independent study into the devolution of the student support
TRANSCRIPT
Independent Study into the Devolution of the Student SupportSystem and Tuition Fee Regime
A Review of Research on Student Support Systems andTuition Fee Regimes, with a special focus on Wales
Dean Stroud, Chris Taylor and Claire Smetherham
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Foreword
The Independent Study into the Devolution of the Student Support System andTuition Fee Regime to Wales (the Rees Review) was set up by Ms JaneDavidson, the Welsh Assembly Government Minister for Education andLifelong Learning to inform decisions being made by the Assembly and theHigher education Funding Council for Wales on policy towards the financing ofhigher education, in particular on variable fees and student support. This is inthe context of devolution of more responsibility for these matters to theNational Assembly for Wales in the Higher education Act, which was givenroyal assent in July 2004.
This review of literature on student support systems and tuition fee regimeswas commissioned in the summer of 2004, so that when the review groupbegan its work in July of that year, members were able to get to grips with themain research findings as quickly as possible. Since then further items ofinterest have been published, or have been identified by group members: theyare included in a separate list at the end.
Members of the study team are most grateful to Dean Stroud, Chris Taylor andClaire Smetherham for drawing this material together to inform ourdeliberations.
Professor Teresa Rees CBE
Chair, Independent Study into the Devolution of the Student Support Systemand Tuition Fee Regime to Wales
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Contents
Figures and Tables 4
List of Abbreviations 5
Summary 6
I. Introduction 10II. Background to the Higher education Act 12III. A Profile of Higher education Funding in the UK and International
Comparisons 15IIIa Systems of Student Support and Tuition Fee Regimes in the
United Kingdom 17
IIIb Mechanisms of HE Financing in the UK & Wales 29
IIIc International Comparisons 34
International Comparisons of Public Expenditure 34
International Comparisons of Tuition Fee & Student Support
Arrangements 35
IV. Higher education Participation, Expansion & Widening Access 39IVa Higher education Expansion and Participation in the UK
and Wales 40
IVb Widening Access to Higher education 44
V. The Student Experience 47Va The Cost of Being a Student 48
Vb Student Debt 49
Vc The Consequences of Student Debt 54
VI. The Graduate Premium 55VIa Graduate Earnings 56
VIb The Demand for Graduate Skills and Graduate ‘Over-
Qualification’ 66
VII. The Future Financing of Higher education 69VIII. Conclusions 75IX. Bibliography 80
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Figures and Tables
Figure 1 Average Annual Gross Earnings of 1995 Graduates by Gender 59
Table 1 Tuition Fee Contribution by Dependent and Independent Status,
2002/03 20
Table 2 ALG Allowances by Mode and Residual Income Level 2003/04 21
Table 3 Income of Higher education Institutions by Source 2001/02 32
Table 4 Number of students by institution 2002/03 43
Table 5 Cross-boundary flows for full-time/sandwich HE undergraduatestudent enrolment, 2001/02 43
Table 6 Widening Access Indicators for Wales and UK 46
Table 7 Students’ debt by socio-economic characteristics 50
Table 8 Students’ debt by institutional characteristics 51
Table 9 Average Annual Income of Respondents by Degree Class
(1997 Cohort) 60
Table 10 Average Annual Income of Respondents with Firsts by Gender
(2001 cohort) 61
Table 11 Average Annual Income of Respondents with Firsts by Gender
(1997 cohort) 62
Table 12 Whether a degree was a formal entry requirement by degree class(1997 cohort) 65
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List of Abbreviations
ALG Assembly Learning Grant
API Age Participation Index
DfES Department for Education and Skills
ELWa Education and Learning Wales
EU European Union
FE Further Education
FCF Financial Contingency Fund
GCS Graduate Contribution Scheme
GDP Gross Domestic Product
GES Graduate Endowment Scheme
HE Higher education
HECS Higher education Contribution Scheme
HEFC Higher education Funding Councils
HEFCE Higher education Funding Council for England
HEFCW Higher education Funding Council for Wales
HEI Higher education Institution
HESA Higher education Statistics Agency
HEW Higher education Wales
IER Initial Entry Rate
IIGSHAF Independent Investigation Group on Student Hardship and
Funding
ILA Individual Learning Account
LEA Local Education Authority
LFS Labour Force Survey
NPA National Participation Rates
NUS National Union of Students
OECD Organisation for Economic Co-operation and Development
SLC Student Loans Company
WAG Welsh Assembly Government
UK United Kingdom
USDA University of Dundee Students’ Association
UWCM University of Wales College of Medicine
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Summary
The Higher education Act 2004 introduces new tuition fee and student supportarrangements. Further, the Act makes provision for the transfer of functions toWales with regard to student support and tuition fee powers. The WelshAssembly Government must decide how best to use the powers now at itsdisposal. The decisions that are made must provide Welsh solutions to Welshproblems, but not disadvantage Wales. The Independent Study into theDevolution of the Student Support System and Tuition Fee Regime,commissioned by the Welsh Assembly Government, is designed to facilitatethis process.
The higher education sector in the United Kingdom has undergoneconsiderable change in recent decades. A greater proportion of British citizensnow participates in higher education than ever before. At the same time, thesector is regarded to be of increasing importance to the success of the Britisheconomy (and to creating social justice). Expenditure on higher education hasnot, however, kept pace with the rate of its expansion and this threatens thefuture success of the sector and the UK economy. The Higher education Act2004 recognises this and makes provision for changes to tuition fee andstudent support arrangements that will provide universities with much neededfunds. These funds are in addition to real term increases in funding from publicexpenditure that will support the continued expansion of the sector.
The principal stated aim of the Higher education Act 2004 is to widen accessto higher education and to furnish universities with the resources to competeeffectively on an international stage. It also aims to make the system forsupporting students fairer. With these aims in mind the Higher education Act2004 introduces in England a graduate contribution scheme as a fairer way offinancing – in part – the continued development of the sector, along with anaccess regulator and targeted maintenance grants as a means to extendHigher education to disadvantaged groups.
For the Welsh Assembly Government to make informed decisions about theappropriateness of the Westminster Government proposals for a fairer andbetter financed higher education sector, it is necessary to understand thewider context with regard to higher education funding and financing, withinwhich the Higher education Act 2004 is situated. The ‘wider context’ iscontained within this research review.
What follows is a summary of points pertinent to the possiblerecommendations of the Welsh Assembly Government’s Independent Studyinto the Devolution of the Student Support System and Tuition Fee Regime:
Expansion and Participation
� The UK’s higher education age participation index for 18 to 19 year-oldshas increased from 6 per cent in the 1960s to a current rate of between 34and 36 per cent. The initial entry rate for 18 to 30 year-olds in the UK is43.5 per cent, which is below the OECD average (45 per cent) and
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compares to 65 per cent in Australia; the model for the current fundingproposals.
� The total number of UK domiciled students (postgraduate andundergraduate) accepted by UK HEIs in 2002/03 was 1,542,515. Thenumber of female undergraduates normally domiciled in the UK was903,545 (59% of total) and the number of male undergraduates 638,970(41%). The number of UK domiciled students at HEIs in Wales was 90,085,comprising 52,175 (58%) female and 37,910 (42%) male undergraduates.In Wales, Cardiff University attracted the most UK domiciledundergraduates in 2002/03: 15,810 in total. The University of Glamorganattracted a similar number of students (15,404) in 2002/03 and is thesecond largest HEI in Wales. The University of Wales, Swansea, is thethird largest HEI in Wales, attracting 9,805 students in 2002/03. Thesmallest HEIs in Wales are Trinity College, Carmarthen (2,275undergraduates) and the Royal Welsh College of Music and Drama (435).The remaining HEIs in Wales each attract between 4,500 and 8,500students. Most HEIs in Wales have experienced expansion in studentnumbers in recent years.
Widening Access
� Welsh institutions have a higher proportion of both mature and young fulltime undergraduates from under-represented groups than the UK ingeneral, and they perform better than the UK as a whole in attracting stateschool and college entrants. However, the claim that Wales is effective inwidening participation must be treated with some caution. First, it ispossible that Wales’s socio-economic base means it naturally acquiresmore ‘non-traditional’ students. Second, it must also be remembered thatWales is more successful in attracting students into Wales than exportingthem. What must be asked is how many of those students coming intoWales are from low participation sectors of the population. Third, peopleborn or normally resident in Wales are among the least likely to have adegree, compared to elsewhere in the UK.
� In terms of performance, it is the experience of economic decline and highincidences of deprivation that are key to understanding poor educationalperformance in Wales. Alongside aversion to debt, individuals from low-income backgrounds tend not to consider HE as an option for a number ofreasons, including poor self-esteem, little or no tradition of highereducation, low levels of educational attainment and so on. In Wales, it isperhaps most telling that the most deprived areas also have the lowest HEparticipation rates. The proportion of all people aged 16-74 havingparticipated in HE in Merthyr Tydfil (11.6%) and Blaenau Gwent (9.3%),two of the most socio-economically disadvantaged areas in Wales, in 2001was substantially less than for more prosperous areas in Wales and theUnited Kingdom more generally.
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The Student Experience
� Research evidence suggests that students from low-income householdsare more likely to be debt averse, and that debt is a significant obstacle toparticipation for individuals from less advantaged households. Debt andborrowing is also a particular concern for women and ethnic minoritystudents. However, others claim that aversion to debt is overstated andthat as loans and contributions to tuition fees become a routine part ofeducational funding, debt will become an accepted part of the highereducation experience for all students.
� The number of students making contributions to tuition fees under thecurrent tuition fee arrangements is increasing, and the number of studentstaking recourse to student loans is also rising. Student loans comprise anincreasingly important part – if not the most important part – of studentincome for many students, as do Hardship Loans and Hardship Funds(also ALGs and FCFs in Wales). Paid employment is undertaken by 7 outof 10 students and the number of hours worked by students is increasing.Parental contributions to higher education costs are now split betweentuition fee and support costs. The gap between student income andexpenditure is consequently growing, and increasing levels of debt areshown to have a detrimental effect on the student experience. Gradedeflation is one consequence of students working too many hours in orderto alleviate their financial burden, which is then likely to have knock-onimplications for their success within the labour market. It is thereforesignificant that working class students and those with fewer financialresources on which to draw are likely suffer from this in a disproportionateway.
The Graduate Premium
� It is frequently claimed, including within the policy literature, that studentcontributions to the cost of their Higher education are fair because it isgraduates themselves who benefit most from the possession of a highereducation qualification and from their experience of higher education. Acentral tenet of this argument is that university graduates will receive a‘graduate premium’ in terms of higher earnings and more rewarding‘knowledge’ work over their lifetime than those with lesser qualifications.However, promoting ‘average’ benefits is in many ways unhelpful forpotential students, and is misleading for a number of reasons. For a start,the employment market is too complex to enable the calculation of anaverage graduate premium. Furthermore, the most up-to-date empiricalresearch evidence demonstrates that there are differential rates of returnfor different groups of graduates, and that not all graduates benefit from HEequally in terms of earnings.
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� Average earnings mask considerable variation in the additional earningsgained by graduates in terms of gender, social background, degreesubject, institution attended, region and sector of work. Furthermore, theidea of an average premium neglects the reduced earning potential of, forexample, older graduates, those who are likely to take career breaks, orthose who are unable to find a demand for their graduate-level skills andqualifications within the job market. This latter issue is particularly pertinentwith regard to Wales, where research shows that skill levels have declinedon all measures in recent years (Felstead, 2002). However, much of theliterature relating to the graduate premium is contradictory, and there is alack of research focusing specifically on Wales. Care must therefore betaken when extrapolating findings, and further work is needed to explore,for example, employer demand for graduate skills – particularly withinWales.
Higher education Funding
� According to the DfES (2003a), Government expenditure on highereducation is increasing. Between 2002/03 and 2005/06 there will be a realterm increase in spending on Higher education of 6 per cent each year,representing an increase of some £2.5 billion a year (from £7.5 billion to£10 billion) (DfES 2003a). HEFCW recently announced a new fundingsettlement for higher education in Wales of grant allocations of £313 millionfor 2004/05, which represents an average increase of 3.4 per cent on2003/04. An additional £4 million has been allocated in capital funding,building on the £9.2 million allocated in 2003/04. An additional £5.2 millionhas also been allocated to assist HEIs in meeting the requirements ofdisability legislation (HEFCW 2004). Funding per student in Wales is nowat a rate similar to elsewhere in the UK, after real term cuts in 2001/02 of0.5 per cent (Universities UK 2001).
International Comparisons
� The UK has started to close the gap on some of its major competitors inthe industrialised world, in terms of funding per student from private andpublic sources. The UK has overtaken Germany and has levels ofexpenditure close to those of Japan, although it remains significantlybehind the United States in these terms. The UK’s level of publicexpenditure per student was, however, close to the OECD average in1995, at 72 per cent compared to the OECD average of 75 per cent. Thelevel of public funding in the US was very much below this at 48 per cent.Less positive, however, is the UK’s level of expenditure on tertiaryeducation as a percentage of GDP. The OECD reported that the averagespend of OECD nations on tertiary education as a percentage of GDP in2000 was 1.7 per cent; UK spend was 1.0 per cent.
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� There are a number of ways in which students receive support for livingcosts. Contributions from family, employment, private borrowing andsavings might all be used to some extent to meet living costs. The twoprincipal methods by which student support is met from public expenditure,however, are maintenance grants and student loans. Some countriesoperate systems that use a combination of the two, whereas others relyexclusively on one or the other. In the Republic of Ireland, for example,student support for living costs are met by means-tested maintenancegrants. Spain and France also tend to rely exclusively on a means-testedgrant system. In Wales, a combination of targeted maintenance grants andincome-contingent student loans are used. In Sweden, Germany, Italy, theNetherlands, New Zealand and Denmark, a combination of loans andgrants is also used. Some countries, however, such as Australia, Canadaand England, rely solely on a system of loans. In Australia and Englandchanges are proposed. The US relies almost wholly on loans, but in somecases grants and scholarships are available, and it is common practice forstudents to find employment whilst in higher education.
