Financing universities: Who pays to study?

Date: 24/01/04

When universities depend on taxpayers, their independence and standards suffer

IT IS depressing to visit Oxford or Cambridge these days. The old buildings are so wonderfully grand that they highlight the cheap, ugly and badly kept new ones. The intellectual history is stunning, too: this is where Newton pondered gravity, and Occam honed his razor. But these days academics at Britain's two finest universities are a harried, ill-paid lot; salaries start at a mere £14,139 ($25,733).

Few disagree that both universities are living off the past, in everything from cash to reputation. The colleges' wine cellars are better than the kitchens, quips one don. The port and claret were laid down in happier times, when cash was flush and planning for the future mattered. But the food that goes with them is often dismal: that must be bought out of current income, which is usually earmarked already for everything from maintaining ancient buildings to supplementing salaries.

Yet Oxford and Cambridge are still in relatively good shape, thanks largely to their structure of self-governing, self-financing colleges. This limits the power of bureaucrats, provides independently managed money and ensures some protection for the original and the excellent. Other British universities have much worse problems.

To begin with, they have little or no endowment income to fall back on. The combined investments of Oxford and Cambridge are £4 billion; the rest of the British university system has £1.7 billion to play with. In America, Harvard alone has twice Britain's total. The “funding gap ” - the hole in the universities' collective accounts created by the unfunded expansion of the past 20 years - is around £10 billion.

It is not just that money is short. The price and quantity of courses are state-controlled, in a system more suited to Soviet central planning than to a modern democracy. And as with other planned economies, the result of government intervention is increasingly unsatisfactory. In Britain, over 30 years, universities have gone from being almost wholly autonomous, with state-financed block grants handed out at arm's length, to becoming branch offices of a government ministry.

Admissions, too, bring a whiff of the old Soviet system. The government is convinced that more working-class students, including many with few formal qualifications, should go to university. Its ultimate target is 50% of 18-30-year-olds by 2010, and it is getting there fast. Figures released this week show that the number of students in higher education has risen in just one year from 43% to nearly 45% of the relevant age cohort. In 1979, the percentage of school-leavers going on to higher education was just 12.4%.

But more does not always mean better. One of Britain's best-known academic institutions, the School of Oriental and African Studies in London, found itself penalised for taking too few students from “non-traditional” (meaning poor) backgrounds. So it reduced entry requirements for such applicants, to take account of their often modest school results. But then it turned out that those students found learning Arabic or Chinese from scratch so hard that they were dropping out, incurring a further fine from the government.

The story of British higher education is less about expansion than inflation of qualifications. University degrees mean less and less and there are more and more of them. The rot set in in 1992, when the Conservative government allowed thepolytechnics - locally based institutions that originally specialised in vocational teaching - to relabel themselves universities. That created a panoply of new academic courses, many of dubious merit, and kicked away a vital pillar of the higher education system, between the purely vocational further education colleges and the fully academic universities. This trend towards uniformity has disastrously weakened higher education in Britain.

Hence the importance of the government's proposed reform of university finance, which will allow a modest liberalisation of tuition fees. Instead of the current flat rate of £1,125, universities will be allowed to charge up to £3,000. The scheme is festooned with carrots, chiefly easy terms for poor students, in order to forestall a revolt by the government's nominal supporters in Parliament.

Critics say the new fees will create an unmanageable debt burden. Yet a broadly similar system in Australia has not had this effect: graduates pay back the loans when they are earning enough.

The scheme's real weakness, as most of the best universities admit in private, is that the top fee should be a lot higher; the cost of actually teaching an undergraduate is at least £10,000 in the humanities, more in engineering and science. But the most welcome ingredient is variability: universities will at last have the chance to offer cheaper, shorter courses to students willing to pay. The misguided notion that all courses at all universities are equally good seems about to be punctured.

Woes across the Channel

The present picture in Britain may be dismal, but misery is relative. Strolling happily through the Oxbridge quadrangles, and in the bustling corridors of less beautiful British universities, are 12,000 undergraduates from other European Union (EU) countries. Their home universities are in a still worse state: not only more overcrowded, but with barely a vestige of direct teaching. Oxford and Cambridge, more than other British universities, still offer undergraduate students close attention from a designated don.

