Issues for Higher Education - Government Handling of Universities and Funding Issues
Issues for Higher Education
Overview
The Government will publish a strategy document early in the New Year setting out its vision for higher education. Secretary of State for Education and Skills, Charles Clarke, has made it clear that he is keen to stimulate debate about the range of issues affecting the future of higher education. As a contribution to the debate, he has published a series of issues papers on some of the most important challenges facing higher education in the UK. These include research, access, teaching, and the freedom and accountability of the higher education sector.
INTRODUCTION
Our universities have long enjoyed an enviable international reputation as being among the best in the world. With over two million students across the UK including 220,000 from overseas, their teaching and research at its best is of world-class standard.
But there are also real challenges. Universities have taken on many more students in recent decades. Student numbers in Britain grew from 340,000 in 1962 to over two million last year. Half of that expansion took place during the nineties, when universities were expected to fund the extra students partly through efficiency savings.
By 2003-04, publicly planned spending on Higher Education will have risen by 15.6% after inflation compared to 1997, following years of continual decline. Student numbers have grown too. There were ten per cent more UK students in 2001/2 than in 1996/7 and a further increase is predicted in this academic year.
Following the National Committee of Inquiry into Higher Education report in 1997 (the Dearing review), the Government asked students to contribute to their tuition fees - a contribution now worth £1100 a year. This is paid on a means-tested basis, with poorer students exempted and those on middle incomes making a partial contribution. Yet the taxpayer still pays around 90 per cent of all university tuition costs. From the early 1990s, the student maintenance grant was gradually replaced by student loans. The maximum loan is now £3,905 outside London, with higher loans available to those from poorer families.
While this Government has halted the decline in university funding and begun to lift controls on numbers so that Universities continue to expand, many argue that more radical change is needed to address three key challenges facing higher education today:
* The first challenge is to enable our universities to have the funding they need to provide high quality teaching and research, and to allow our best universities to continue to hold their own against the best in the world. That requires significant extra investment.
* The second challenge is to enable more able students from poorer backgrounds to go to university. Tuition fees and loans have not reduced working class numbers compared to middle class students. But the child of a professional is still four times as likely to get the chance to study for a degree as the child of unskilled or semi-skilled parents.
* And the third is an economic challenge. In today's globally competitive world, the country needs more people educated to a higher standard than ever before. The Government has set a target of fifty per cent of those aged 18 to 30 experiencing higher education, compared with over 40 per cent now.
These key challenges raise fundamental questions about higher education - not just about the funding of the sector, but also about the pattern of provision, about freedom and accountability, and about fairness and standards. These papers look at these important and difficult questions, to stimulate a wider debate around the full range of issues which our HE strategy will address.
. Research
Key Facts
* Britain has produced 44 Nobel Prize winners in the last 50 years.
* There are over 300,000 postgraduate students at English universities, a quarter from overseas.
* The UK does well on international research league tables. With 1 per cent of the world's population, British research has over 9 per cent of citations in the world's scientific publications - showing the influence that it has on other researchers.
Do good research and good teaching go together?
Research funding is distributed through the Higher Education Funding Council for England (HEFCE) and the Office for Science and Technology (OST), and its research councils. HEFCE distributes almost £1bn for research, with the rest of its funding - over £3bn - going to Universities for teaching and learning.
HEFCE Research funding is selectively allocated on the basis of the Research Assessment Exercise that has taken place in 1992, 1996 and 2001. The 2001 RAE found 55 per cent of research-active staff now work in highly-rated departments (the top two categories) compared with 31 per cent in 1996.
Russell Group universities get 63 per cent of the funding - with much of that going to the four top-rated research Universities (Cambridge, Imperial College, Oxford, and University College London). Whereas many students choose their university on the basis of the quality of its research as much as teaching reputation, newer universities increasingly sell themselves on the basis of their teaching quality and reputation.
Of 80,435 full time posts in Universities1, 84 per cent do both teaching and research. Some argue that this lack of specialisation means that our best researchers can't focus enough of their energies on research, or our best University teachers on teaching.