The proposed changes to the financing of higher education represent a realtest for policy makers in Wales. The institutional framework of the WelshAssembly provides the democratic mandate to re-act to policy from theWestminster government and be pro-active in identifying (education) policythat addresses the situation specific to Wales in a way that reflects political,historical, cultural and regional imperatives. Explicit within any policy decisionsare issues of governance, which broadly reflect new patterns of regionalgovernance dynamics and real divergence between processes in theconstituent parts of the UK and, in Wales particularly, efforts to apply Welshsolutions to Welsh problems – without disadvantaging Wales. Further, theremust be continuity between wider strategies to build a ‘Better Wales’ and theneeds of the Welsh higher education Sector.
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I Introduction
1. The Higher education Act 2004 introduces changes to the funding andfinancing of higher education. The Welsh Assembly Government (WAG) mustdecide on the applicability of variable fees and the future student supportarrangements in Wales. Jane Davidson AM, Minister for Education andLifelong Learning, has commissioned a review group to conduct an‘Independent Study into the Devolution of the Student Support System andTuition Fee Regime to Wales’. The review group, chaired by Professor TeresaRees, Cardiff University, will produce a report to inform Assembly Governmentand HEFCW decisions on future policy towards student funding and Highereducation financing, and make recommendations to the minister as regardsthe applicability or otherwise of the Act. This research review is designed toinform the review group about the research on issues of student funding andthe financing of higher education, with special reference to Wales.
2. The research review is shaped by the remit of the review group. Takingaccount of the work of the Independent Investigation into Student Hardshipand Funding (IIGSHAF), which reported in 2001, and developing that work asnecessary, the review group will advise the minister as regards:
� the shape and responsiveness of the existing student support systemand the impact on learners of changes since the previous independentinvestigation;
� the most appropriate use of the newly transferred student supportpowers, particularly in relation to supporting access for the leastadvantaged learners;
� the application of the devolved tuition fee powers to Wales;� the opportunities offered by the transfer of these functions both for
access and participation in higher education;� the opportunities offered by the transfer of these functions to support
the delivery of public services in Wales;� the likely impact in Wales of the introduction of variable fees in England
from academic year 2006/7 onward;� the likely effects of a) introducing variable fees in Wales from academic
year 2007/8; and b) not introducing variable fees in Wales on:* the Welsh higher education sector generally - with specific
regard to matters of institutional reputation, viability and funding;quality of provision; and operational responsiveness;
* students - including those facing hardship;* access and participation;* cross border issues; and* the financial resources available to the Assembly for the short,
medium and long term.
� modelling the implications, and especially the likely responses oflearners and institutions, wherever practicable and appropriate.
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The study is required to begin after Royal Assent of the Higher education Bill,which was received in July 2004. A final report on questions relating tovariable fees will be submitted in February 2005, with a final report in April2005.
3. The research review draws on data from a variety of sources, national(Wales and UK) and international, including:
� Academic publications.� Professional journals and web sites.� Trade union publications and web sites.� Government commissioned and other investigations and reports.� Expert comment, from a variety of sources.
4. There is a wide range of data available on student funding and highereducation financing, which varies in focus and quality. The arrangements forstudent support and tuition fees and the effects thereof, more than themechanisms by which finance is allocated and distributed, are muchdiscussed, and this is reflected in the fairly substantial volume of academicliterature devoted to these issues. Indeed, with hotly contested debates overthe proposed introduction of top-up fees, there is much comment from expertsand others. Also available is research commissioned by governmentdepartments and other sector stakeholders. As with other sectors however, thebody of literature available is fragmented across organisational anddisciplinary divides (see, for example, Penn (1998) on work and occupations).This creates gaps in knowledge and carries implications for the understandingof the relationship between the financing of higher education and the studentexperience, and the needs of the sector and the economy more widely.Indeed, a less comprehensive body of research is available on the financing ofhigher education, and a serious gap exists in our knowledge andunderstanding of the development of higher education in Wales, which is onlyjust beginning to be addressed (see Williams 2000). Indeed, more problematicfor this review generally is the lack of research specific to issues of fundingand financing in Wales.
5. This review presents the research in the following way:
a) First, the review sets out the national and policy context and the background to the Higher education Act and what informs the drafting of the Act.
b) Second, the review profiles current systems of student funding and higher education financing, and makes international comparisons.
c) Third, the review profiles higher education participation and outlines the existing research on the way that current systems of student funding impact on widening access to Higher education for non-traditional students.
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d) Fourth, the review explores what the current system of studentfunding means for the student experience. In particular, thissection focuses on levels of student debt and the implications ofdebt for students and their experiences of higher education.
e) Fifth, the review investigates what current systems of studentfunding mean for the graduate premium, particularly for thoseentering the labour market from post-92 HEIs and for non-traditional students.
f) Sixth, the review examines the literature on the possible wayforward for student funding and the financing of higher educationin Wales, by outlining alternatives to the higher education Act2004.
g) A final section provides conclusions to what is discussed in themain body of the review, particularly with regard to Wales.
II Background to the Higher Education Act
6. Over the last thirty years or so the UK higher education system haschanged beyond recognition. Until relatively recently only a small number ofindividuals participated in higher education: in the region of 6 per centattended university during the 1960s. Since the 1960s, however, successivegovernments, of all political persuasions, have begun to place an increasingemphasis on the contribution of education to the building of a strong economyand, for this reason, have expressed a desire to increase the number ofindividuals participating in higher education. Participation rates have increasedexponentially and the target of the current Labour administration is for 50 percent of young people in England under the age of 30 to have participated insome form of higher education by 2010.
7. The driving force behind the expansion of higher education is oftenargued to be the needs of the British economy (DfES 2003a). Employers’complaints about a shortage of skilled labour and government concern with theneeds of a ‘knowledge-driven’ economy have resulted in a number of policiesand strategy documents to improve the skill and qualification profiles of thepopulation. Most recently, the 21st Century Skills (DfES 2003e) White Paper,the Education Act 2002 (Morris 2002) and the Learning and Skills Act 2000(Blunkett 2000) tackle, in different ways, Britain’s skill and qualification deficits.In Wales too, improved opportunities for learning are at the centre of thedevolved administration’s plans for economic development, and are addressedin the following key strategy and paving documents: Reaching Higher: Highereducation (WAG 2002a) and the Learning Country, Putting Wales First: APartnership for the People of Wales (WAG 2000), The Learning Country (WAG2001), A Winning Wales (WAG 2002b) and Wales: A Better Country (WAG2003):
Higher education is central to this Assembly Government’s vision for Walesand to my vision of Wales as a ‘learning country’. We want to see a countrywhere every individual is given equal opportunities to fulfil their potential,
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maximise their earning potential and contribute fully and effectively to society.We want to see a society where knowledge is valued in its own right, as wellas for the benefit of its application. We want to see an economy whichcompetes with the strongest in the world and has a thriving and flexibleknowledge based economy. (Davidson 2002, p.v)
In Wales, the Education and Lifelong Learning Committee’s ‘Policy Review ofHigher education’ (WAG 2002c), published in January 2002, is important inthis respect, too.
8. The higher education sector is at the centre of the drive to fostereconomic growth, both in terms of the expansion of student numbers in orderto produce a more highly skilled and qualified labour-force, and as a sector:
in pursuit of (Wales’) innovation, entrepreneurship, and internationalisationobjectives (WAG 2002b).
There are a number of implications that flow from these goals for the fundingof students and the financing of higher education. An expanded and dynamichigher education sector is not without cost, and successive governments havewrestled with ways in which these twin aims might be best funded. TheAnderson (1960) and Robbins (1963) reports, employing a discourse of‘citizenship’ and ‘national need’, produced a commitment to state fundedhigher education. Similar language shaped the Dearing Report (NCIHE 1997),the largest inquiry into higher education since the Robbins Report. However,the emphasis of the Dearing Report was quite different to Robbins in that itrecommended student contributions to the cost of higher education, and not asystem funded wholly through public expenditure.
9. The Education (Student Loans) Act 1990 (Clarke 1990) meant thathigher education students had been contributing to their cost of living for anumber of years, before the findings and recommendations of the DearingReport. Previously, students had been prevented from claiming housingbenefit and supplementary benefits during their summer vacations. A newLabour administration received Dearing’s recommendations and in its owninterpretation of the recommendations introduced immediately the Teachingand Higher education Act 1998 (Blunkett 1998). The Act brought about theintroduction of front loaded tuition fees and the end of maintenance grants,which were replaced entirely with a system of income contingent studentloans. In Scotland, following devolution, the Cubie Report (ICISF 2000a)abolished up-front tuition fees and replaced them with an end-loaded graduateendowment scheme (GES). In Wales, the Rees Report (IIGSHAF 2001)recommended that the Welsh Assembly Government seek to persuade theWestminster government that an end-loaded GES should replace up-fronttuition fees in England and Wales, and that a system of maintenance grants bere-introduced. Specific recommendations to the WAG led to the introduction ofthe means-tested Assembly learning grant for students normally resident inWales and attending a HEI in the UK, in 2002.
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10. More generally, the HE sector in England and Wales has suffered fromyears of under investment. According to the Association of UniversityTeachers (AUT), levels of academic pay have been seriously eroded over thelast 20 years (Stagg 2004). The National Union of Students (NUS 2003)documents how students have been plunged into debt by the government’sfunding strategies. Universities UK spells out clearly, in a number ofdocuments and press releases, that years of under investment threaten thequality and level of university based research and innovation. Universitybuildings and services have been left in a critical state too, not to mention thedeleterious effects of under-funding for teaching and learning. Universities UK(Floud 2003) identifies the need for an investment of £9.4 billion in the HEsector in the period 2003-04 to 2005-06 across six key investment areas1.Charles Clarke MP, Secretary of State for Education and Skills, in the WhitePaper The Future of Higher education (DfES 2003a, p.5), has thus committedto ‘reversing years of under-investment’. The Higher education Act 2004 (DfES2004) is the Westminster government’s response.
11. The Higher education Act 2004 (DfES 2004) implements a number ofpolicies set out in The Future of Higher education (DfES 2003a) White Paper.The general aim of the Act is threefold, as outlined in the White Paper (DfES2003a):
a) Improve access to higher education for the socio-economically disadvantaged.b) Make better progress to harnessing knowledge to wealth creation by reversing under-investment.c) Make the system of student support fairer.
To meet these aims and address administrative changes, the Act (DfES 2004,p. 2) is divided into 5 parts:
Part 1. It makes provision for the new Arts and Humanities Research Council;Part 2. It deals with the review of student complaints;Part 3. It permits institutions to charge variable fees and, with an approved plan, charge fees above a basic rate;Part 4. It makes various provisions for the transfer of functions to the National
Assembly for Wales, the prevention of student loans being written off ondischarge from bankruptcy, amendments to student loan regulation inrespect of money owed by students to universities to be paid to thelatter so as to facilitate deferral of fee payments by students, andprovisions on the disclosure of information;
Part 5. It makes a number of general and miscellaneous provisions.
1 The key investment areas identified by Universities UK’s submission to the Spending Revieware: additional student numbers; health professional education; human resources; theteaching infrastructure; research infrastructure and knowledge transfer.
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The Act extends to England, Wales, Scotland and Northern Ireland for Part 1and to information sharing by student support authorities. However, theprovision on bankruptcy only covers England, Wales and Northern Ireland, as,more importantly, do changes to the Teaching and Higher education Act 1998(section 22(3)), which covers funding and financing arrangements in the highereducation sector, particularly with regard to loans. The remainder of the Actextends to England and Wales, including provision on information sharing tostudents.
12. The Act is important in a number of ways, but particularly with regard tostudent support and tuition fee regimes, and for Wales the devolution of thesefunctions to the National Assembly. Together with the provisions in the Act, theUK Government’s proposals include:
� From September 2004, a new higher education grant will be introducedfor those from households with an income less than £21,185. Studentsfrom households with an income of £15,200 or less will receive a fullgrant of £1,000. Above this income to the upper limit, the amount ofgrant will be awarded on a sliding scale.
� From September 2004, full-time undergraduates will pay £1,150 intuition fees. Students from low-income households will have access to afee-remission grant and most likely pay nothing.
� From September 2004, a new financial package will be available forpart-time students.
� From April 2005, the salary level at which students will pay back loanswill be increased from £10,000 to £15,000.
� From September 2006, up-front tuition fees will be abolished in Englandand Wales and students will be able to defer payment until they leavehigher education and begin earning above the £15,000 incomethreshold. Students will take out a fee loan with the Student LoansCompany and repay in a similar way to the maintenance loan.
� From September 2006, undergraduates from low-income households inEngland and Wales will be able to claim a means-tested maintenancegrant of up to £2,700 per year.
� From September 2006, the Act allows HEIs in England to set their owntuition fees up to £3,000 per academic year for new undergraduates.This is capped (increasing only in line with inflation) until 2010.Universities wanting to charge the full £3,000 will have to sign anaccess agreement with the new Office of Fair Access (Offa), to beheaded by the new director of fair access to higher education. (Offa’sremit does not extend to Wales.) This agreement will ensure thatuniversities charging the full £3,000 tuition fees provide a bursary of£300 or over to students in receipt of the full maintenance grant.
� From September 2006, the level of maintenance loan will be raised tomatch student expenditure on basic living items. Students starting theircourse in 2006 and who do not complete re-payment of their loan withina 25 year period, because, for example, their salary is less than thethreshold at which repayment begins, will not be obliged to repay thebalance of their loans.
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Changes to the way higher education is funded, and in particular to studentsupport and tuition fee regimes, have specific implications for students andHEIs. These are discussed in the following sections and are the focus of thisresearch review. More generally, the review provides some historical contextto the development of policy so that the reader has some notion of how it hasevolved, and in what direction it is headed.
III A Profile of Higher education Funding in the UK and International Comparisons
13. This section is in three parts and covers respectively:
� A profile of current systems of student support and tuition feeregimes in the UK.
� A profile of the mechanisms of higher education financing andissues of governance with regard to those mechanisms, includinglevels of public expenditure on the higher education sector in Wales.
� International comparisons with regard to systems of highereducation funding and financing.
