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This ain’t no market

The White Paper is important, but it is not a plan. A plan would imply vision, perhaps ideology, evidence, and internal coherence

In the White Paper on higher education the government has put heavy emphasis on competition to drive through many improvements. This has been widely interpreted, especially by opponents of the reforms, as an attempt by the government to create a market in higher education. But is that right?

A proper market would give universities much more autonomy than today. For example, they would be able to expand. Whereas total student numbers are in fact capped.

Then the two elements of competition in the White Paper segment the supposed market into three parts. Universities in the “new elite”, as the Financial Times termed them [http://rsrch.co/nDAh0A], take mainly AAB students and can expand. In the “squeezed middle” (the great majority of universities in fact) are universities that will lose some places to the margin. But many, especially at the top end, cannot get their fees down below £7,500 a year while retaining their present quality. The “insurgents”—existing access universities, further education colleges and new private providers—are invited to expand into the places lost, primarily, by the squeezed middle. In all three segments, the supposed market fails.

Among the new elite, many are so embedded in tough, global competition that they will barely notice the new domestic competition.

A squeezed-middle university can only attract students by cutting prices. There is no mechanism to increase numbers by improving quality. Also, it risks losing AAB students to the new elite. So rather than enabling institutions to devise their own strategy, this supposed market forces the squeezed middle to rush to the bottom. This will save the government money on student loans. But it may also trash a large swathe of successful and important universities and diminish choice for students, who could lose many good options.

And the new insurgents of course are not dependent on a market for success in winning students. No, they depend on the Higher Education Funding Council for England tossing them some of the margin by diktat.

Note too that expansion of the margin in this kind of market will increase instability. The risk of the “wrong” university going bust will therefore probably prevent the margin being increased radically. So the prospect of ever reaching a genuine market via the White Paper disappears over the horizon.

Also, all the big issues have been sent out for consultation, and this may have fundamental consequences. For example, there is an argument that, when calculating the places to be lost to the 20,000 margin, science and engineering subjects should be excluded. This is because it is not going to be possible for anyone to offer STEM courses at less than £7,500. The argument makes sense. But in this case, all the STEM disciplines have been entirely excluded from competition. Pouf!

Generally, most of the language in the White Paper is about allowing new institutions to “enter the market” but the complete lack of an effectively functioning market for them to enter is never discussed.

So where does that leave us? Yes, the White Paper is an important document that may have a powerful effect on universities. But it is not a plan. A plan would imply vision, perhaps ideology, and evidence with any luck. It would at the very least—like the Browne Review—be internally coherent. But as many have already pointed out, the White Paper has none of these things.

The White Paper is best understood, like the human genome, not as a blueprint but simply as the consequence of a sequence of events. The timing of the Browne Review, immediately after an election, provided the opportunity. This was seized by the Conservatives to service their overriding political narrative of deficit reduction. Switching funding for teaching from a block grant to student loans may be an accounting trick, but it is as irresistible to a party that wants to win the next election on the deficit as the promise of the Singapore Kiss was to Edward VIII.

In the afterglow of that coup, the Conservatives allowed the Liberal Democrats to bastardise the actual policy however they wished, to serve whatever peculiar notion of equity remained in Vince Cable’s budget-bound head. Incompetence at the Department for Business Innovation and Skills then led to the mistake of relying on the Office for Fair Access to restrain fee levels. This in turn led to the rush towards £9,000, and hence to the need to find new innovations to cut fees, and hence the two bits of new competition in the White Paper.

The White Paper may disarm its opponents by wrapping itself in the seemingly irresistible language of market economics. But what we are witnessing is simply a sequence of additional policy contraptions being bolted on to the accounting trick. The mess remains a mess.

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