This distinction between research and teaching has always been recognised much more in the US, where only a fifth of degree-awarding HE institutions2 award a research doctorate, compared to over 90% in this country. In some US institutions, there are many more academics who do not teach than is usual in the UK.
Should we enable more of the best researchers to focus on research, and develop a more professional teaching force for Universities, specialising in teaching? Will pressure for such distinctions grow if universities spend more on hiring top researchers?
What about institutions with different focuses? Should some specialise in teaching, and others in research - perhaps developing more graduate schools? Should institutions group together to play to their strengths?
Do we need better measures for helping students understand the quality of teaching in different institutions?
Government Funding of Research
One study estimated that every £1 spent on research and development is worth £1.80 to the economy, compared to only £1.42 in the US and £1.50 in Germany.3
The Higher Education Funding Council for England (HEFCE) allocated £940 million for research in 2002-3. While this was a 5.9 per cent increase over 2001-2, it came after a large increase in the number of top-rated research departments. So the money was spread more thinly, with funding levels reduced for the lower ratings.
The latest spending review announced the largest sustained growth in science expenditure for a decade - £1.25bn extra a year by 2005-06. It also made changes to make sure that the costs of research were fully-funded - making better provision for overheads and infrastructure costs.
Because research funding is distributed according to quality, there are big differences between different universities. Oxford and Cambridge can expect to receive over £100 million each per year from HEFCE and the OST research councils. But many of the newer universities receive significantly less than £1 million.
Research charities and industry provide a further £800 million for higher education research each year. Industry supports £11 billion worth of research and development within its own structures, but its annual contribution has fallen in recent years as a proportion of GDP. A higher proportion of basic research is done in Universities in the UK than in many other countries, where more is done in private laboratories.
US universities like Harvard and Yale also enjoy substantial endowments, not replicated in Britain. London's Imperial College has an endowment of £49 million but Harvard enjoys a £12 billion endowment. Endowments and investments make up less than three per cent of British university income (though there are big variations between different Universities).
Is our current level of investment sufficient to enable Britain to remain globally competitive?
As well as funding the best research, are we doing enough to support emerging departments and areas of study, so that innovation and new talent can flourish?
Should every university be funded to do research - or should we emulate America where only a minority of universities offer postgraduate research studies?
Is the balance right between research with an obvious benefit to society and the economy, and research aimed at discovering new ideas?
Do business and students contribute enough to research costs - and if they contributed more, how would this affect the nature of research?
What more should we do to encourage the build-up of endowments in our universities?
2. Capital infrastructure
Key Facts
* Higher Education Institutions have a capital stock valued at £26 billion for buildings, and a further £8 billion for equipment
* Universities received just over £300 ...
This is a preview of the whole essay
Is the balance right between research with an obvious benefit to society and the economy, and research aimed at discovering new ideas?
Do business and students contribute enough to research costs - and if they contributed more, how would this affect the nature of research?
What more should we do to encourage the build-up of endowments in our universities?
2. Capital infrastructure
Key Facts
* Higher Education Institutions have a capital stock valued at £26 billion for buildings, and a further £8 billion for equipment
* Universities received just over £300 million for 2002/3 in earmarked capital funding from HEFCE; their block grant may also be used to fund capital.
* The latest Spending Review established a permanent stream of capital for science research infrastructure in universities, worth £500m per year by 2004-05, replacing the temporary SRIF and JIF infrastructure funds.
* There is an estimated £4.7 billion backlog in university teaching infrastructure needs - buildings, equipment and libraries.
What are the pressures?
While many think of the historic nature of many British universities, half of their current infrastructure was built to low inflexible specifications in the sixties and early seventies. It is nearing the end of its design life.
Universities suffered from a dearth of capital investment from the seventies to the nineties. HEFCE reckons that 4.7 million square metres of buildings constructed between 1962 and 1975 are in poor condition. Bringing these buildings up to scratch would cost £1.7 billion alone.