IIIa Systems of Student Support and Tuition Fee Regimes in the UnitedKingdom
14. Higher education has been a focus of investment for successive UKgovernments. For many years the HE sector was almost exclusively financedfrom public expenditure, and students benefited from a system of support thatmet most, if not all, students’ living and learning costs, including tuition fees.Concerns about the accountability of the HE sector to the taxpayer and thebest way of managing an expansion of student numbers informed a number ofdevelopments in the sector in the 1960s and subsequent years. However, as asite for investment in human capital, the HE sector continued to be viewedworthy of funding from the public purse, and students were not required tomake contributions of a pecuniary nature. More recently, however, as thesector has expanded and changed in a way not previously envisaged, therehas been more emphasis on investment from the individual in order to fundHE.
15. The higher education sector has therefore come to rely more heavily oninvestment from the individual than was previously the case. Indeed, morelately it is particular readings of (market-liberal) human capital theory thatinform the development of higher education policy and wider learning societydebates (Marginson 1997, Rees et al. 1997). Economic growth at a macrolevel has become dependent on market behaviour at the micro level(Majumdar 1983). It is expected that an individual’s participation in highereducation will extend from a natural calculation of future benefits. According tothis model, earnings foregone, student loans, tuition fees and so on representan investment by the individual in the acquisition of qualifications that will bringenhanced future rewards, in terms of higher levels of remuneration than forpeople with lesser qualifications, for example. The way HE is presently funded
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is, perhaps, less to do with a rejection of the idea of (human capital)investment in the HE sector and more to do with finding ways in which thatinvestment might be best afforded, when measured against other publicexpenditure priorities – albeit in ways foreshadowed by a New Right discourseof economic and social transformation (Phillips 1998).
16. Two reviews of higher education - the Anderson (1960) and Robbins(1963) reports - shaped the current system of higher education that we havetoday. Whilst there have been many new developments, Robbins’recommendation that all those who might benefit from higher education shouldbe in a position to do so has continued to be at the root of higher educationpolicy development ever since – in whatever way that particularrecommendation might be interpreted. Following Anderson and Robbins, asystem of maintenance grants and tuition fees – to be funded from the publicpurse – was legislated for. There was, moreover, an increase to theuniversities’ capital building programme, and the higher education system wasto be funded to cope with and facilitate the existing and further expansion ofstudent numbers, without prejudicing standards. Universities lost someautonomy with regard to funding and objected to the introduction of a binarysystem (the introduction of polytechnics), but the higher education sector wasto be wholly funded by the taxpayer. Robbins did state, however, that:
…If, as time goes by, the habit (higher education) is more firmly established,the arguments of justice in distribution and of increasing individualresponsibility may come to weigh more heavily and lead to some experiment inthis direction (loans). (Robbins 1963, p. 212)
17. As it was, whilst swingeing cuts were made to the sector’s funding duringthe 1970s and early 1980s, student numbers continued to grow in absoluteterms. Higher education students continued, moreover, to benefit from asystem of maintenance grants and fully paid tuition fees. During the early1980s however, expansion was curtailed for the first time since the 1960s andthere was a fall in student numbers relative to recent years. Ambitions to bringabout long-term improvements in the competitiveness and growth of the Britisheconomy re-ignited moves to expand the sector (Rees and Stroud 2001). Theway expansion was to be funded was about to change, however. Studentswould now be expected to contribute directly to the costs of their education;firstly through loans to cover living costs and then, sometime later, tuition feesto cover learning costs.
18. Robbins’s statement that recourse to ‘justice in distribution and…increasing individual responsibility’ became reality when the Conservativeadministration’s White Paper, Top-Up Loans for Students (Baker 1988)introduced new arrangements for higher education students to meet their livingcosts. The Education (Students Loans) Act 1990 (Clarke 1990) empoweredthe Secretary of State to make provision for higher education students, belowpostgraduate level, to receive subsistence loans. The Student
19
Loans Company (SLC) administered the loans. The same Act introducedAccess Funds to provide additional support for students in cases of realfinancial difficulties. Previously, higher education students had seen their rightto claim social security and housing benefit during the summer vacationremoved.
19. Maintenance grants were eventually frozen, then cut by 10 per centevery year for 3 years, and student loans increased proportionately, by theConservatives during their last administration. The Labour government electedin 1997 then abolished maintenance grants altogether in favour of incomecontingent student loans, introducing a front loaded tuition fees scheme witheffect from 1998. Currently, students in England, Wales and Northern Irelandcontribute up to £1,125 to tuition fees each year. Students whose families earn£28,000 per annum and above pay the full contribution, whilst those earningabove £20,000 pay a proportional amount. Where parental income is less than£20,000 no contribution is made. Income contingent loans for the costs ofliving and studying are available, and the amount a student can borrow isdependent on: where you live and study; which course you study; which yearof your course you are on; how much you and your family are expected tocontribute; and, the length of a student’s academic year (DfEE 2000).
20. Callender and Wilkinson (2003) argue that the number ofundergraduates liable for full tuition fees in England and Wales is increasing.Higher proportions of students originate from families whose income is abovethe threshold at which full contributions are made. This might be as a result ofwage inflation or mean that fewer students from low-income households aredeciding to participate in higher education. For the 2001/02 academic year, 43per cent made no contribution, 41 per cent paid the full amount, and 16 percent made a partial contribution. For the following academic year, 2002/03,there was a slight increase in the proportion of students who made a fullcontribution, increasing from 41 per cent to 42 per cent (the proportion makingpartial contributions fell from 16 per cent to 15 per cent). However, it would stillappear that 43 per cent of students continue to make no contribution towardstheir tuition fees, perhaps contradicting Callender and Wilkinson’s conclusions.Furthermore, with a rise in the number of students attending university overthe last few years, the absolute number of students who make no contributionis actually increasing. Unfortunately these figures cannot be disaggregated toWelsh domiciled or Welsh HEI groups. Geographic variation could existbecause of the uneven distribution of wealth and poverty across England andWales.
21. The level of contribution made by students to tuition fees is different for‘dependent’ and ‘independent’ students. Dependent students are those whosefamilies are liable, and independent students are those aged 25 and over,married for two years, or supporting themselves for three years beforeenrolment to a course. Dependent students are more likely to make a fullcontribution and independent students more likely to make no contribution, asindicated in Table 1. Again, these figures cannot be broken down accuratelyfor Wales.
20
Table 1: Tuition Fee Contribution by Dependent and Independent Status,2002/03
(England and Wales)
Dependent Students Independent StudentsLevel ofContribution Number Percentage Number PercentageFull Contribution 318,000 48 10,000 9PartialContribution
111,000 17 4,000 4
No Contribution 230,000 35 101,000 87[Source: Callender and Wilkinson 2003]
22. All students are eligible for three-quarters of the maximum loan; theremaining quarter is means tested. Loans are paid back from the Aprilfollowing either leaving or finishing a course. Interest is payable on the loans,the rate of which is linked to inflation. Repayment is made in monthlyinstalments. Currently, a student starts paying back the loan once they startearning over £10,000; the amount paid back per month is 9 per cent of grossincome in excess of £10,000. The most recent figures for 2002/03 show that82 per cent of students entitled to a loan were in receipt of one. The averageamount of loan was £3,130, meaning that a total of £2.6 billion was borrowed(Callender and Wilkinson 2003). Unfortunately a comparison cannot be madein the uptake of student loans among Welsh domiciled students nor students inWelsh HEIs.
23. A number of payments can also be claimed for those experiencingfinancial hardship. These include (among others) supplementary grants toassist those from vulnerable groups to access higher education, and HardshipFunds for students facing financial difficulties, which are available as eithergrants or loans from the SLC. Access funds are operated by colleges to assistthose with financial difficulties and are available as once yearly non-repayablegrants, although there are a limited number available and they are oftencompetitive and difficult to gain, and what counts as ‘financial difficulty’ can beinterpreted in different ways.
24. In Wales the system is slightly different from that operating in Englandand maintenance grants have been re-introduced, albeit on a much smallerscale than previously. The system of front-loaded tuition fees and incomecontingent loans that applies to England, Northern Ireland and Wales isunchanged. However, in Wales, budgets for hardship funds, access funds andsuch like have been rolled into one to create the Assembly Learning Grant(ALG) and the Financial Contingency Fund (FCF). The ALG is a means-testednon-repayable maintenance grant designed to assist those from low-incomehouseholds with living and learning costs. To be eligible a student mustnormally be resident in Wales, studying in the UK, and individual or parentalresidual income must be less than £15,3502. The FCF is a fund
2 Residual income is calculated by taking gross income (before tax and National Insurance)and deducting allowances.
21
against which students from anywhere in the UK can claim if they can showthey are experiencing financial hardship. Being in receipt of the ALG or theFCF does not affect a student’s eligibility for income contingent student loansand other hardship grants.
25. The ALG is available to students enrolled on full-time and part-timehigher and further education courses and whose contact hours (above 275hours for further education) or credits (above 30 credits for higher education)can be confirmed by the institution a student is attending. Table 2 shows thelevel of grant a higher education student might be eligible for, depending oncredits and residual income levels. At the time of its launch in 2002 some50,000 students were expected to benefit from an ALG pot of £44 million forthe academic year 2002/03. What proportion of these students are in HE isunclear. The average payment for that period was expected to be £750 (£935across both sectors) (HEFCW 2002), but was in fact £1,120 (StatisticalDirectorate 2004)3. Moreover, data from LEA statistical returns units documentthat less than half the expected number applied successfully for an ALG in itsfirst year, 2002/03 (Statistical Directorate 2004).
Table 2: ALG Allowances by Mode and Residual Income Level 2003/04Residual IncomeHigher
education 0 - £5,115 £5,116 - £10,225 £10,226 -£15,349
Part-time (30credits)
£750 £450 £300
Full-time £1,500 £750 £450[Source: http://www.wales.gov.uk/subieducationtraining/content/higher/alg-intro1-e.htm]
26. As of July 2003 some 18,810 students from all levels and modes hadmade successful applications. A further 1,260 applicants were ineligible for theaward. Of the total number of applicants from higher education for 2002/03,390 part-time and 13,900 full-time students received an award. Ineligibleapplications comprised 730 of a total of 14,650 higher education applications.Provisional figures for 2003/04 suggest an 18 per cent increase in overallapplications, to 22,4404. For higher education the figures are as follows: Full-time: 14,100; Part time: 480; Ineligible: 1,430; Total: 15,550. Whilst the figuresare an increase on the previous year and a full comparison is not possible untilthe end of the academic year, applications are still very much below thoseexpected at the launch of the grant. The implications of this for the funds setaside for the ALG are as yet unclear. It is also unclear what the lower thanexpected number of applications says about student hardship in Wales, orefforts to draw in more students from lower-income households.
3 The average payment for full-time higher education students was £1,100 and for part-time higher education students was £590.4 This figure includes those awaiting evaluation. On current figures we would expect the majority to be ineligible.
22
27. Despite the number of successful ALG applications standing at 90 percent, the number of ineligible applications has almost doubled for 2003/04, andsuccessful applications have increased only marginally. This seems to indicatethat students are either unaware of the eligibility criteria; that the criteria areunclear; that the advice provided to students is misleading; or that thosemaking speculative applications is increasing. The majority of successfulapplications are from higher education students (72 per cent compared to 28per cent for Further Education). Moreover, for 2003/04, 72 per cent ofsuccessful applications came from students studying in Wales, and 22 percent from students studying in England. Since Gorard and Taylor (2001) reportthat about 30% of first-year Welsh domiciled undergraduate students attendedEnglish HEIs in 1998/99 then this might indicate some flaw in the targeting ofeligible students in English HEIs. Indeed, recent figures from HEFCW suggestthat about 38% of all Welsh HE students attended English HEIs. More likely,however, is that the students most likely to be eligible for the award will befrom low-income/vulnerable groups, and evidence suggests that such studentsare more likely to live at home whilst studying (Furlong and Forsyth 2000).
28. Of those in receipt of an ALG, 62 per cent (12,470) of successfulapplicants were in receipt of the full award as of February 2004. Of the totalfull-time Higher education applicants that were successful (14,100), themajority (55 per cent) were from households earning below the lower residualincome threshold of £5,115. Full-time students on the middle residual incomelevel comprised 22 per cent of the total, and those from the top bandcomprised 23 per cent. Of part-time students in higher education, LEAstatistical returns (Statistical Directorate 2004) recorded that 63 per cent ofsuccessful applicants were from the lower band, 16 per cent from the middleband, and 21 per cent from the upper band5.
29. A similar pattern of figures was evident for 2002/03 and the inauguralyear of the ALG. More interestingly, figures for successful applications by LEAfor 2002/03 (not yet available for 2003/04) show that the bigger cities in Wales,such as Cardiff (2,200) and Swansea (1,400), were responsible for a largenumber of applications. However, more socio-economically deprived areassuch as Caerphilly (1,150) and Rhondda Cynon Taff (1,470) also attracted alarge number of applications. Of more concern is that some of the mostdeprived areas in Wales, such as Blaenau Gwent (400) and Merthyr Tydfil(470), recorded some of the lowest levels of successful applications in Wales(Statistical Directorate 2003). Whilst these figures would need to be adjustedand weighted to show the relative merits of the initiative, whatever they mightbe, it is perhaps no coincidence that two of the poorest areas in Wales alsorecord two of the lowest recorded levels of applications.
30. The FCF is paid at the discretion of colleges. The amount that might beclaimed ranges from £100 to £3,500. It is available to both full and part-timeFE and HE students, provided the eligibility criteria are met. Payments fromthe FCF can be in the form of a non-repayable grant, a loan, or paid directly toa third party - for a service such as childcare for example. At present there is
5 No figure for the average grant awarded for the current ALG period is available.
23
no data on FCF take-up. However, Callender and Kemp (2000) and Callenderand Wilkinson (2003) provide some insight on the take-up of access funds in1998/99 and 2002/03.
