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University funding - misconceptions and government mistakes

    Dear, oh dear. With each passing day the government seems to be getting itself in a right tangle with mixed policy messages. Yesterday it was the turn of David Willetts, who appeared to suggest that extra university places might be generated if individuals could get privately sponsored to undertake courses. Instantly picked up by the liberal mafia, it was widely condemned by the Guardian, the BBC and others as a ‘disgrace’ and labelled ‘rich kids set to be able to buy their way into university.’ Cue the now regular government back down.

    What I have learnt since discussing these sorts of things with friends is that Willetts will never be able to win over these people and convince them that what he is doing is enhancing opportunity. For they see all sorts of policy decisions like this as zero-sum games. For every winner, there must be a loser.

    Let’s look at what Willetts is actually suggesting. He recognises that demand for university places currently exceeds supply. This means that many people who achieve the necessary academic attainment to get into top universities can’t get in. The universities are also facing tightened finance. His solution: allow the creation of extra places for people with the academic attainment who are able to obtain private sponsorship. Everyone else can get the usual government support. In his view, this results in more people going to university, with the extra places not requiring state assistance. Universities will be richer, and more people will get a better education. Win-win, no?

    Here’s the problem. Opponents don’t recognise that the new places wouldn’t be there in the counter-factual world. In their view, Willetts is allowing the creation of extra places which are only open for those with the ability to pay or get sponsored. This is quite an understandable, yet misguided, view point. At its heart, it implies that only the state should fund university up front, setting a rigid number of places.

    The real hypocrisy in the opposition, however, is that these off-quota style places exist already – for non-EU students. So, despite the virulence of debate yesterday, this isn’t a matter of principle. What the opponents are really saying is “we don’t mind rich, clever foreign students taking up extra places at university to cross-subsidise our services, but we do mind rich, clever domestic students taking up extra places at university to cross-subsidise our services.”

    This seems a self-defeating philosophy. Surely it is better to give more domestic students the opportunity for a first-class education? We are ignoring the grave lesson that abolition of grammar schools should have taught us – extra opportunity for some should still be preferential than limited opportunity for all. As the Adam Smith Institute blogged yesterday , nobody would lose out as a result of this. These would be extra places – meaning more people fulfilling their potential and enhancing their learning.

    That’s not to say that I’m a massive fan of the Willetts plan. Though the case for supply-side reforms in universities is well-founded, politically it is absolutely toxic. The government surely must have seen how it would be portrayed, particularly given the tuition fees protests. What it really shows, however, is that the government’s current reforms to Higher Education alone are not going to work. The truth is that the government has got into this mess by putting a cap on fees at the same time as ruling over a quota on places. All of the market signals suggest that demand still exceeds supply – and in any ordinary market mechanism prices would rise. The government should have adopted ALL of Browne’s recommendations, including not having a cap. Attempting to part-marketise will, I’m afraid, simply create a two-tier system - with all the petty resentment that comes with it. 

    Ryan joined the Centre for Policy Studies in January 2011, having previously worked for a year at the economic consultancy firm Frontier Economics.

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