Poor facilities don't just make it tougher for students to learn effectively; they make it harder for universities to attract the best researchers and lecturers. And where research equipment or libraries are out-of-date, they can affect the quality of research as well.
Yet university infrastructure is increasingly costly. Computerisation, new subjects and increasingly complex scientific equipment push up costs. In some areas of 'big science', where the infrastructure is particularly large and expensive (for example, the CERN ring or the biggest telescopes, where it would be wholly impractical for every University to try to have their own) new models have emerged where resources are shared internationally by researchers.
In the traditional universities, there have also been issues about strategic estate management. Although most Universities are now addressing this issue, priority has not been given to commercial property and investment skills, and matters have too frequently been left in the hands of academics.
As equipment becomes increasingly complex, does this strengthen the case for the greater concentration of research infrastructure?
Could there be greater pooling between universities to share support services? What about making more efficient use of duplicated or underused building, as well as large scale research equipment?
Who should pay?
The HEFCE and OST are responsible for controlling and assigning funding for university facilities and infrastructure, but Universities can also use their block grant for capital projects. There are also 13 existing Private Finance Initiative projects worth £290m in higher education, and three prospective projects worth £88 million.
Historically, there have been issues about whether the way research is funded, both by government and by the private and voluntary sector, really reflects the true costs of research - and in particular overheads and infrastructure costs. Changes introduced in the most recent spending review altered the way funding was calculated to address this issue.
But Universities also have their own capital assets, and many other sources of investment - public funding makes up a small proportion of investment overall, because HEIs are private institutions (unlike, for example, schools) and they are free to borrow, solicit gifts, or save up to invest.
A study by JM Consulting has shown that of £4 billion in capital funds made available to Higher Education over the past twelve years, just over 35% was available for teaching, notwithstanding the fact that 60% of infrastructure costs are teaching-related. Of the £7.8 billion investment backlog identified by JM Consulting, £4.7 billion relates to teaching and learning compared to £3.1 billion for research.
Do Universities give enough priority to funding infrastructure? Is it right to give Universities the choice about how much funding to devote to infrastructure? Are Universities using their assets as well as they should be to fund infrastructure improvement, or do they rely too much on Government?
In reducing the funding backlog, should the priority be on improving the worst estates or funding the ones that will bring the most benefit to the economy and society? How do we strike the right balance?
Do we need more incentives for private gifts and endowments to help fund infrastructure, or does that distort what Universities can use their funding for too much?
If private funders make a greater contribution to infrastructure costs (either associated with research or otherwise), might that limit the uses that can be made of those facilities? Does that matter?
3. Access and Expansion
Key Facts
* The proportion of young people going to university to study full time has increased from 1 in 8 in 1980 to 1 in 3 in 2000.
* The son or daughter of a professional is still four times as likely to get to university as a child from a working class home.
* 41.5% of those aged 18-30 enter higher education at present. The Government target is to increase that proportion to 50% by 2010.
Expansion
Like those in many industrialised economies, our universities have expanded rapidly in recent decades. Whereas a university education was once an aspiration for a small minority of students, it is now accepted that a third of young people will go to university and many more adults will gain a degree in their twenties or later.
This expansion has been pushed by economic demand and rising aspirations. A graduate can expect to earn 64 per cent more than somebody without a degree. And even allowing for time out to study, and other costs, the OECD concluded that the personal rate of return for male British graduates is 17% (15% for women), higher than many other industrialised nations.
The relative return to graduates as opposed to non-graduates, in terms of higher earnings, has rise in recent decades in spite of the huge increase in the number of students. So there is no good reason to believe that expansion of university opportunities has been too rapid or that the current level of participation should be artificially capped. On the contrary, almost every developed country is expanding university participation, and some have higher levels of participation, and more ambitious targets, than the UK.
Moreover, many employers value graduates from disciplines not directly related to the job. And at a national level, it is estimated that an increase in those with higher education spurs faster economic growth.