31. Callender and Kemp found, for 1998/99, that 7 per cent of all full-timestudents were in receipt of Access Funds (£596 on average per annum), and 3per cent of students were in receipt of hardship funds (on average £623 perannum). Mature students account for 50 per cent of these payments (DfEE2000c). In Wales, 4,790 students were in receipt of access/hardship funds in1998/99, an increase of 15.5 per cent on 1994/95. Despite a decrease of 9.6per cent on 1996/97 figures, the underlying trend for those students seekingfinancial assistance is upward.
32. Callender and Wilkinson (2003) found hardship loans and funds tocomprise an increasing part of students’ income. There was a sevenpercentage point rise in the up-take of hardship loans on 1998/99 figures (from1 to 8 per cent), and a rise in their real value (from £272 to £443). The up-takeof hardship funds hardly increased at all; by two percentage points (from 5 to 7per cent), and there was an increase in terms of their value (from £470 to£523).
33. Other forms of funding available in Wales to help with the costs oflearning include the passport to study grant, Individual Learning Accounts(ILA) and career development loans. Some students from vulnerable groupsmay also be allowed to continue to claim some welfare benefits whilst inreceipt of these and other payments while studying. Another source of incomefor students is from bursaries and grants from employers, educationalinstitutions, councils, charities, foundations and others. There are specificconditions that apply to all of the latter6. By rolling funds into the ALG and FCFin Wales student support arrangements have been simplified somewhat. Thereremains, however, a bewildering array of funds from a number of differentsources from which students facing financial hardship might claim.
34. The devolved administrations of Northern Ireland and Scotland haveimplemented different systems of student support, too. The devolvedadministration in Scotland particularly, which is less restricted in its powersthan the Welsh administration, employs for Scottish domiciled students anend-loaded system of tuition fees. Following the recommendations of theCubie Report (2000) a GES has operated since 2001/02. All students makeretrospective contributions to fees of £2000, when their residual incomereaches £10,000 a year or more, with some exemptions for vulnerable groupssuch as mature students, lone parents and the disabled.
35. The Scottish Executive also developed an access bursary scheme forlow-income families, with a maximum bursary of £2,000 per year available tostudents whose family income is under £10,000. The bursary tapers down to£1,000 for those on an income of up to £15,750, and is zero for those whoseincome is £25,500 or more. In addition to this the Scottish Executive 6 Details of all funding arrangements are available from the ELWa website at the following address: http://www.elwa.ac.uk/elwaweb/elwa.aspx?pageid=2961
24
announced changes to the higher education means test designed to benefitlow and middle income families. The allowable earnings of families was raisedby 12 per cent, thereby increasing the number of students receiving fullsupport, and the amount of scholarship raised from £1,025 to £4,000, beforedeductions are made from students’ support payments.
36. Hence there are now a number of regional differences in the waystudent support is arranged across the UK. Scotland also operates a tuitionfee regime that is different from that in England, Northern Ireland and Wales.The main differences in the systems are at what point students make theircontribution, and in the support arrangements for vulnerable groups.Nevertheless, wherever UK domiciled students might study in the UK they willbe expected to make some direct financial contribution to their living andlearning costs. Indeed, student contributions are now central to highereducation funding policy and accepted by successive governments as ameans by which the expansion of the sector is best afforded.
37. Perhaps the most compelling argument used by the Government andothers for the introduction of the arrangements outlined above is that it is thegraduates of Higher education who benefit most from their participation andthat they should therefore make some kind of financial contribution. Indeed, aswill be discussed in more detail in Section VI, it is often highlighted howgraduates have, on average, significantly higher lifetime earnings than thosewith lesser qualifications. This is the premise upon which much of the highereducation Act, outlined in Section II of this Review, is based. It has also beensuggested, however, that the graduate premium is depreciating as Highereducation expands and students are asked to absorb more of the costs of theireducation7. Further, it is suggested that a system of funding that involvesstudent contributions, particularly one that makes financial debt inevitable, is athreat to widening access to higher education (Callender 2003a).
38. Current proposals to introduce a system of deferred but much higher(variable) fees and student loans have come in for a number of criticisms:
� First, the level of debt from study will be much higher than previouslyincurred. Evidence suggests that students from low-incomehouseholds might be deterred from participating in higher educationby the high level of debt with which they would expect to graduate(Callender 2002, Callender 2003a, Callender 2003b).
� Second, the new arrangements introduce elements of the freemarket (and privatisation) into the higher education system in amuch more explicit way than previously. Variable fees will introducea system whereby HEIs will be forced to ‘market’ themselves topotential customers (students) by placing a price on what they canoffer the consumer. Price, however, will not be the sole determinant
7 It is also suggested that under the proposed system graduates will pay twice for their education, first in tuition fees and income contingent loans, and second in the higher level of taxes they pay on enhanced graduate earnings.
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in consumer choice since the higher charging and elite universitieswill be viewed to give the best return and will, therefore, be able toconsolidate further their place in the market at the expense of otherinstitutions (Brown and Scase 1997, see also Brown and Scase,1994, Brown 1995 on reputational capital).
Some commentators suggest, moreover, that the current proposals are ‘thethin end of the wedge’. These commentators highlight how, although variablefees will be capped at £3,000 until 2010, a number of universities have alreadyindicated that they wish to introduce fees of between £10,000 and £15,000 peryear. It is suggested that this will create a three-tier system of higher educationwhere a small elite of universities will charge higher rates, a larger middlesection will charge something more moderate, and a number of universitieswill attempt to fill places at any cost to survive (Crace 2004). Of course thishas to be set against HE provision in Wales.
� Third, patterns of university choice will be transformed and existinginequities in university choice compounded. Survey evidencesuggests that a third of students would be put off their first choice ofuniversity if charged top-up fees (Unite 2004). The survey evidencefrom Unite would therefore seem to indicate that top-up fees wouldfurther transform patterns of university choice (See Callender2003b). Research based on the level of debt students expect toaccrue under the current system finds that students from low-incomehouseholds already choose to study at the local HEI to save onliving costs (Furlong and Forsyth 2000).
Further, a system of variable fees has obvious implications for wideningaccess to the most prestigious HEIs. Ultimately, this might impact on thepossibility of graduates from low-income households benefiting fully from thegraduate premium. It is likely that the most prestigious universities will chargethe maximum fee allowed, whilst other less prestigious universities mightcharge less. Students from low-income backgrounds could be forced to opt forinstitutions charging lower fees and students from wealthier backgrounds willmonopolise places at the more prestigious HEIs. Within this context it hasbeen argued that it is graduates from the high status universities (and courses)who will have the greatest earning potential (Brennan et al. 1993, Brown andScase 1994, Brown 1995, Conlon and Chevalier 2002).
The other scenario is that because of the 36 per cent cut in per-capita fundingto universities in the last decade, most HEIs will be forced to charge maximumfees, whatever their status. This would result in students who attend the lesswell funded and lower status universities, who also tend to come from low-income households, paying the same for their degrees as students at the morewell funded and higher status universities, which continue to be populatedmainly by the middle classes.
26
� Fourth, the introduction of a free market into higher educationthreatens the ideals of a ‘liberal’ education and restricts choice.Students, for example, might be forced to be more instrumental intheir choice of degree and the range of courses offered byuniversities will be subject to market forces.
Recent research suggests that students are beginning to reject subjects thatthey perceive to have no or little direct relation to employment opportunities. Insome universities, the fall in applications to some disciplines is so pronouncedthat a number of universities are to close departments. This directly relates toissues of funding. The allocation of teaching funds follows the student. If acourse or department fails to attract sufficient numbers of students then thereappears to be some question as to its future. Evidence suggests that thelikelihood of graduating with large debts is making students more instrumentalin their choice of degree. The danger is that market forces and consumerchoice begin to threaten the tradition of education for education’s sake (see forexample Ainley 1997, Marginson 1997). This is also inextricably linked toselective research funding (QR funding) as determined by the researchassessment exercises. Together these two forces are transforming highereducation provision in Wales (for example the closure of departments ofeducation, chemistry, anthropology, sociology, development studies andphilosophy at the University of Wales, Swansea).
39. The Westminster government and others have, however, offered adefence of the Higher education Act 2004 proposals on student support andtuition fee regimes:
� First, tuition fee contributions and students loans are the fairest wayto pay for an expanded higher education system. Higher educationstudents benefit massively from participation in the form ofenhanced labour market opportunities and all the benefitsassociated with graduate employment. The government remains thelargest contributor to the funding of higher education and willincrease funding in real terms to fund further expansion. With theproposed increases in funding its contribution is the equivalent of£400 from every taxpayer, whether or not they gain personally fromhigher education. It is thus only fair that students contribute directlyto the costs of their education (DfES 2003a).
� Second, the new proposals contain measures to ensure that highereducation is available to all those who might benefit. Wideningaccess to higher education will be facilitated by the re-introduction ofa system of maintenance grants for the least well-off students and,in England but not Wales, the introduction of the Office of FairAccess (Offa) and bursaries for students in receipt of themaintenance grant. The Offa will ensure fairness in universityadmissions policy and practice. Other forms of bursary willencourage students to take up foundation degrees. It is suggestedthat it is not debt so much that prevents students from low-income
27
households accessing Higher education but that rather, it is therelatively low number of working class students that meet universityentry requirements (i.e. A Level grades) and because university isnot part of working class lived experiences (Bradley and Whitehead2003).
� Third, contributions to the costs of higher education will not be paiduntil an individual is in the financial position to do so. Fees and loansare not repayable until a graduate is earning above £15,000 andrepayments will depend on a graduate’s earnings. A graduatecontribution scheme (GCS) will allow tuition fee contributions to bepaid back through the tax system. Student loans will beadministered and repayments collected by the SLC, as has operatedfor some years now. This will mean that student contributions areaffordable and sensitive to the level of graduate premium that mightor might not be experienced.
� Fourth, these contributions provide guaranteed income to HEIsindependent of government. It is acknowledged that the UK’suniversities are chronically under-funded and the new proposalspromise additional extra income direct to the sector, allowinguniversities to use the funds in a way that best fits with the needs oftheir institution. Further, this revenue has few implications for shortand medium term public expenditure (DfES 2003b).
40. Some suggest that the proposed arrangements for student contributionsto tuition fees and income contingent loans do not go far enough. Othercommentators suggest they go too far. These arguments incorporateperspectives on what is the fairest way to fund higher education and in whatways the level of funding necessary to ensure the competitiveness of the UK’suniversities might best be achieved. This material will be outlined anddiscussed in Section VIII of this review.
41. Robbins did not foresee and, indeed, did not advocate the degree towhich the higher education sector has expanded today. It is neverthelessclear that he accepted that there was a point at which student contributions tofund continued expansion might be necessary. Indeed, his recommendationthat higher education should be available to all who wish to undertake it wasalways contingent (Fulton 1981). However, whereas previously thatcontingency was implicit within the workings of the education (and class)system and thus largely disguised, student loans and tuition fee regimesperhaps represent an explicit contingent to accessing higher education. Thistheme will be explored in more detail in later sections.
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IIIb Mechanisms of higher education Financing in the UK and Wales
42. The mechanisms by which funding is allocated to the higher educationsector and then on to HEIs has remained largely unchanged since the Furtherand higher education Act 1992. More particularly, expenditure on highereducation has failed to keep pace with the rate at which the sector hasexpanded. As Universities UK point out:
The starting point is the year-on-year cuts in university funding that began inthe 1980s under the Conservatives and only came to a halt last year. Between1989 and 2002 our universities endured cuts in funding of 37% while studentnumbers grew by 94% over the same period. (Crewe 2003)
According to the DfES (2003a) however, Government expenditure on highereducation is increasing. Between 2002/03 and 2005/06 there will be a realterm increase of 6 per cent each year in spending on higher education, whichrepresents an increase of some £2.5 billion a year (from £7.5 billion to £10billion) (DfES 2003a). There are, moreover, a number of issues that derivefrom the way financing is organised and funding allocated with regard tomatters of governance, and, in particular, a number of implications for thenewly devolved administrations.
43. Following the Robbins Report a number of changes were made to theway in which the funding and financing of higher education were organised.However, it is not the case that the Report’s recommendations wereimplemented. Rather, changes to the mechanisms of funding and financingfollowed in the wake of the Robbins Report. The Robbins Report was ratherconservative in its recommendations and the Labour administration in receiptof the report went much further in the changes it made than was expected.
44. The higher education sector was expanding at a significant rate at thetime the Anderson and Robbins Reports were commissioned. Part of theRobbins Report’s remit was to recommend ways in which existing and furtherexpansion might be best managed. Very real issues of sector governancebecame points of contention. Broadly, the autonomy of the universities waschallenged and accountability to the taxpayer took precedence. The UniversityGrants Committee (UGC), which was responsible to the Treasury,administered funding to the universities and acted as a buffer between theuniversities and state in order to preserve academic freedom. However, withhigher education accounting for £200 million of public money (and Robbinsrecommending increased public expenditure) a new governmental department,the Department of Education and Science (DES), was created to take controlof educational expenditure.
29
45. Since then power has become more centralised, and the mechanismsby which funding is administered have gone through a number of changes.Currently, it is the higher education Funding Councils (HEFCs) that havegeneral responsibility for the administration of funding to HEIs. The financingof higher education remains, however, with government, and, in particular,rests with the Department for Education and Skills – which has seen severalincarnations since its inauguration as the DES.
46. The financing of a mass system of Higher education presents its ownparticular problems. However, the way in which Higher education is financed(and governed) must be viewed as part of a broader political agenda. Theemphasis of successive governments on creating an economically astutesector, closer to wealth creators in industry and commerce, and the way inwhich the student has been reconfigured as consumer, highlights the agendacurrently driving higher education reform (see Williamson 1986, Walford 1991,Shattock 1998) – at least, that is, the Westminster government’s agenda (seeDaugherty et al. 2000).
