very clever businesspersons sometimes come in to review higher education but, unfortunately, do not take account of the great experience of academics and those who have lived their lives in the field to learn from them. The Browne review’s figure for a soft cap of £6,000 took us off the scale, far above any other public university system in the world. That £6,000 cap also failed to provoke price competition —so we did not get the competition that we were told would happen—and was immediately superseded by the £9,000 cap. The invisible hand of the market failed to generate competition. Therefore, even with the £9,000 fee, the heavy hand of government moved in to impose price differentiation, which forced the average price down to £8,354, which noble Lords will agree is not much of a reduction.

I want us all to note, because we always turn to the United States as being an incredible place to which we aspire, that the fee we now charge our students is now over twice the average tuition fee in public universities in the United States. We charge our students over twice that price. However, no sooner was the £9,000 fee in place than the vice-chancellor of the university at which I now head a college called for it to be raised to £16,000. We can just imagine what the trajectory will be. If Oxford obtains £16,000 in fees, Cambridge will follow suit, and so will Imperial College London, University College London, the London School of Economics, and all the rest will rush into the gap. We can be sure that that is the bad story.

Is that evidence of market forces driving down prices? I am afraid not. It is rather evidence that the hypothesis on which current university higher education policy is founded is incorrect. If Vince Cable or David Willetts had taken the trouble to study the way in which university pricing works in the relatively liberal higher education market in the United States, they would never for one moment have imagined that the market drives down prices in higher education. It does not. I am afraid that price becomes a proxy for quality, so the old universities start to charge more and more.

I am afraid that we are on a very poor journey. I urge the Government to start to review this, and I hope that any opposition party, particularly the one to which I belong, will look carefully at all this and perhaps think, “Maybe we made a wrong choice in the early stages”. I am anxious that we do not all take too much time, but, quickly, I encourage noble Lords to look at the work of Howard Hotson at Oxford. He has been able to show that America is not a good place to look to as our guide. Recent figures show that the United States is attracting fewer foreign students than before, and that the numbers are on a downward curve. Another myth about America is that it educates more of its young people in tertiary education, and again, that is on a downward trajectory because the market is not working there either.

We have to look again at the system we have chosen and decide whether the education of our young is a priority for us. If it is, it needs our investment.