Although the latest graduate recruitment survey suggests that 35% of early post-graduate jobs don't require a degree, graduates are twice as likely to be promoted within their companies as non-graduates.
But some employers argue that too many graduates lack the skills needed to work in modern business environments. Others argue that university and A level standards have been reduced because of the undergraduate expansion. And employers also say they want more graduates with different types of degree - work-related degrees and sub-degree qualifications like HNDs and Foundation Degrees.
Will the demand for graduates (and the graduate premium) hold up through further expansion? How can we make sure that standards are maintained whilst the sector expands?
To what extent should any future expansion focus on applied and sub-degree programmes like foundation degrees, rather than traditional 3-year honours degrees? Will this simply draw from the same skills pool as other programmes?
Fair Access
The son or daughter of a professional is still four times as likely to get to university as a child from a working class home. Contrary to some suggestions, the proportion from the poorest groups has not fallen since fees were introduced and grants abolished, but it has not significantly increased either.
OECD research shows that a key factor in closing the social gap is good quality secondary education, and especially increasing participation and achievement after the age of 16. Only 25 per cent of 19 year olds from unskilled manual backgrounds had an A-level equivalent qualification compared with 65 per cent of those from professional or managerial backgrounds4, which shows that a large part of the gap in University entry is the result of earlier differences in results.
However, students from state schools with 3 A grades at A level are still significantly under-represented in leading universities compared to those from private schools with the same grades.
Some universities like Bristol give pupils from poorly achieving state schools offers by assessing potential as well as results. They argue that these students can outperform their peers. Others, particularly in the independent sector, see this as unfair discrimination.
Loans fully replaced maintenance grants for most students in 1999, but students from families with an income below £20,480 a year don't pay fees at all. A range of initiatives has been introduced to improve access, including opportunity bursaries and the Aim Higher programme. Universities also receive a 'postcode premium' from HEFCE to cover the cost of educating students from non-traditional backgrounds.
How much does the access problem lie in students' prior attainment at school or college or their own aspirations? Why are some Universities better than others at attracting a more representative range of students?
How significant is student maintenance funding in helping to solve access problems, given that universities were still middle-class when grants existed?
What are the best ways of closing the social gap while safeguarding the principle of admission on the basis of merit?
4. Independence at 18 and investment in the future
Key Facts
* 80 per cent of all students study away from home and can receive a subsidised loan to help them do so
* Young students spend 38 per cent of their income on rent, food and bills and 31 per cent on entertainment.
* In most respects, the law treats 18 year olds as independent. The exceptions are higher education, driving a heavy lorry or having an air weapon in a public place.
Adulthood
8-year olds are treated as independent adults in law in most respects. They can vote, pay taxes, drive a car, drink alcohol, get married without parental permission and borrow money.
Yet as a third of 18-21 year olds go to university, they remain dependent on their parents for assessing HE support. Their parental income is assessed to decide whether they should pay fees or get a larger loan.
But the maintenance system also makes an assumption that most students will want to live away from home when they attend university. With grants they didn't have to pay those costs back. Even with loans, they can borrow the money without paying any interest back.5 And 80 per cent of students live away from home.
A 19 year old who started on apprenticeship pay or in a low paid job would not have their rent covered. Students in other countries are much more likely to continue living with their parents until they graduate.
We treat 18 year olds as adults in most aspects of their lives. But for HE they are treated as dependents and we assume their parents will fund them. Is this the best approach?
If we don't take family circumstances into account, doesn't the state either end up subsidising the people that need it least, or failing to provide support for those that need it most?
Does the focus of our current student finance system on a student's parental income rather than their own later earnings discourage students from thinking about a degree as a long-term investment?
Independent choices to invest in the future
Buying a new house or new car costs money. Young people think nothing about borrowing the funds or beginning a mortgage. According to the Right of Admission Reserved Study in 2002 half of young people accepted that they would be in debt for most of their life.