47. The HEFCs distribute public money for teaching and research touniversities. England, Northern Ireland, Scotland and Wales each have theirown council. It is not possible, nor is it necessary, to go into the complex waysin which funds are allocated for the purposes of this review8. Suffice to say thatfunds are allocated to HEIs in a way that reflects the priorities of the devolvedfunding councils, and the administrations under which they serve. Most often,Research Assessment Exercise (RAE) scores influence the allocation ofresearch funds, and student numbers (or places) are the main force in theallocation of teaching grants (Stiles 2002). The current shape of funding hasbroader implications for HEIs however, and reinforces Higher educationstructures - between research and teaching led HEIs - in a particular way.Universities receive funds from a number of other bodies too, includingresearch councils, private sources and other alternative sources such aspatents and intellectual property rights. However, it is worth noting that tuitionfees have affected universities differently, depending on their position in themarket place (Rolfe 2003, p.42). Most notably, the consequences of studentcontributions to tuition fees have had less of an impact on pre-1992universities than post-1992 universities:
A popular pre-1992 university felt largely unaffected by any changes resultingfrom their introduction, while the others (post-92) reported changes inapplication patterns and a feeling of uncertainty about the future from within 8 The allocation of funds to territorial departments (Scottish Parliament, Welsh Assembly Government and Northern Ireland) is calculated using the Barnett Formula. ‘The Barnett Formula does not determine the overall size of the budgets but provides that, where comparable, changes to programmes in England result in equivalent changes in the budgets of the territorial department calculated on the basis of population shares. The Barnett Formula does not directly reflect public expenditure ‘need’’ (Twigger 1998, p.5). Recent increases to HE funding from central government will result in an increased level of funding to Wales and the WAG will need to look carefully at how best these extra funds are used – for example, to increase ALGs and support the most vulnerable student.
30
their institutions. However, the effect of tuition fees is difficult to separate fromother changes in funding. Universities’ strategies were strongly influenced bythe need to reduce costs and to generate income from more diverse sources,which resulted from financial constraints and, particularly, the acute fall inresources per student. (Rolfe 2003, p.42)
48. In Wales, the Higher education Funding Council for Wales (HEFCW)administers funds made available by the Welsh Assembly Government tosupport the research and teaching activities of the thirteen HEIs in Wales andprescribed higher education courses at further education colleges. Table 3indicates the main sources of income for Welsh HEIs in 2001/02. HEFCWrecently announced a new funding settlement for higher education in Wales ofgrant allocations of £313 million for 2004/05, which represents an averageincrease of 3.4 per cent on 2003/04. An additional £4 million has beenallocated in capital funding, which builds on £9.2 million allocated in 2003/04.An additional £5.2 million has also been allocated to assist HEIs to meet therequirements of disability legislation (HEFCW 2004). Funding per student is ata rate similar to elsewhere in the UK, after real term cuts in 2001/02 of 0.5 percent – despite which the WAG made a proportionately greater investment (of£385 million) in HE than that made in England (WAG 2002a). The unit ofresource in Wales for 2001/02 was £5,323, compared to £5,281 in England(WAG 2002a). The unit of resource should not however, be the ‘primary driverfor future funding decisions’, as it is ‘not a secure basis’ and ‘increasinglymisleading’ (WAG 2002a, p.6):
The gradual divergence in funding components, in strategic direction and incharacteristics of the sectors in the different parts of the UK make thisinevitable. (WAG 2002a, p6)
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Table 3: Income of Higher education Institutions by Source 2001/02(millions)
InstitutionFundingCouncilGrants
TuitionFees &EducationContracts
ResearchGrantsandContracts
OtherIncome
Endowment &InvestmentIncome
TotalIncome
University of Glamorgan 37,108 17,548 2,247 13,134 422 70,459
University of Wales,Aberystwyth 29,269 10,828 9,980 16,650 2,289 69,016
University of Wales, Bangor 31,364 16,358 9,777 17,202 534 75,235
Cardiff University 66,862 35,841 39,548 23,524 3,131 168,906
University of Wales, Lampeter 5,652 1,787 265 1,891 247 9,842
University of Wales, Swansea 36,877 19,116 10,295 24,486 806 91,580University of Wales College ofMedicine 17,974 15,256 14,218 28,307 1,613 77,368
University of Wales Institute,Cardiff 22,145 10,034 721 12,607 122 45,629
University of Wales College,Newport 17,513 4,936 121 4,981 234 27,785
North East Wales Institute ofHigher education 13,250 4,630 531 2,098 219 20,728
Swansea Institute of Highereducation 11,855 3,939 37 1,805 227 17,893
Trinity College Carmarthen 5,295 1,475 0 2,709 47 9,526Royal Welsh College of Musicand Drama 4,826 1,199 0 583 24 6,632
Federal University of Wales –central functions 562 120 244 5,261 782 6,969
Total 299,582 143,067 87,984 155,148 10,697 696,478
[Source: NCETW and HEFCW 2003, p.52]
49. The new proposals have important implications for the future financingof higher education in Wales, not only in the decisions to be made on tuitionfee and student support arrangements but in its administration, too. As Stiles(2002, p.727) argues, a more devolved system results in regional allocations‘incorporating some differences in funding principles and accounting forparticular regional circumstances’. In Wales, for example, HEFCW hasdecided to promote a system whereby subjects are funded at similar ratesacross Wales, which is different from elsewhere in the UK – even if the endresult is that the structure of funding has changed little, and is close tohistorical allocations (Stiles 2002). It is also important to consider the conflictbetween academic and corporate governance within universities, and theexternal pressures on universities in shaping the interests which becomeoverriding in guiding university agendas – including in relation to issues offinance and funding (see Shattock 2002, Salter and Tapper 2002).
50. Explicit within these decisions are issues of governance, which broadlyreflect new patterns of regional governance dynamics and real divergencebetween processes in the constituent parts of the UK (Marshall 2003) – as isevidenced in the re-introduction of maintenance grants in Wales and efforts toapply Welsh solutions to Welsh problems. The WAG’s encouragement of‘reconfiguration and collaboration’ in the sector (i.e. merger between HEIs) isanother example of this (Curtis 2004). Indeed, education policy in Wales moregenerally is distinctively Welsh in its characteristics and origins (Daugherty et
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al. 2000) – such as on policies on language for example. The institutions ofgovernment (Westminster and Welsh) and those with a more independentbasis are important in this respect as shapers of (Welsh) policy in Wales(Daugherty et al. 2000).
51. As Daugherty et al. (2000) argue, the institutional framework of theWelsh Assembly provides the democratic mandate to re-act to policy from theWestminster government and to be pro-active in identifying (education) policythat addresses the situation specific to Wales in a way that reflects political,historical, cultural and regional imperatives. The IIGSHAF, and the WAG’sacceptance of its proposals, perhaps provides one concrete example of thewillingness to differentiate policy in Wales from policy elsewhere, and to makethe Welsh higher education Sector distinctive to Wales – a distinctivenessevident in a range of other sectors and policy areas, too (see, for example,Daugherty and Elfed Owens (2003) on the National Curriculum in Wales).
52. A Higher education Wales review sets out quite clearly how it expectsthe Future of higher education in Wales to progress (HEW 2003). Thedocument spells out a commitment to open higher education to all those whocan benefit, and explicitly acknowledges the costs of social inclusion. Thedocument also expresses a desire to bring about its own arrangements for anaccess regulator, and backs fully the WAG’s commitment to rule out top-upfees before 2007. However, if arrangements are to differ between England andWales it is important not to disadvantage Wales. Some vice chancellors ofHEIs in Wales are already expressing concern that they will be disadvantagedif the new proposals come into effect in England before they do Wales.
53. HEIs in Wales fear they will not be able to compete in financial termswith those in England, and Welsh domiciled students fear losing places toEnglish students who come to Wales to benefit from cheaper degree courses(Curtis 2004a). In Scotland, the parliament has pledged to increase chargesfor English students once top-up fees are put in place to stop them floodingScottish HEIs, but has rejected the idea of quotas for English students (Curtis2004b)9. The WAG and HEW are also concerned about losing academics toEngland, whose HEIs – with the promise of extra funds from top-up fees – arebetter able to plan. Anecdotal evidence supports these concerns. ProfessorJames Lusty, VC of University of Wales Newport, expresses concern thatsome of his staff have already been approached (Curtis 2004a). The WAG haspromised to match funding to alleviate problems and HEFCW is involved inpreparing a funding formula – it is, however, unclear where these funds willcome from. A further concern comes from Peter Black AM (2002), of theWelsh Liberal Democrats, who alleges that top-up fees will undermine theALG, by plunging Welsh students from low-income households into debt anddiscouraging their participation in HE.
9 It is estimated that the current annual fee for English student in Scotland of £1,200 will be raised to between £1,700 and £1,900. It is however, difficult to predict exactly how much fees would need to be increased by, because of the variable dimension to top-up fees in England (Curtis 2004).
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54. The proposed changes to the financing of Higher education represent areal test for policy makers in Wales. As Stiles (2002) argues, the currentmethods used by the funding councils to allocate funds are rather‘conservative’ and reinforce higher education structures. Despite someinitiatives from HEFCW, funding, as elsewhere, takes the form of formulaicblock funding. That is, research funding continues to follow HEIs with the besttrack records – more recent changes mean that funding councils cannot fund3a and 3b departments – and teaching is influenced by existing patterns ofstudent volumes and types across HEIs (Stiles 2002). However, top-up feesfeed funding directly to HEIs and potentially increase university autonomy. Ofcourse, higher variable fees are not unconditional and the Act does provide forconditions to be imposed on HEIs by the Secretary of State/WAG through theHEFC mechanism. Nevertheless, in a number of obvious ways, the Act hasreal implications for the shape of higher education in Wales – not least in that itmight reinforce inequities between HEIs in Wales – and ultimately for thecompetitiveness of the Welsh higher education sector.
IIIc International Comparisons
55. It is widely documented that the expansion of higher education isintegral to Britain’s economic competitiveness. Compared to the ‘competition’,however, the levels of public expenditure devoted to the higher educationsector has for many years been at levels below that of major competitors. TheUK is nevertheless in step with many of the same competitors when it comesto the arrangements for financing higher education. Student contributions totuition fees and the introduction of loans to meet students’ living costs whilststudying are becoming more widespread. This section comparesarrangements in the UK with those elsewhere and is in two parts:
� First, international comparisons are made on levels of highereducation expenditure.
� Second, international comparisons are made on tuition fee andstudent support arrangements.
International Comparisons of Public Expenditure56. Funding per student: Greenaway and Hayes (2000) report the UK to belagging behind other OECD countries in terms of total funding per student,when calculated from both public and private sources. In 1995, the UK’sexpenditure per student was US$7,225, which is 60 per cent below the OECDaverage (US$12,018) and also below the EU average (Greenaway and Hayes2000). The United States had the highest rate of expenditure per student in1995 (US$19,965), and continues to do so. The UK has however started toclose the gap on some of its major competitors in the industrialised world. The
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UK has overtaken Germany and has levels of expenditure close to those ofJapan. The most recent OECD data shows UK expenditure per student tohave increased by 34 per cent between 1995 and 1998, to US$9,699 in 2001(OECD 2001). Despite this, UK levels of funding per student remain below theOECD mean-average.
57. Public Expenditure: The UK’s level of public expenditure per studentwas close to the OECD average in 1995, at 72 per cent compared to theOECD average of 75 per cent. The level of public funding in the US was verymuch below this at 48 per cent (Greenaway and Hayes 2000). This point isworth noting when considering alternative funding arrangements to thoseproposed and the call of some commentators to move towards the US systemof financing HE.
58. Less positive however, is the UK’s level of expenditure on tertiaryeducation as a percentage of GDP. In 1995, the OECD average spend ontertiary education was 1.5 per cent of GDP and the EU average was 1.1 percent. The UK spent just 0.7 per cent as a percentage of GDP. More recentfigures suggest that there has been little improvement. The OECD reportedthat the average spend of OECD nations on tertiary education as a percentageof GDP in 2000 was 1.7 per cent; UK spend was 1.0 per cent (OECD 2003).
International Comparisons of Tuition Fee and Student Support Arrangements
59. Higher education students in the UK have for a number of years madefinancial contributions to the costs of their education. The higher educationfunding arrangements in the UK include student contributions to tuition feesand income contingent student loans to meet living costs. Whilst theconstituent parts of the UK each have different arrangements, studentcontributions to tuition fees and student loans form part of the basis for highereducation funding arrangements throughout the UK. These kinds ofarrangements are in evidence in a number of other countries too, and arebeing debated in countries where they do not exist at present.
60. There is little tradition of student contributions to the costs of tuition inEurope, although most European countries charge nominal amounts forservices provided. Sweden, Germany, France, Denmark and the Republic ofIreland, for example, do not currently charge tuition fees10. Recently, however,tuition fees have been the subject of much discussion in France, Germany andthe Republic of Ireland. Sweden and Denmark have no plans at present tointroduce these kinds of arrangements. Non-deferred tuition fees are chargedin the Netherlands, Italy and Spain, and Spain operates a system of feesdifferentiated by institution and subject (DfES 2003d).
10 There are some minor exceptions such as in France, for example, where private institutions charge tuition fees; and in Denmark, where Open University students contribute to fees.
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61. The US, Canada, Australia, New Zealand and Japan all charge tuitionfees. Only Australia and New Zealand operate a system of deferred fees. TheUS, Canada and New Zealand also operate a system of fees differentiated byinstitution and subject. Australia will follow suit in 2005. Burgeoningeconomies, such as China, have also started to introduce these kinds ofarrangements. In China, fees are set according to market conditions, takinginto account costs and demand (DfES 2003c). The University of Buffalo (2000)and DfES (2003c) report that similar arrangements to those in the developedworld are being introduced in many developing countries across Africa, Asiaand Latin America.
62. Australia has operated the higher education contribution scheme(HECS) since 1989; a system of deferred fees repaid after graduation throughthe tax system. This is the model for the tuition fee arrangements proposed forEngland, Northern Ireland and Wales. HECS provides an index-linked loan topay tuition fees, with a deferred and contingent system of repayment. Theaverage HECS debt in 2003 was AUS$8,969 (approx. £3,495). The Highereducation Support Bill 2003 will allow HEIs in Australia to determine their ownHECS fees, which range from AUS$0 (i.e. no fees) to a maximum 25 per centabove each subject band level11. The minimum repayment threshold for HECSis to be raised from AU$25,000 to AUS$35,000 (approx. £13,640) for 2004/05and an index-linked AUS$36,184 (approx. £14,100) from 2005/06 onwards.
