The Big Bang in UK Universities

5 04 2012

In 1986, the financial services sector in the UK was deregulated with the famous Big Bang package of reforms. The debate about the consequences of this move towards a much more competitive environment continues to this day.

As Chris Cook reports for the Financial Times, the higher education sector in England is now undergoing a similarly dramatic Big Bang reform aimed at producing a genuine market in higher education. Subsidies for the teaching of most non-STEM subjects have been scrapped, forcing students (or more correctly, graduates) to cover the full costs of their education. Tuition fees have increased, although not to the level common in private profit and non-profit universities in the US. New entrants, such as the proposed New College of the Humanities in London, are trying to get into the education market. Moreover, the regulations governing the admissions process that previously shielded less attractive universities from the prestigious Red Bricks universities have been watered down, although not totally eliminated. In the days when governments subsidised every space in the UK’s  universities, the number of spaces at each university was capped by the government. In practice, the quota meant that some of the top universities were forced to turn away good students, even though these universities would have liked to have expanded their student populations. The beneficiaries of this regulation were other universities, which ended up accepting the students who were very good but just below the cutoff to get spots at top institutions such as University College London. The following chart, which shows data for four universities in four different grades of institution, shows that the quotas affected the top universities (e.g., University College London) the most and had a minimal impact on student numbers at institutions such as the University of East London.

The conventional wisdom in British academic circles has been that the end/softening of the quota on student numbers at elite universities would result in these institutions expanding student numbers rapidly at the expense of less attractive universities in close proximity. The apparent reasoning is that since the marginal cost of teaching an additional student is very small, it would make sense for universities to pack more students into lecture theatres. However, according to data reproduced a few days ago on the Financial Times’s Data blog, the most prestigious institutions are not considering major expansions at this time.

As a business historian, this raises several important questions for me.

1)      Is there another set of regulations, aside from the aforementioned quota, that has impeded the growth of the universities that have been forced to turn away students? I’m thinking about the UK’s onerous planning permission system, which makes it hard to put up new buildings and thus expand student numbers quickly. I would note that UCL is located in a part of London with really expensive real estate. Unless you want to grow vertically or to establish a suburban campus, your freedom to increase student numbers is limited.

2)      To a certain extent, technology can help universities to cope with the costs of expansion. Delivering an increasing proportion of classes over the internet might be one way of easing growing pains.  However, it is my impression that the ability of English universities to deliver content electronically is limited by other regulations that dictate that students have to have a certain amount of “face time” with their instructors. Is this correct?

3)      Expansion involves all sorts of other capital expenditures. A private business can issue lots of bonds to fund expansion, using the future revenue to offset the expenditure. Public sector entities such as universities have less freedom to raise capital. Under New Labour, so-called Public-Private Partnerships were formed for expressing this purpose. The current government has discouraged the use of such PPPs, since they often involved the provision of capital at interest rates that were quite high, certainly higher than the government’s own borrowing costs. Discouraging PPPs is probably a good move, but alternative sources of capital should be provided, perhaps along the lines of the Export Banks that many countries use to subsidise exports.

4)      The pricing structures adopted by English universities are still relatively simple. The tuition fees are much higher than they used to be, of course, but students are still charged in basically the same way: they pay in advance for the whole term or year’s worth of education. Contrast this with the “freemium” model adopted by an increasing number of US institutions. Freemium is common model in many businesses: a basic service is provided free of charge to users as a sort of teaser, but extra features must be paid for. The Massachusetts Institute of Technology is offering many of its lectures online for free via its MITx OpenCourseWare programme.  The catch is that you have to pay to write the exams and get degree credit. Many other US and Japanese universities have adopted this model. To date, no bricks-and-mortar British university has even begun to offer this sort of pricing model. I suspect that regulations have something to do with it.

There is a lot of prejudice against the online provision of higher education. I have to admit that I used to be skeptical of the whole concept. However, a friend who worked for the Open University, which only delivers learning by distance, suggests that very good education can be provided in this way. Yes, online courses are no substitute for the one-on-one mentoring of young people by established scholars that I was lucky enough to receive as an undergraduate. I certainly do my damnedest to try and replicate that experience for my students. However, the reality is that only a small minority of young people in higher education today have anything resembling any of the sort.   As Kevin Carey, a proponent of online higher education, recently wrote:

Whenever I write a post on this topic, I usually get comments along the lines of “This entire conversation is ridiculous and distasteful because online higher education can’t possibly be as good as the higher education that I once received and/or am currently employed to provide.” Short response: There is incredible diversity within our higher-education system. I have personally witnessed a class taught by a full professor to two (2!) undergraduates at a wealthy liberal-arts college and read senior theses produced in close collaboration with full-time research faculty that would put most graduate work to shame. Online higher education can’t touch that. But I’ve also seen—and participated in—big lecture classes that are worse than well-designed online courses. The difference between what higher learning should be in theory and what it really is in practice (and what’s feasible given the current economic and funding environment) is vast. And it’s in that space that new organizations are going to thrive.




2 responses

5 04 2012
J Liedl

I’m all for distance education. Done well (from planning and preparation all the way through the actual teaching) it can be comparable to any ‘meatspace’ classroom. But the economies of scale sought by universities often mean that the quality isn’t first priority. The idea that anyone can administer a distance course, with just a little background, is problem one. The idea that we can admit as many students as want into an online course is problem two. The concept that students will all be able to thrive in the regimented yet often-unsupported online environment is problem three.

Putting the quality and supportive aspects of education first is going to be the tricky part in any sort of expansion. I look forward to seeing what some of these discussions will inspire!

6 04 2012

Laurentian is in the position to deliver quality online education because it also delivers quality education in physical classrooms. Not all institutions have this foundation to build from.

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