One in four graduating students funds their social life on a credit card. Students spend 51% of their income on essentials and 49% on what could reasonably be called non-essentials.
And the Student Income and Expenditure Survey found that while students spent £2750 on essentials (rent, food, books, travel) in 1998-9 compared with £2905 three years earlier6, spending on non-essentials (mainly entertainment) grew from £2125 to £2653 in the same period.
It also found that most students boosted their income with a part-time job. Nearly two thirds of full-time students worked during the academic year while 82% worked over the summer holidays.
Student loan repayments have been linked to earnings since 1998 and attract no interest. This represents a substantial subsidy by the government, equal to about 40% of the value of the loan in terms of interest foregone. Yet student loans are still presented as a debt on a par with more expensive liabilities like commercial loans and credit card debt. This may lead to some reluctance among young people to see a university education as an investment in the future. Yet 86% of full-time students said they expected to benefit financially from going to university.
Why are young people reluctant to invest in their own future, given the benefits which a university education can bring?
If it is a question of risk, how can we make the benefits clearer and help them to make well-informed, independent choices? Are poorer students more reluctant to take out loans?
Is this made more or less difficult by the fact that at present the price tag for every HE course is the same, but the benefits can be very different?
Should paid work experience be accepted as a fact of life - and be better structured - or does it mean students can't focus on their studies?
5. Human Resources and Human Capital
* UK universities employ 116,405 full time equivalent staff.
* Of 80,435 full time posts (funded by HE institutions, HEFCE and fees), 84 per cent do both teaching and research.
* An average American professor at a top University can expect to earn $150,000 a year, about twice the salary of his or her British counterpart
Pay and Professionalisation
A qualified graduate school teacher with a one year PGCE can expect to start in inner London now on £20,700. This is not much less than a lecturer, given that they are likely to have a three year research degree, who might expect as little as £24,325 as a starting salary, if appointed on the bottom of the pay scale. The teacher's salary includes an inner London weighting of £3,105 compared to £2,134 for lecturers. The pay scale for a 'senior lecturer' ranges from £25,708 to £34,191, with even the maximum being only slightly higher than a senior teacher can expect.7
A survey of how lecturers use their time (conducted by the AUT in 1994) suggested that during term, they worked a 54.8 hour week, which the union maintained included 18 hours of administrative time. This is not dissimilar to the term-time working pattern of school teachers.
A HEFCE study found that staff numbers grew by 6.5 per cent between 1995 and 2000, but there were fewer lecturers and more professors. Staff are older too, with 41 per cent over 50. And women now make up 31 per cent of academic staff, a proportion set to increase. The study said annual recruitment rates would need to grow substantially if staff numbers were to increase.
Universities UK maintains that HE salary costs rose by over 21% since 1996. Some leading universities fear that their best lecturers are being enticed overseas, notably to the United States, by higher salaries, which can be over twice as high for those professorships. Yet the Office for National Statistics reports that more scientific professionals entered the UK in 2000 than left the country - a net gain of 4,700.
The Institute for Learning and Teaching in HE has had just under 17,000 applications since being set up in 1999, less than a quarter of all non-clinical teaching staff employed by universities. Unlike the General Teaching Council for school teachers, membership is voluntary.
Can UK Universities pay enough to attract the best staff? Does pay properly reflect performance? If pay was even better differentiated would it be easier for universities to attract the best people?
Do universities have the right career structures to promote the brightest academics quickly? Are lecturers properly prepared for teaching?
Does the time currently spent on administrative tasks represent value for money for the University and the taxpayer?
Different roles
In many ways, university staffing structures look little different from how they always have. Most academics are expected to combine teaching with research. Only where research projects are specifically funded does this pattern change significantly.
Insights gained from research can make lectures more interesting. And the best lecturers are often those who have written extensively on a subject. However, this doesn't always follow. Without good communication skills, a dedicated and successful researcher may equally deliver an uninteresting lecturer.