63. Where tuition fees exist in Europe a number of different systemsoperate. In Italy, for example, fees are set to some degree by HEIs and thelevel of the fee is determined by a student’s financial circumstances. Fees arenot deferred and range between €2,000 and €3,000 (approx. £670 and£1,340). They are set at up to 20 per cent of what an institution receives fromthe state. In the Netherlands, however, there is a single non-differentiated rateof €1,445 per year (approx. £965) that is non-deferrable and payable up-frontor in monthly instalments. In most other parts of Europe, all fee costs are metby the state. In Sweden for example, where participation rates are very high,higher education expenditure as a percentage of GDP is at the OECD averageand this is borne principally through high rates of personal taxation. Tuitionfees are not charged in Germany, Denmark, France or the Republic of Ireland,but for a number of these countries the introduction of tuition fee contributionsare very much on the political agenda.
64. In Germany, politicians and others have challenged the principle of freetuition. Six Länder for example have made a direct challenge to the Federalgovernment’s ban on charging for tuition, arguing that it violates theirconstitutional responsibility for higher education (DfES 2003c). The Republic ofIreland is perhaps the most interesting case because a system of tuition feecontributions operated until 1995. However, tuition fees were then droppedbecause it was believed they acted as a disincentive to participation by 11 Subjects are assigned to one of three bands. The rate for a band 1 subject (humanities and social sciences) is AUS$3,768; for a band 2 subject (maths and engineering) is AUS$5,367; and for a band 3 subject (law, dentistry, medicine, veterinary science) AUS$6,283. Fees for those on nursing and teaching courses will be frozen.
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individuals from low-income households. Somewhat paradoxically, overallparticipation rates fell further when fee contributions were scrapped. Thereasons for this are not clear. However, a recent report by Patrick Clancy onthird-level participation in Ireland highlights how attitudes to higher educationwere more of a barrier to participation than financial concerns (Clancy 2004).In 2003 proposals were drawn up for the reintroduction of subject differentiatedmeans tested fees and a student loan scheme, but were not carried through.
65. There are a number of ways in which students receive support for livingcosts. Contributions from family, employment, private borrowing and savingsmight all be used to some extent to meet living costs. The two principalmethods by which student support is met from public expenditure however aremaintenance grants and student loans. Some countries operate systems thatuse a combination of the two, whereas others rely exclusively on one or theother. In the Republic of Ireland, for example, student support for living costsare met by means-tested maintenance grants. Spain and France also tend torely exclusively on a means-tested grant system. In Wales, a combination oftargeted maintenance grants and income-contingent student loans are used.In Sweden, Germany, Italy, the Netherlands, New Zealand and Denmark acombination of loans and grants is also used.
66. Indeed, many countries now provide a combination of grants and loansrather than relying solely on loans. Woodhall (2000) argues that explicit buttargeted subsidies (e.g. means-tested maintenance grants) are more effectivein widening and promoting access to higher education than “hidden” interestsubsidies for student loans. Some countries, however, such as Australia,Canada and England, rely solely on a system of loans. In Australia andEngland changes are proposed. The US relies almost wholly on loans, but insome cases grants and scholarships are available and it is common practicefor students to find employment whilst in higher education (DfES 2003c).
67. It was the US system of student loans that was the original model forthe system introduced across the UK. The introduction of student loans wasinitially based on two American mortgage style models: the guaranteedstudent loans (GSL) system and the student tuition and repayment system(STARS) (MacFarland 1993), and was meant to be administered by privatebanks through an ‘administrative mechanism’. However, student protest andthe considerable costs of financing the scheme resulted in the bankswithdrawing from it (Hesketh 1999). A number of private banks have sincebought out some SLC contracts – although all administration continues to bethrough the SLC. The UK then moved to an income-contingent student loanmodel in 1998, as described in sub-section IIIa.
68. There is an enthusiasm among many commentators for incomecontingent loans, including Richards (2002), Barr (2001) and Chapman andRyan (2002). Richards (2002), however, highlights that the zero per centinterest rate on loans in the UK is regressive and others are more sceptical ofthe system more generally. Johnstone (2002) argues that there are only a veryfew countries (Australia, Sweden and the USA) in which such systems havehad a real bearing on government revenue (see Woodhall 2002). It is, after all,
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that any system that has a ‘grant’ element in any shape or form can be self-financing (Jackson 2002, see Woodhall 2002).
69. Governments present a number of arguments in defence of studentcontributions to the costs of their education. The principal argument is thatstudent contributions are the fairest way of financing some of the costs ofhigher education. Chapman (1996. See also Chapman 1997 and Chapman2001) argues that the fiscal constraints on funding the further expansion ofhigher education, and the regressive nature of funding the socio-economicallyadvantaged to receive economic benefits from being graduates, justify theintroduction of systems such as HECS in Australia. If higher education isexpanded in a way that is fair, however, a system of funding that involvesstudent contributions must be seen to provide a well-designed system ofstudent support for those who need it (Woodhall 2000 and 2002).
70. HECS is the system upon which the Higher education Act 2004proposals are based. Chapman (1996) suggests that it is the ‘incomecontingent nature of the scheme (that) is its (HECS) most important definingcharacteristic’, and it is in this that the government claims to be introducing afairer and more equitable system of student support and tuition feearrangements. However, the Times Higher education Supplement (Tysome etal. 2000) reported that following a 14 per cent rise in the level of HECScontributions to the cost of an undergraduate course in 1997, there was a 14per cent drop in university admissions. The NUS also report that:
Australia’s Department of Education, Training and Youth Affairs (DETYA) hasreported a marked deterioration in access rates over the period since highereducation contribution scheme (HECS) had been fully introduced (1991-97) forstudents from low income, rural and isolated backgrounds. (NUS 2003, p.48)
Further increases will be implemented in 2004. As Chapman (1996) suggests,the parameters within which HECS works, and schemes like it, require carefulconsideration (See also Chapman 1997, 2001 and Chapman and Ryan 2002and 2003).
71. Lampl (2004) criticises the Westminster government for not introducinga model of higher education funding closer to the US system, which is morereliant on private finance. Lampl highlights that there are 35 US universities inthe top 50 rated HEIs worldwide and only one Australian (there are five UKuniversities in the top 50, none of which are in Wales) and yet it is theAustralian model on which the current proposals are based. Certainly, the UKhas long rejected the financing of higher education from public expenditurealone, and in this respect relies more on private investment than waspreviously the case. However, as mentioned previously, a number of countriesin Europe continue to finance tuition fees if not student support costs, and insome cases meet the costs of tuition and student support. (For more detailsabout World rankings visit http://ed.stju.edu.cn/ranking.html).
72. The taxpayer meets the burden in Sweden and participation rates aremuch higher than for the UK. Sweden has an IER of 69 per cent, compared to
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45 per cent in the UK. Elsewhere in Europe too, such as France and Germany,the tax-system is employed to help students meet support costs. Germany, forexample, has a generous system of tax-breaks and family allowances, fromwhich 90 per cent of families and 27 per cent of students in employmentbenefited in 1998. Tax reductions mainly affect parents, but German studentsrely heavily on parental contributions (which parents are legally obliged tomeet) and paid employment (two-thirds are in paid work) to financesubsistence. France, like Germany, also provides support in the form of taxconcessions for students’ families.
73. There seems to be little consensus internationally in the financing ofhigher education, although some commonalties can be applied to regions orwhat ‘hegemonic project’ dominates the political agenda in any onenation/region. Europe, with its more social-democratic traditions, particularly incontinental northern Europe, is perhaps more inclined to meet the costs offinancing Higher education from public expenditure. Elsewhere in the world,where neo-liberalism is more influential in shaping policy, such as in Australia,Canada, New Zealand and the US, student contributions are de rigour. Costsharing and diversification of revenue resources, are, however, becoming anincreasingly widespread response to mass participation in HE (Johnstone2002).
IV Higher education Participation, Expansion and Widening Access
74. This section is in two parts:
� The first section uses API rates to profile the way higher educationhas expanded since the 1960s in the UK and Wales, and IER ratesto show how UK participation levels compare internationally. Thelatter part of the section details current rates of participation in theUK and Wales.
� The second section engages with some of the available research onwidening access to higher education.
IVa Higher education Expansion and Participation in the UK and Wales
75. The current UK administration’s ambition to increase the number of 18-30 year-olds in higher education is a continuation of successive governments’aspirations. Student numbers have been rising decade upon decade and thisis the consequence of successive governments’ policies to expand the highereducation sector – the rationale for which is documented elsewhere in thisReview. The expansion of higher education in the UK has continued almostuninterrupted for decades. According to the most recent figures available, the
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age participation index (API) for 18 to 19 year olds was between 34 and 36 percent in 2001/02 (DfES 2003f). In the 1960s, the API for 18 and 19 year oldswas 6 per cent. It was 12 per cent at the beginning of the 1980s and in theregion of 35 per cent in the late 1990s.
76. The UK initial entry rate (IER) for 18 to 30 year olds was 43.5 per centin 2003 (OECD 2003). This is just below the OECD IER average of 45 percent. The UK’s net rate of participation is 45 per cent12. New Zealand has thehighest net rate of participation at 76 per cent. Finland (72 per cent), Sweden(69 per cent) and Poland (67 per cent) have the highest net rates in Europe.Australia, the model for the current funding proposals, has a net rate of 65 percent.
77. Initial entry rates (IER) are not available for Welsh students alone.However, National Participation Rates (NPR), although calculated slightlydifferently, do enable some comparison between England and Wales. TheNPR for 18 to 19 year old Welsh domiciled students for 2000/01 was only 30.0per cent. Although this has increased since 1998/99 (27.3 per cent) this is stillbelow the equivalent rates for the UK (see para 70) and England, whoserecent initial entry participation rate (IEPR) was 44 per cent. In Scotland theproportion of 17 to 21 year olds in Higher education for 2001/02 was 51.9 percent. In Northern Ireland similar proportions of 18 to 30 year olds had enteredhigher education (50 per cent):
….competition (between the constituent parts of the UK for students) is madeall the greater by a disproportionately large number of small institutions inWales. Despite a high number of students relative to population share, theWelsh sector has the lowest average number of full-time equivalent studentsper institution in the UK. (WAG 2002a, p.3)
78. The total number of students (postgraduate and undergraduate)accepted by UK HEIs in 2002/03 was 2,175,115, including overseas students(HESA 2004)13. This figure comprises 497,500 postgraduate students and1,677,615 undergraduate students. Of these, 357,335 postgraduates and1,542,515 were UK domiciled. The number of female postgraduates normallydomiciled in the UK was 197,515 and the number of male undergraduates159,820. The number of female undergraduates normally domiciled in the UKwas 903,545 and the number of male undergraduates 638,970.
79. The total number of students (postgraduate and undergraduate)accepted by Welsh HEIs in 2002/03 was 119,535, including overseas students(HESA 2004). This is an increase of 6,130 students (or 5.1 per cent) on theprevious year’s figure of 113,405, and a substantial increase (89,001) on thetotal for 1995/96. According to the WAG (2002a), 51 per cent of students fromWales studied in Welsh HEIs in 1999/2000 (48 per cent of students in WelshHEIs came from elsewhere in the UK).
12 The net rate is based on the probability of a 17 year-old entering higher education for the first time before the age of 30.13 All HESA figures are rounded up or down to the nearest 5.
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80. At Welsh HEIs the total number of postgraduate students for 2002/03was 23,475, of which 9,920 were full-time and 13,555 were part-time. Thenumber of UK domiciled postgraduate students at Welsh HEIs was 17,480,comprising 9,750 female and 7,730 male students. The number ofundergraduate students at HEIs in Wales was 96,065. This figure comprised60,540 full-time and 35,525 part-time students. The number of UK domiciledstudents at HEIs in Wales was 90,085, comprising 52,175 female and 37,910male undergraduates (HESA 2004).
81. In Wales, Cardiff University attracted the most UK domiciledundergraduates in 2002/03 - 15,810 in total. This comprised 9,135 femalestudents and 6,675 male students, or 57.7 and 42.2 per cent ofundergraduates respectively. The total number of undergraduates studying atCardiff University will increase following its imminent merger with theUniversity of Wales College of Medicine (UWCM). UWCM recorded 2,325undergraduates in 2002/03. The University of Glamorgan attracts a similarnumber of students (15,404) to Cardiff University and is the second largestHEI in Wales. The University of Wales, Swansea is the third largest HEI inWales, attracting 9,805 students in 2002/03. The smallest HEIs in Wales areTrinity College, Carmarthen (2,275 undergraduates) and the Royal WelshCollege of Music and Drama (435). The remaining HEIs in Wales attractbetween 4,500 and 8,500 students each. Most HEIs in Wales haveexperienced some kind of expansion in student numbers in recent years(HESA 2004). Table 4 illustrates the number of all students attending HEIs inWales.
82. Of all Welsh domiciled undergraduate students in higher education in2001/02, 61 per cent attended Welsh HEIs (Table 5). This compares with 95per cent of English students attending English HEIs. Of course, most of thisvariation is likely to be because there are more HEIs in England than in Wales.However, it is also worth noting that 45 per cent of students studying in WelshHEIs were from England. Furthermore, 93 per cent of Scottish domiciledstudents continued to study in Scottish HEIs, where provision is morecomparable to Wales.