The system is threadbare and arguably wasteful, especially as many students do little to prepare for their supervisions. But at least it happens. At France's best-known university, the Sorbonne, a translation seminar at the start of last term had 80 registered students. “Too many,” said the teacher superciliously. “Half of you have to leave. When we are down to 40 I'll start teaching. Foreigners will go first.”

In Germany, too, where professors enjoy the status of tenured civil servants, conditions are frequently dreadful. A current scandal is the Blockseminar - an ingenious system whereby an academic turns up briefly at the university and delivers an entire term's teaching in the space of a weekend, before returning to the unhurried pursuit of private knowledge.

Similar stories come from Spain and Italy, where universities are plagued by rigidity and corruption. Last year, students at Rome's Sapienza University were found to have paid up to €3,000 ($3,400) to pass their exams; and a professor at the University of Bari was arrested for demanding sexual favours in exchange for getting candidates onto the psychology course.

In effect, universities in these countries have become government-owned degree mills. Their aim is to get the greatest number of young people in and out for the least money and trouble. Really determined students may fight their way through to gain a professor's attention, win a research scholarship and start doing some real work, probably in postgraduate study. The others will arrive in the labour market, qualification in hand, feeling that their mostly middle-class parents have something to show for their taxes.

It is not all gloom and doom. Most countries have islands of excellence: German postgraduate engineering faculties, for example, or the French grandes ecoles, fiercely competitive and independent. Finland and Holland have largely managed to keep quality up and bureaucracy down. But for the most part, universities in the larger countries of continental Europe are a dreadful warning of the consequences of nationalisation.

No wonder, then, that British and European academics cast envious and wondering eyes at the American university system. It manages both quantity and quality: more than 60% of American high school graduates at least start some form of tertiary education. And it keeps standards high, too. The European Commission recently published a painstaking ranking of the world's best universities, compiled by researchers in Shanghai. Of the top 50, all but 15 were American. From Europe, only Oxford and Cambridge made it into the top 10; from other EU countries, no university ranks higher than 40.

The American system is not flawless. The diversity which makes the system so dynamic also leaves it vulnerable to abuse. In the humanities, intellectual fashion seems bizarrely distant from the real world. Many bad ideas - notably political correctness - started life as American campus fads. And budget pressures squeeze the system when times are tough. This year, the axe has fallen hard on California's public universities.

Yet for all that, the numbers going into American higher education continue to rise, and the average tuition fee in an American university is around $4,500 - some $1,000 less than the proposed maximum to be charged in England. Fees in the California state system, even after two steep recent rises compelled by leaner budgets, are less than $3,000, and a third of the income from them goes into grants for students who cannot afford even that.

Degrees of difference

Why does America succeed where Europe fails? The most important factor is diversity. American higher education is not just more varied, but has less of the crippling snobbery and resentment that accompanies variety in, say, Britain. At the bottom of the pyramid are community colleges, offering inexpensive, flexible, job-focused courses for millions of Americans each year. They are pretty basic, and Britons sniff at them. But the difference in mentality, says Martin Trow, an observer of both the British and American education systems, is that in America “something is seen as better than nothing”.

Crucially, too, the different bits of the system fit together. As Mr Trow points out, a student can start in a California community college, earn some credits, move on to state university and finish up taking a degree at Berkeley. Such a path would be inconceivable in most countries in Europe. In France, for example, the division between the state-funded, mass-market universities and the grandes ecoles is vast and jealously guarded. Britain's further-education colleges are the poorest relations of an already impoverished family.

American universities are also fiercely competitive: for talented staff and students, for donations, for results (though competition on fees at the top end, where tuition can cost tens of thousands of dollars a year, is yet to come). Fund-raising efforts at the best-organised universities start even before students have graduated. Star professors attract star salaries.

That contrasts with the two extremes across the Atlantic. In Britain, performance is so minutely measured by the state that it stultifies the efforts of the brilliant, without really rooting out the incompetent and lazy. State supervision, coupled with penury, gives universities the smell of a failing nationalised industry, rather than of world-class outfits devoted to the risky business of thinking original thoughts.

In much of continental Europe, the problem is that senior university staff are not scrutinised enough. The intention, to keep academic freedom sacrosanct, is admirable, but the cocoon has become a prison. German academics are all but forbidden by law from getting involved in business. The best motivators for academic excellence are money, recognition and team spirit. But the German system penalises success in the name of equality: a university that does too well in the eyes of the federal bureaucracy will have its funding cut. So great is the risk of entrenched mediocrity that the chancellor, Gerhard Schröder, has urged the creation of horrors - ten new elite universities.

