Chapter 2: Funding Higher Education
There is very substantial political (and public) support for the current Scottish approach to funding higher education as part of general public expenditure rather than charging students fees. More generally there is limited enthusiasm in Scotland for creating a 'market' in higher education, although Scottish institutions participate (very successfully) in the wider global markets for international students and staff.
However, within this broad consensus there has been a lively debate about the best way forward.
A particular concern is that, by providing 'free' higher education, the overall number of funded places for Scottish (and non- UK European Union) students is capped. Institutions are free to recruit as many students as they like from the rest of the UK and from outside the European Union. Audit Scotland (2016) has pointed out that, within a fixed total, comparative gains in participation by some groups of students must be balanced by comparative losses by other groups. This has given rise to fears of so-called 'displacement', in effect that applicants of middling attainment and from middling backgrounds will get squeezed by high-achieving applicants from socioeconomically privileged backgrounds and by SIMD20 applicants. The evidence that this is actually happening on a significant scale is patchy at this stage. But it naturally remains a matter of concern. Clearly an increase in the number of funded places would reduce any squeeze and help to dispel these fears. This issue will be addressed in the recommendations made at the end of this report.
A second concern is that the Scottish Government's policy of fee-free higher education for Scottish students is a wasteful use of scarce public resources because it benefits better-off students and their families as well as those from deprived backgrounds, limiting the scope for any additional funding targeted at the latter. For example, a 2016 report from the University of Edinburgh's Centre for Research in Inclusion and Diversity, commissioned by the Sutton Trust, cautioned against concluding that 'free' higher education was the main instrument for achieving fair access, and highlights some of its downsides (Hunter Blackburn et al., 2016)
One conclusion that has been drawn is that a more effective way to deploy resources would be to spend more on student financial support, and the funding priorities recently established by the National Assembly Government in Wales are cited in support. From my own observations, and meetings with students, it is clear that financial support is a major concern. The Scottish Government has recognised this and established an independent Further and Higher Education Student Support Review, which has just published its final report (Scottish Government, 2017). The review recommends that students in further and higher education should be treated in the same way, with national provision replacing institutional support, although the Scottish Government has yet to announce its final decisions.
Another more controversial conclusion that has been drawn is that a fees-based funding system as (currently) prevails in England would be more friendly to fair access, because it would generate extra funding and also because there would need to be no cap on the number of students that can be recruited. Under this system, as has already been indicated, institutions are required to make access agreements, and provide targeted support for students from deprived backgrounds. This support is funded out of the additional income generated by charging students fees and, therefore, can be represented as a cross-subsidy from well-off to more deprived students. However, the extent to which the current high-fee funding regime in England is genuinely more access-friendly remains a matter of controversy, both academic and political. Two recent contributions, published less than a month apart, have produced starkly opposite conclusions (Leach, 2017; Wyness et al., 2017)
There are two compelling counter arguments, one practical and the other principled:
- The practical objection is that, because all English institutions have decided to charge the maximum fee allowed, they received greater funding than was intended or envisaged by the UK (English) Government. It is doubtful whether this additional funding can be maintained into the future. Almost three-quarters of English students are now projected not to pay back in full the loans they received to pay their fees because they will not meet the income threshold that triggers repayment, representing 50 per cent of the total. As a result the English system represents a potentially wasteful and certainly inefficient allocation of public resources. Loans to English students to pay their fees is as indiscriminate a subsidy as funding higher education out of general taxation.
- The principled argument is that higher education is a public good from which the whole community benefits as well as conferring individual benefits on graduates, in a similar way to school-level and further education (or other universally provided public services, from defence to the National Health Service). In other ways free higher education is not only a fundamental political principle but also a powerful cultural signal, which has strong resonance with the particular history of Scottish universities and also with the civic culture of Scotland and its commitment to social justice. The Scottish Government has chosen to embody that principle in its approach to the funding of colleges and universities, a decision that is very unlikely to be overturned and with which I have absolute sympathy.