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Table 4: Number of students by institution 2002/03
Institution Total HEstudents
Totalpostgraduatestudents
Totalundergraduatestudents
Full-timeundergraduatestudents
Part-timeundergraduatestudents
University of Glamorgan 19,820 3,200 16,620 9,380 7,240
University of Wales,Aberystwyth 10,825 2,395 8,425 6,070 2,355
University of Wales,Bangor 9,255 1,825 7,430 5,430 1,995
Cardiff University 22,720 5,710 17,040 13,035 4,005University of Wales,Lampeter 7,105 1,050 6,055 875 5,185
University of Wales,Swansea 13,480 2,975 10,500 7,465 3,035
University of WalesCollege of Medicine 3,750 1,330 2,420 2,175 245
University of WalesInstitute, Cardiff 9,090 1,590 7,500 6,080 1,420
University of WalesCollege, Newport 8,980 1,675 7,305 2,535 4,770
North East WalesInstitute of Highereducation
5,815 595 5,220 2,590 2,630
Swansea Institute ofHigher education 5,470 695 4,775 3,300 1,475
Trinity CollegeCarmarthen 2,610 285 2,325 1,155 1,165
Royal Welsh College ofMusic and Drama 590 140 450 450 0
Total 119,510 23.465 96,065 60,540 35,520
[Source: HESA (2004) Table 0a - All students by institution, mode of study,level of study, gender and domicile 2002/03http://www.hesa.ac.uk/holisdocs/pubinfo/student/institution0203.htm Accessed30th July 2004]
Table 5: Cross-boundary flows for full-time/sandwich HE undergraduatestudent enrolment, 2001/02
Studying in TotalWales England Scotland Northern
IrelandWelsh students 28,660 17,859 433 6 46,958English students 24,163 726,725 14,841 203 765,932Scottish students 230 5,887 87,741 37 93,895Northern Irelandstudents 276 5,746 4,921 24,678 35,621
Total 53,329 756,217 107,936 24,924 942,406[Source: NCETW and HEFCW 2003, p.28]
83. The expansion of both student numbers and the higher educationsector have been accepted by government as necessary to maintain economiccompetitiveness. The government for example claims the British economy is‘becoming ever more knowledge-based’, which consequently demands ‘a
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more highly-skilled workforce’14. It is also suggested that education, and highereducation particularly, increases productivity, and that there are a number ofindirect benefits on the economy that derive from education. For individualstoo, the economic benefits of higher education are tangible, especially in termsof higher earnings over a lifetime and enhanced labour market opportunities.(Section VI on the Graduate Premium takes a more critical look at thesearguments.) Arguments are also made that an expanded system of highereducation is to the benefit of society more generally: that graduates are moreengaged with society, helping to make society more cohesive and increasinglevels of social capital.
84. However, whilst there is some consensus that higher education needsto expand, the level at which expansion is taking place does not meet withapproval from all quarters. The Confederation of British Industry (CBI) andInstitute of Directors (IoD), for example, have questioned the continuedexpansion, particularly with regard to employer needs and skill shortages (see,for example, IoD 2004). The Conservative Party also suggests that the currentrate of expansion is to the detriment of the sector more generally, despiteoverseeing much of the transition to a mass system of higher education duringthe 1990s. The WAG views the setting of targets, such as the since modified50 per cent participation target in England, as ‘artificial’, suggesting that they‘distort peoples opportunities’. As mentioned previously, however, UKparticipation rates are below the OECD average, and Wales specifically hasfewer graduates than any other constituent part of the UK.
IVb Widening Access to Higher education
85. A principal aim of the proposed changes to student support and highereducation financing set out in the higher education Act 2004 (DfES 2004) is toencourage those from disadvantaged backgrounds to participate in highereducation in greater numbers. The White Paper The Future of HigherEducation (DfES 2003a) sets out the problem:
The expansion of higher education has not yet extended to the talented andbest from all backgrounds. In Britain today too many of those born into lessadvantaged families still see a university place as being beyond their reach,whatever their ability. (Clarke 2003, p. 2)
It is therefore a central aim of the Higher education Act 2004 to ‘open upaccess to our universities’ (Clarke 2003, p. 2). The aim of opening up accessto higher education for those groups traditionally less likely to experiencehigher education is in many ways laudable. However, the proposals containedwithin the Higher Education Act have a number of implications for potentialstudents from less well-off backgrounds.
14 The government uses forecasts by the Institute for Employment Research to show that between 1999 and 2010 the number of jobs in higher level occupations – the ones most likely to be filled by those who have been through higher education – will grow by over one and a half million. That represents 80 per cent of new jobs over the decade. Almost half of these jobs will be at the associate professional and higher technician level – best served through effective work-focused programmes (DfES 2003a).
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86. First, much evidence suggests that individuals from low-incomehouseholds are put off participating in higher education by the ‘debt’ thatresults as a consequence of participation (Callender 2003a, WAG 2003). Putanother way, individuals from low-income households tend to be ‘debt-averse’and this impacts on their decision to participate in Higher education (seeHesketh 1999 and Callender 2003a). Ethnic minorities are also less likely tofeel comfortable about borrowing, although there is some variation by ethnicgroup (Callender and Kemp 2000). In 2003 students left higher education withan average debt of £12,069, calculated from all sources, such as studentloans, credit cards and overdrafts. Further, as will be detailed in later sections,the latest research suggests that for a number of reasons a significant numberof graduates, particularly non-traditional graduates, are unlikely to benefit fullyfrom the graduate premium i.e. greater earnings over the life-time than thosewith lesser qualifications (Brown et al. 2004). The implications of this areobvious for widening access to higher education.
87. Aversion to debt is not the only reason why individuals from low-incomehouseholds might not consider higher education an option. For an individual toparticipate in Higher education, it must be considered to be a realistic choice.However, for many individuals from low-income backgrounds “university” stillremains the preserve of a small elite. An individual’s decisions with regard tolearning (and career) opportunities is mediated by a number of factors, anddetermined by the resources derived from social background and the kinds ofknowledge they posses of the opportunities available (Rees et al. 1997). Moreplainly, individuals from low-income backgrounds tend not to consider Highereducation as an option, because of poor self-esteem, little or no tradition ofhigher education, low levels of educational attainment and so on. Further, it isunlikely that an emphasis on the pecuniary advantages of higher educationparticipation will encourage those from low-incomes to access such‘opportunities’. An emphasis that relies on ‘the unwarranted abstraction ofeconomic behaviour from social relations’ (Rees et al. 1997, p.486), fails totackle the real barriers to participation.
88. In Wales, it is perhaps most telling that the most deprived areas alsohave the lowest higher education participation rates. For example, in 2001 theproportion of all people aged 16-74 in Merthyr Tydfil (11.6%) and BlaenauGwent (9.3%), two of the most socio-economically disadvantaged areas inWales, was substantially less than for more prosperous areas such as Cardiff(25.2%) (Office of National Statistics 2003). Gorard and Taylor (2001) alsoshow that in 1995/96 only 51 out of every 1,000 18 to 20 year olds living in themost ‘income deprived’ wards in Wales entered the HE sector. This compareddramatically with 155 out of every 1,000 18 to 20 year olds in the least ‘incomedeprived’ wards. Typically, areas of low participation in higher education areareas of industrial decline, too. They are, moreover, places where educationalqualifications have tended not to form part of job specifications, and whereworkers were often recruited with no formal qualifications whatsoever (Fullerand Unwin 1998, Gore and Smith 2001, DETR 2000). As a result education inits formal sense was most probably less valued in these areas than elsewhere.
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89. Nevertheless, the number of Welsh students who accessed highereducation from low-income households in 2001 was higher than the number ofEnglish students from low-income households accessing higher education(Callender and Kemp 2001). Welsh HEIs also tend to encourage participationamong groups that are under-represented in higher education, relative to thepopulation as a whole. Hence, Welsh institutions have a higher proportion ofboth mature and young full time undergraduates from under-representedgroups than the UK in general, and they perform better than the UK as a wholein attracting state school and college entrants. In Wales, 91 per cent ofstudents came from state schools and colleges, compared to 85 per cent UKwide, in 1998/99. Wales was also successful in recruiting those from skilledmanual, semi-skilled and unskilled groups (26 per cent in Wales compared to25 per cent UK wide) and those from low participation areas (15 per cent inWales compared to 12 per cent UK wide) [See Table 6] (HEFCE 2000).Furthermore, Gorard and Taylor (2001) highlight that while participation rateshad increased in both the most and least ‘income deprived’ wards in Wales,the rates of improvement were greater in the most ‘income deprived’ wards(17.1 per cent improvement compared with 10.9 per cent improvement in theleast ‘income deprived’ wards).
Table 6: Widening Access Indicators for Wales and UK
Wales (%) UK (%)HE participation ratesfrom state schools andcolleges
91 85
HE participation fromskilled manual, semi-skilled and unskilledgroups.
26 25
HE participation fromlow participation areas
15 12
[Source: Callender and Kemp 2001]
90. However, the claim that Wales is effective in widening participationmust be treated with some caution. First, it is possible that Wales’s socio-economic base means it naturally acquires more ‘non-traditional’ students.Second, it must also be remembered that Wales is more successful inattracting undergraduate students into Wales than it exports (it ‘imports’24,669 students and ‘exports’ 18,298 students – see Table 5). What must beasked is how many of those students coming into Wales are from lowparticipation sectors of the population. Third, people born and normallyresident in Wales are among the least likely to have a degree compared toelsewhere in the UK. The areas with the lowest participation rates in Wales arein the South Wales Valleys and areas of high socio-economic deprivation.Most noticeably, those from Blaenau Gwent, Merthyr Tydfil and Caerphilly areless likely to posses a degree (or higher) level qualification than those fromother parts of Wales (Statistical Directorate 2003).
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91. A further problem is the retention of those accessing HE from low-income households. In 1998/99 8 per cent of full-time first degree entrants inWales did not continue beyond the year of entry, compared to 10 per cent inthe UK as a whole. More particularly, 9 per cent of young full-time studentsfrom areas of low participation dropped out in the first year of study, comparedto 6 per cent from other areas. These figures are, however, lower than the UKaverage (WAG 2002a).
92. It is the experience of economic decline and high incidences ofdeprivation that are key to understanding poor educational performance inWales (including in accessing higher education). Research suggests that thereis an established, if poorly understood, link between indicators of deprivation –such as low capital investment in schools, high levels of eligibility to freeschool meals and children dependent on Income Support recipients – and lowlevels of educational attainment (DfEE 2000a, Gore and Smith 2001).
93. The Higher Education Act 2004 introduces an access regulator topromote a widening access agenda, but this is in England only. The specificsof the Offa are outlined in Section II. The Conservative Party and some othersare largely opposed to the introduction of an agency that interferes inuniversity business. Layer (2003) argues that Offa would largely replicate thework already being done to widen participation and would actually work with anarrower remit. For this reason, some MPs suggest that Offa should be morelike Ofsted, and that its powers to interfere in admissions policy should actuallybe extended.
V The Student Experience
94. The development of knowledge and skill in the population is central tothe government’s (Westminster and Wales) strategy for a successful economyand more socially just society. It is these goals - a strong and prosperouseconomy and civil and just society - that provide the rationale for theexpansion of higher education. Whilst the link between a more highly skilled(and educated) labour force and the needs of the economy is often overstated,and much more complex than suggested, the need for the individual to investin education in a direct way informs much of recent education policy. This isevidenced in the financial contributions undergraduates now make to theireducation, the policy language of which is mediated by a political discourse ofopportunity and investment. There are, however, a number of implications forthe student experience that are a direct consequence of the current andproposed systems of student support.
95. The student experience today is certainly somewhat different to thatwhen fully supported by public expenditure. Evidence suggests that theinevitability of graduating with a debt (for many substantial) is influencingstudent behaviour and performance in a number of ways, and that the current
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system of student support is to the detriment of the student experience ofhigher education. This section examines the various consequences of currentsystems of student support and tuition fee regimes for the student experience.Where possible, evidence on students at HEIs in Wales is drawn upon.
Va The Cost of Being a Student
96. There is strong evidence that student loans do not cover the living costsof students. This has been the case for some time and there is little evidencethat the situation is improving. Smith and Taylor (1999) estimated the gapbetween the funding available and the funding required to complete a year ofstudy to be £1,300. The NUS (1999) calculated the shortfall for the academicyear 1999/2000 to be closer to £3,225. Callender and Kemp (2000) found theshortfall to be £1,237 for UK students studying full-time and £764 for UKstudents studying part-time for academic year 1998/99. The mean expenditureby students was £6,161 and the available funds from all sources amounted to£4,924. A survey of law students in Wales found 81 per cent expecting toexpend between £2,000 and £6,000 on living costs for academic year 1998/99(Rees et al. 2000). Much of this burden fell on the families of students, andtwo-thirds of students had taken recourse to a student loan.
97. The most recent data from the Students’ Income and ExpenditureSurvey (Callender and Wilkinson 2003) suggests that the shortfall betweenincome and expenditure has increased15.
� The average student income for the academic year 2002/03 was£5,513 (a 7% real increase on 1998/99), and average expenditurewas £6,897 (a real increase of 15%). The shortfall is £1,384.
� Student loans make up more of income than previously; the realvalue of a loan has risen by 70 per cent and student up-take of loanshas increased from 72 per cent in 1998/99 to 83 per cent in 2002/03.Students are also beginning to rely more on paid employment andstudents now take up paid employment in greater numbers, workingan average of 14 hours per week. Student income comprised loansand hardship funds (49 per cent), family (24 per cent), employment(20 per cent), other sources of income and other sources of studentsupport (7 per cent).
� More students also contribute to their tuition fees (up from 20 to 26per cent), and the level of that contribution has also increased – asopposed to parental contribution, which has dropped. With theintroduction of new funding arrangements in 1998, parents nowdivide their contribution between tuition fees and student support.
15 The Callender and Wilkinson (2003) study sample was based on a representative sample of full-time, single, childless, undergraduates aged 25 or under at the start of their course and studying in England and Wales. The survey does not include the experiences of financially vulnerable groups such as mature students and single parents.
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� A student’s living costs have increased by 20 per cent since1998/99. Housing costs have, however, fallen by 5 per cent in realterms, and expenditure on entertainment has risen by 15 per cent.Living costs made up 67 per cent of student expenditure andhousing 19 per cent.