A crucial part of competition is flexibility in setting fee income. Most European countries charge little or nothing. But fees have two beneficial effects. The first is that the university is beholden to nobody in its planning. Engineering and medicine are expensive to teach, so they cost more. Law is in high demand, so it is rationed by price at places like Harvard. But these are the university's own decisions. If it wants to teach something expensive, it can raise the money from fees, or from outside donors, or subsidise it from its endowment. It is not left, as Britain's academic managers are, wondering if it can squeeze money from the English department to keep the chemistry labs open.

Fees also mean that students are much more motivated. Underpriced goods and services are usually wasted, and university education is no exception. In a new book*, Robert Stevens, an academic who has run colleges in both America and Britain, writes of “an alcoholic yobbish culture” among students, for whom university is principally “a rite of passage”, like national service in the army, rather than an education. When Austria introduced a modest tuition fee of €363 per term in 2001, the number of students enrolled dropped by a fifth. Many, it seemed, were signing up simply for benefits such as health insurance.

But fees will also make students more powerful customers. Teaching at American universities is much better presented than in most European ones. Visiting American students are often startled to attend lectures with no visual aids, out-of-date hand-outs and droning, inaudible speakers. Such complacency will not long survive when customers have a choice.

The last big issue is selection. In most of continental Europe, this is a taboo. Access is either entirely open to anyone who has passed the school-leaving exam, or, at most, is rationed according to the marks gained. Universities, in effect, have to take the students the government sends them.

That sounds good, but works badly. The advantage of university-based admissions is that academics end up choosing the people they really want to teach. Students are more likely to focus on the course they want to study, and to try to meet the university's specific requirements.

Dream on, spires

American universities, with their mighty reserves of talent and money, look well placed to compete with the world's new academic powerhouses in India and China (which last year alone produced 2m graduates). How can sleepy Europe and timid Britain even hope to keep up?

The best hopes are in the piecemeal changes that are already happening. Students, for example, are voting with their feet. Britain's Open University, which offers part-time courses by post and e-mail, says that young people of university age are its fastest-growing bunch of students, up nearly 5% this year. That suggests that the disadvantages of a dumbed-down full-time undergraduate course, with the attendant debts and time spent not earning, are beginning to bite.

Employers too are signalling that there are too many graduates with indifferent qualifications. With luck, the British government's ill-starred 50% target may turn from its original force-feeding of the universities to a harmless exhortation that people should do something educational at some point after they leave school.

The days of social engineering may also be drawing to a close. The British government's proposed “access regulator”, an official body originally designed to force the top universities to take fewer students from fee-paying schools and more from poor backgrounds, seems unlikely now to penalise anyone. Just as well. Harvard and Stanford are both shopping for talent at Britain's top private schools, where pupils have been deterred from studying in Britain by official contempt for their class.

New institutions have sprung up, too. In Germany, the city-state of Bremen has set up an independent private university in conjunction with Rice University of Texas. “We wanted to be able to select students, to charge tuition fees, to have excellent and competent professors, to teach in small groups and in decent working conditions,” says Fritz Schaumann, its director.

Five years after its foundation, the International University of Bremen has 500 students, who contribute just over €3.5m in fees. It raises a further €20m a year from endowment income and donations. Other German universities at first regarded the newcomer with great suspicion. Now they are co-operating, for example in joint research programmes. Eventually, says Mr Schaumann, they will have to adopt a similar model.

Old institutions are also behaving in new ways. Britain's London School of Economics (LSE), for example, has largely escaped from the state's clutches. It now gains most of its income by selling courses to students from outside the EU, whom it can charge market fees. With that money, it can afford to hire world-class staff. “This is the only way we can compete with American academic salaries,” says Sir Howard Davies, the LSE's director.

For Britain's best universities, the big question now is whether to wait for more denationalisation, or to move towards freedom on their own initiative. For Europe's universities, the question is whether they can stop talking about reform and actually introduce some. Meanwhile, America's universities, hugely wealthier, happier and brainier, march remorselessly on.

* “University to Uni: The politics of higher education in England since 1944”. Robert Stevens, Politico's, £15.99

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