There's another issue too. In this industry with a turnover of £12bn that is a hub of national and regional development, a high premium should be places on excellent financial management. By and large the days of Universities using untrained academics in roles - like those of estate manager or bursar - that really need specialist expertise are gone. But there have been a number of mergers - especially involving smaller institutions - as a result of poor financial management.
Universities, as large employers, must also take human resources seriously across the board, and manage and develop all their staff well.
Meanwhile the staff: student ratio declined from 1:9 in 1980 to 1:17 in 1998, as unit funding fell while student numbers expanded.8
Could Universities do more to deploy, manage and develop people with the right skills for different jobs? Do they take human resources issues seriously enough, and get the best from all their staff? Do HE managers need different skills than managers in the private sector?
What can we do to encourage more flexible use of people and interchange of staff between Universities, industry and the public service?
Are the ratios of support staff to academics right? How do technology and the changing profile of students affect staffing roles in universities?
How much do staff: student ratios matter at universities, given that most subjects mix large lectures with smaller tutorials? Does the change in the staff:student ratio represent better value for money or a decline in standards?
6. Freedom and accountability
Key Facts
* Universities are audited by HEFCE for five days every five years.
* The Quality Assurance Agency has shifted away from inspection towards internal audit, except where there are concerns about performance.
* The research assessment exercise (RAE) is being reviewed to eliminate unnecessary bureaucracy and deliver better value for money.
Freedom from and accountability to Government
Universities have often expressed concerns about excessive bureaucracy from Government bodies which they say increases their administrative burden. The QAA's teaching inspection regime was a particular focus of discontent. The RAE commands more widespread confidence, but was nevertheless also identified by the Better Regulation Task Force as a cause of some unnecessary bureaucracy in HE.
As a result of such complaints, there have been considerable changes in the audit systems for universities. The teaching inspection burden has been radically reduced. Rather than inspecting every University department, quality assurance will now rely on universities' internal audit procedures, and focus more detailed inspections only where there are problems.
HEFCE has reduced the need for bidding and is working more closely with OST to avoid duplication of effort. Its own institutional audits now take place every five years, rather than every three, concentrating more on those in financial risk. Performance Indicators are published annually by HEFCE, which is also reviewing research assessment, including the RAE.
Permission to award degrees (and become a university) rests with the Privy Council. Fees are effectively regulated by government, with a maximum set for all HEFCE funded universities. If they exceed this fee, universities lose HEFCE grant. Only a handful of universities, such as the University of Buckingham, are run privately. Furthermore, some funding is allocated to achieve particular purposes, for example money linked to human resources strategies which must be used to help recruit, retain, reward and develop staff.
Does freedom for institutions have a value in and of itself? Given that the taxpayer provides almost half of all University funding, what say should government have over issues like fees or access?
How do we measure standards of education and financial probity in universities? Is there too much or too little accountability to students and taxpayers? How can we balance freedom and accountability?
Could the idea of 'earned autonomy' work in HE to free successful Universities from restrictions without losing all accountability?
Accountability to students and the wider community
With over 2 million students, universities have many 'customers' who want to be sure they are getting the best teaching and facilities. Many now pay fees (or have them paid by parents) and expect value for money. Most universities have students on their governing body, often the student union president. And most now ask students what they think about the quality of their courses and lectures, though the way they use this information varies a great deal.
While universities have developed links with industry, and these are valued, local employers sometimes have a different perspective and are less aware of these links. Structured work experience is much better developed and organised in some Universities and some Departments than others. Those that do not do this well make it harder for their graduates to find work afterwards, and don't deliver the skills employers require.
Is there more that universities could do to listen to their students? Are the existing quality measures sufficiently robust to enable them to choose between courses?
To what extent to universities meet the needs of employers - and enable graduates to have the skills employers are seeking?
Should Universities build better a closer links with schools - perhaps through student volunteering, or through academics working in a certain subject supporting teachers in that subject?
Management and Governance
While universities argue for more independence, there are in fact fewer requirements and controls operating on the way they are governed than on a private company under the DTI's corporate governance requirements. Some universities are moving closer to a corporate governance model, but others have governance systems with elements that stretch back to medieval times.
Institutions are expected to have effective review by lay members, clear management control policies, proper financial and operational control systems and procedures; and an effective internal audit function.
Are Universities sufficiently good at managing and governing themselves to take on more freedom?
Do they have to little - or too much - freedom over audit issues? Can we be sure that the taxpayer's £5bn is being well-spent?
7. Funding and Finance
Key Facts
* Just over half of all students or their families contribute to tuition fees
* The taxpayer still pays around 90 per cent of the cost of all tuition
* Having a degree increases the lifetime salary expectation of a graduate by an average of £400,000.
Who should pay for HE teaching?
Since 1998, students have had to contribute towards the cost of their tuition, provided that their family's income is in excess of a threshold which currently stands at £20,480.
That £1,100 fee represents only around a quarter of the real cost of tuition at most universities. And because poorer students pay no contribution, the taxpayer is still funding around 90 per cent of tuition costs.
Yet a graduate earns a lot more from their university experience. The average graduate earnings premium is £400,000 during their lifetime compared with the national average.9
And the average graduate starting salary of £18,252 is over £4,000 higher than that for non-graduates. However employability varies between sectors, and with the state of the economy. The latest graduate recruitment survey shows that engineers and accountants are better placed to find work than IT graduates.
Many full-time students rely on their parents to pay fees. And of their average £4924 income in 1998/9, £1395 (or 28%) came from family and friends, over £2324 (47%) from loans, grants or access funds and just £710 (14%) from paid work.10
Employers contribute indirectly to the costs of Higher Education, both through the salaries of the graduates they employ, and through national insurance contributions (which are higher on average for graduates, because of their higher salaries). In addition, some employers pay the fees of the graduates they employ (for example, law firms), or pay off their loans (as government does for teachers).
Each year approximately 10 percent of Princeton University's overall budget for educational and general expenses is raised through Annual Giving. In 1999-2000, Annual Giving produced a record $35.7 million in unrestricted funds, with 60.8 percent of all undergraduate alumni participating. Durham University's Annual Giving Programme, which has grown considerably in recent years, has only raised a total of just over £1.5 million since 1997.
Who should pay tuition costs? How much should taxpayers contribute? What proportion should come from students and parents? Should employers contribute? Should alumni be encouraged to give more?
Who derives the most benefit? The nation as a whole benefits from having well-educated graduates, but graduates and their employers get a disproportionate personal benefit - where does the right balance lie?
Paying for what you get
An engineering degree course at Oxford University costs overseas students £9975 a year (plus £2500 college fees). But an arts degree in a newer university would cost less than £4000. Yet where home students contribute, they pay £1,100 a year (or a fixed proportion of that sum) for both courses. The taxpayer makes up the difference.
In Scotland, graduates contribute £2000 to the Scottish Graduate Endowment after finishing university. This was introduced for those entering university in the 2001/2 academic year, and although some types of student don't pay - for example, part time and mature students - there isn't any means testing, so even the poorest are asked to pay the endowment. The sum can be paid as a once-off payment or through the student loan scheme.
Some argue that universities should be able to charge a market rate for courses, or that they should be able to charge more for an engineering or medicine degree course than an arts course. They point out that this is the norm in most other walks of life, and suggest that choice might help to drive up quality.
Others argue that by charging a single rate for different courses in different universities, students will choose the right course for them regardless of its cost. They fear that differential fees might lead to students taking the second best option. They also question whether students' choices would be well-informed enough to drive quality up.
Is it right that every course should cost the same when the benefits can be so different? Some courses may only marginally increase average earnings, whereas others promise a substantial boost to earnings?
Should those who put something back into their communities, by working for example in the public sector, pay the same as where the main benefits are seen by the individual and private employers?
When should fees be paid - up front as in England and Wales or after graduation as in Scotland? If fees were higher, how might an endowment or other graduate repayment scheme work - and how would universities receive the necessary funds in the interim?
Should universities have their own bursary and scholarship schemes to help poorer students - how should the balance be borne by the taxpayer and institutions?
Would differential fees produce more discerning customers - and create a vibrant market in HE - or would many students settle for cheaper courses of a lower standard?
8. Higher Education in the Economy and the Regions
Key Facts
* UK universities generated over 562,000 jobs in 1999/2000 directly or indirectly.
* Industry collaboration with universities, and use of university research, has grown in real terms from £135m in 1988-9 to £242m in 1999-2000 - an increase of 79%.
* Overseas students contribute an estimated £1.3 billion a year to the UK economy additional to their university course fees.
* One study estimated that every £1 spent on research and development is worth £1.80 to the economy, compared to only £1.42 in the US and £1.50 in Germany.11
What should we want HE to contribute to the economy?
The relationship between higher education and the economy often leads to heated debates. While many vacancies are open to graduates of any discipline, some like the Institute of Directors argue that there are too many graduates and too few skilled workers.
Yet the world increasingly demands people with higher level skills than before. Other European countries and the United States already have more graduates than England. The economic return to graduates from having a degree remains substantial.
But the demand is also more specific. IT graduates seem less in demand at the moment, after the problems with technology industries. But other scientific and engineering graduates remain in short supply.
The turnover of UK higher education institutions is over £11 billion. Taking into account the direct effect on related economic activity, the final impact is over £40 billion, including overseas income of £1.8 billion.
There are also fears that a business-driven agenda could devalue study for its own sake and place a premium on research with economic returns over that which may simply have social benefits.
Who should drive the links between business and HE? Or can it be a wholly equal relationship?
How do we make sure HE services employers' needs better while safeguarding research which might lead to new discoveries or real long-term social benefits?
How do we protect the independence and integrity of universities if they have to rely on business increasingly for sponsorship?
Employability
Some degrees offer better job prospects than others, despite the generic demand from some employers for graduates. And some university courses include significant work experience with their studies with placements that often lead on to longer term employment.
The National Committee of Inquiry into Higher Education in 1997 concluded that employers welcomed the thinking, learning and technical skills of graduates, but criticised their applied skills and felt they had unrealistic expectations. One in four employers also said that many graduates had poor communication skills.
However, PriceWaterhouseCoopers found that small and medium sized employers were often too specific about the skills and experience they expected from graduates, without recognising their long-term potential.
New two year foundation degrees are developing as an important route to higher technician qualifications. They are specifically intended to provide the higher-level skills which employers have said are in short supply. But although employers say that they want more skills of this kind, the labour market premium is still much higher for traditional three-year honours degrees - and students are still choosing these over sub-degree programmes.
Is there a clear picture of what employers want and need from graduates?
How can we best use foundation degrees and other sub-degree programmes like HNDs and HNCs to address higher level skills shortages?
Do universities do enough to prepare students for the world of work?
Regional policy and regional engagement
In the regions, having a university is seen as an important part of an area's economic regeneration. The lobby for the Combined Universities in Cornwall was a clear example of this. But the relationship can work in two ways: universities can simply serve their regions, both economically and socially, or they can be the driving force for change.
Posts funded by HE institutions, HEFCE and fees.
2 Those awarding degrees at at least bachelor's level
3 How important is business R&D for economic growth and should the government subsidise it? Griffith, R. (2000) Institute for Fiscal Studies
4 Youth Cohort Study
5 In real terms - interest is charged at the rate of inflation
6 At 1998/9 prices
7 Note that these are figures from the pay scales, and different Universities use them very differently - for example, in some Universities no lecturer starts at the bottom of the scale.
8 Greenaway and Haynes (Nottingham 2000)
9 Taylor Nelson Sofres
0 The balance is made up of social security benefits, other grants and other income.
1 How important is business R&D for economic growth and should the government subsidise it? Griffith, R. (2000) Institute for Fiscal Studies