98. Callender and Kemp (2001) provides some useful insight on sources ofstudent income and expenditure for Welsh students, but these record thesituation before the new funding arrangements were introduced in 1998. Theaverage income of a Welsh full-time student in 1998/99 was £4,972, and theirexpenditure was £6,055 for the same period. This leaves a shortfall for Welshstudents of £1,083. Interestingly, despite Welsh students being more likely tobe of low socio-economic status, less than 1 per cent of Welsh students’income derived from social security benefits or access and hardship funds(Callender and Kemp 2001). The majority of Welsh full-time students’ incomederived from family and friends (28 per cent), student loans (27 per cent) andmaintenance grants (19 per cent), in 1998/99. Paid employment was alsosignificant (14 per cent). Expenditure for the same cohort was principally onliving costs (68 per cent) and housing (21 per cent).
Vb Student Debt
99. The shortfall in funding is despite an overall increase in the level ofdisposable income that students have (NUS 1999). The consequence of theincome/expenditure shortfall and changes to tuition fee and student supportarrangements in 1998 is increased levels of student debt. Student debt rose by10 per cent in 2003, according to a survey conducted by Barclays Bank, andhas risen five-fold since 1994 (BBC 2003). The NUS (2003) report that CharlesClarke, Secretary of State for Education, estimated that students charged thefull top-up fees will graduate with an average debt of £21,000, almost doublethe £12,000 debt the government currently records as average. The IFS(2004) calculate that the largest government sponsored debt with parents onan income of £26,000 for a three-year course studied outside London wouldbe £19,335, in 2006/07 prices. The potential debt rises to a maximum £21,875for students whose parents’ income was £33,600 (and no longer entitled to agrant) and declines to £18,664 for those earning above £44,000.
100. Evidence from a number of sources indicates that student debt isalready becoming more pronounced and that borrowing and debt are majorfactors in students’ lives. Callender and Wilkinson (2003) found the anticipatedaverage debt on graduation to have increased by two and a half times since1998/99. Callender and Kemp (2000) reported that student debt rose by 195per cent between 1995/96 and 1998/99, from £777 to £2,743, and £1,209 to£3,131 for mature students. However, the average debt anticipated ongraduation of the 2002/03 cohort was £8,666, and by the end of academicyear 2002/03, 87 per cent of students were in debt (Callender and Wilkinson2003). The level of debt a student might experience varies across a number ofvariables, as indicated in Tables 7 and 8.
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Table 7: Students’ debt by socio-economic characteristics
Type of Respondent Percentagewith debt Mean £ Median £
GenderMaleFemale
8689
5,4795,479
4,7054,973
Age Started Course17-2021+
8791
5,4685,579
4,9004,827
EthnicityWhiteNon-white
8885
5,5495,061
5,0004,536
Socio-Economic ClassHigh – managerial/professionalMiddle – intermediateLow – routine, manual andunemployed.
858893
5,2505,1866,424
4,7004,5365,575
Family member studied atuniversityYesNo
8689
5,2495,844
4,6055,000
Living ArrangementsWith parentsUniversity/collegeaccommodationOther rented accommodation
848491
3,8213,8217,226
3,1903,9017,451
All 87 5,479 4,900[Source: Callender and Wilkinson 2003, p. 128]
101. It is evident that indebtedness varies across a number of variables andthese differences are supported by a number of other studies. According toCallender and Wilkinson’s data, non-white and middle-class students havelower levels of debt than do mature, white and working class students.Moreover, as might be expected, students attending new universities (post-92HEIs) experience more debt than do those who attend old universities. Thereare a number of factors at play here, some of which are outlined below.
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Table 8: Students’ debt by institutional characteristics
Type of Respondent Percentagewith debt
Mean£
Median£
Type of InstitutionOld universitiesNew universities
8391
5,1135,803
4,5825,087
RegionLondonNot London
8588
5,8115,405
5,0774,900
Year of Study1st
2nd
3rd+FinalNot final
8192919285
2,2705,8818,9128,6664,020
3,0006,55510,0979,6734,000
Whether paid feesNonePartFull
919183
6,2967,0974,330
5,5006,7553,819
Taken out a student loanYesNo
9548
6,417615
5,6000
All 87 5,479 4,900[Source: Callender and Wilkinson 2003, p. 129]
102. First, working class students are more likely to have debt quite simplybecause they are from poorer backgrounds and are more likely to need toborrow. This is despite the working classes being less comfortable withborrowing than the middle-classes and less likely to have a bank account toaccess loan payments. Second, working class students are more likely toattend new universities, hence the greater level of student indebtedness atnew universities. Third, mature students are more prone to debt because of anumber of factors, such as dependants, greater levels of householdexpenditure and so on. Fourth, men are more prone to debt because of a morerelaxed attitude to it, compared to women and ethnic minorities. Fifth, culturalreasons also seemingly play a part in attitudes to debt, and are responsible forlower levels of debt among non-whites (see Johnes 1993, Gayle 1994,Callender and Kempson 1996, Hesketh 1999, Callender and Kemp 2000,Furlong and Forsyth 2000, Callender and Wilkinson 2003, Callender 2003a).
103. The evidence suggests that women, ethnic minority (Asian studentsparticularly) and working class students tend to be the least comfortable withdebt, and that men and the middle classes are more ‘confident’ and ‘relaxed’about borrowing (Hesketh 1999). Rather perversely, it is those students whoare most reluctant to borrow are forced into debt, and who are also more likelyto have a greater debt. Working class students are most likely to need to takerecourse to a loan, as are mature students, lone parents, and students withcommercial debts or in receipt of hardship payments or benefits of some kind.
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Callender and Wilkinson (2003) find that students living at home, who aremore likely to be from low-income households, and Asian students, are lesslikely to take recourse to a loan – along with those studying short courses andin London. A major concern for women and ethnic minorities is repayment ofdebt, and evidence suggests that a number of factors, such as familycommitments, labour market disadvantage and poorer wages, affect attitudesto debt (EOC 2000).
104. Debt and the expectation of debt is now a fact for many students, andthis has implications for widening access to higher education, particularly forworking class students (Callender 2003a). Indeed, the present and proposedfunding arrangements ignore the social and cultural factors that informindividual decisions concerning higher education participation. Decisions arereduced to investment decisions, which individuals are meant to approach insome rational egoist way (Fevre 1999). This bears little relation to reality,however, and the process by which an individual chooses to apply to do adegree. Nevertheless, it might be that as debt becomes a more routine part ofstudy that some of these apprehensions will disappear and acceptance ofborrowing (investing) will grow among debt-averse groups, which mightindicate a broader set of socio-cultural shifts. Some commentators on theother hand claim that debt aversion is, in fact, overstated (Bradley andWhitehead 2003).
105. In Wales, a number of small independent studies give some indicationof the situation with regard to debt in Welsh HEIs. The methodologies andfindings of the studies are, however, questionable in some respects, and thefollowing should be treated with caution. The situation with regard to debt inWales is in many ways a reflection of the situation elsewhere in the UK. Asurvey of Law students in Wales suggests that the current fundingarrangements have implications for postgraduate pupilage and vocationaltraining: Law students in Wales are struggling to meet these costs (Rees et al.2000). The same survey reported 65 per cent of law students to be makingcontributions to tuition fees and 77 per cent of students to be in debt by thetime they completed their course. The average contribution to fees was £865and the average debt was expected to be in the region of £6,000, although thisvaried widely by institution.
106. A more recent study conducted by UWCM Students’ Union (2003)suggests that all UWCM students experience debt and the severity of the debtvaries according to length of course, levels of financial support and thefinancial pressures of particular courses. Students completing longer coursesat UWCM tend to have the greatest debts, but also benefit from a goodstarting salary and early pay increases. The reverse is true for thosecompleting shorter courses. Across the range of courses, from medicalstudents to nurses, the level of debt ranged from an average £4,445 fordiploma nursing students to £17,592 for medical students16. Those with tuitionfee exemptions (for the majority of UWCM students, fees are met by the NHS)and financial support experience less debt than those without an exemption or
16 Five per cent of medical students graduated with debts over £45,725.
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access to financial assistance of some kind, with the exception of dentalauxiliary students. More generally, the report highlights that ‘there is not astereotypical student who faces financial difficulty or extreme levels of debt’(UWCMSU 2003, p.43). It is therefore possible the NHS will face increasingdifficulties attracting students and staff, who may choose career paths anddegree courses that are less consuming of individual resources.
107. UWCMSU (2003) argue that trebling fees, as would be the case if thenew proposals go ahead, would worsen considerably an already parlous stateof affairs for UWCM students. This same argument might, however, be appliedto any number of students, studying any type of degree and at any number ofinstitutions. It is important, therefore, that financial support reaches those mostin need. However, evidence suggests that students are confused aboutfunding arrangements and are unclear about what support is available. Moreworryingly, there are implications for the most vulnerable students and forwidening access to HE when targeted support fails to reach those who mostneed it because it is too transient and complex.
108. A number of studies suggest that students are confused about thecurrent funding arrangements, and there will be more confusion if the newproposals are accepted and promoting awareness of them is not handledproperly. The low number of applications for ALGs in Wales compared to thenumbers expected gives some indication of the problems to be faced.Following the introduction of the current arrangements, some students wereunaware that maintenance grants had been abolished or that they wereentitled to fee remission, and others expected the same entitlements asprevious generations (NUS 1999, Archer and Hutchings 2000). Disadvantagedgroups tended to experience more difficulty in accessing information onfunding (Archer and Hutchings 2000) and it is suggested that the mediaaccessed by disadvantaged groups presents things in a way that discouragestheir participation in HE (Watt and McGavock 1999). Other studies highlightthe ‘obscure and arbitrary’ nature of hardship funds and loans (UDSA 1999, p.10), and more research is required on the difficulties faced by studentsaccessing these funds.
109. It is evident that student debt is already at record levels and that thereare a number of implications for widening access to higher education and theway ‘debt’ is experienced, both qualitatively and quantitatively, by differentgroups of students. There are moreover a number of consequences, notdiscussed so far, which relate directly to the consequences of debt for attritionrates and student performance. These are discussed in the following section.
Vc The Consequences of Student Debt
110. Evidence suggests that students are increasingly taking up paidemployment during term time to minimise the extent to which they becomeindebted, and that this is impacting in negative ways on student performance.Perhaps more worryingly, some evidence indicates that increased levels ofdebt are leading to more numbers of students leaving their courses and more
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likely to experience depression. A recent study conducted by University ofLondon suggests that financial hardship is the most important factor affectingstudents’ level of depression. In turn, this affects student performance(Andrews and Wilding 2004).
111. More students are taking recourse to paid employment to meet thecosts of HE participation than was previously the case. The Income DataService (1999) reported that 38 per cent of students took up part-timeemployment in order to finance their studies, and Callender and Kemp (2000)found 62 per cent of students to have taken up paid employment at some timeduring the 1998/99 academic year. In Wales, 54 per cent of law studentsbelieved it would be necessary to take up employment during term time (Reeset al. 2000). This varied by HEI: Glamorgan University has the largest numberintending to work (and the most working class students) and Aberystwyth theleast (and most English students). The most recent data suggest that sevenout of ten students rely on paid employment to make up some of their income(Callender and Wilkinson 2003).
112. Older students (over 21 years of age), working class students, womenand students living at home, are more likely to be in paid employment. Olderstudents are also more likely to take employment during term-time, to worklonger hours, and to pursue the same employment throughout the year. Paidemployment is, however, a fact of life for the majority of students. The averagenumber of hours worked by all students is 14 hours, which falls to 10 hourswhen based on term time hours alone. Older students work an average of 15.2hours per week (397 hours during a whole term) and younger students 14.2hours (294 hours). Students tend to be forced into low paid employment (thusalso forcing them to work more hours); the average net wage is £5.07 perhour. Older students earn more per hour (£5.47) on average than youngerstudents (£5.02). The disparity is because older students work more hours, aremore likely to be in work and negotiate better rates of remuneration (i.e. hourlyaverage rates of pay) than younger workers (Callender and Wilkinson 2003).
113. The most recent studies report that students are working more hoursthan previously. Previously, full-time students worked an average of 11 hoursper week and earned on average £56 per week. Evidence suggests thatworking more than 15 hours a week damages a student’s ability to keep upwith academic study (Income Data Services 1999, Callender 1999, Smith andTaylor 1999, Callender and Kemp 2000). It is difficult to know if the proposedfunding arrangements will result in students working fewer or more hours.
114. What is evidenced is that grade deflation is a result of students beingforced to prioritise work (and financial obligations) over study. According toCallender and Kemp (2001) 25 per cent of Welsh students believedemployment to have a detrimental affect on their study. This may also then ofcourse impact on the opportunities available to students post-graduation, givenresearch at Cardiff University, which shows that in absolute terms,
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those with firsts tend to be better financially rewarded within the labour marketthan those with 2.2s, and are also more likely to be happy with the extent towhich they feel they are using their skills and abilities in their work after 5years in the labour market (Smetherham 2004).
115. There is also some evidence of a link between student debt andincreased dropout rates17. Although concrete evidence on a link betweenfinancial hardship, changes to support arrangements and increased rates ofattrition is thin on the ground, a number of commentators claim a link betweenfinancial hardship and increased rates of dropping-out (see Watt andBlicharski 1997, Callender 1999, NUS 1999). The NUS (1999) claim that over50 per cent of students consider leaving their courses because of financialhardship, and drop-out rates increased significantly between 1983/84 and1994/95, which coincides with the introduction of student loans and removal ofentitlement to benefits. There has, however, been a massive expansion ofhigher education, and an increase in dropout rates may therefore be expected.
VI The Graduate Premium
116. This section of the review investigates what current systems of studentfunding mean for the graduate premium, particularly for those entering thelabour market from different kinds of institutions (e.g. post-92 HEIs as opposedto those from older, pre-92 institutions) and for non-traditional students. Inparticular, it considers the role of gender, social background and educationalbiography (subject studied and institution attended) on the graduate premium.
117. Much of the discussion concerning university fees revolves aroundgraduate earnings and the ‘graduate premium’, so it is important to be clearwhat we are referring to when we talk of a ‘graduate premium’. The term itselfis often taken to refer simply to the supposed economic premium thatgraduates gain within the labour market by virtue of having a degree. In otherwords, it suggests that being a ‘graduate’, as opposed to a ‘non-graduate’,brings a financial premium in terms of earnings for graduates within the labourmarket, particularly over the medium and long term. However, a considerationof the graduate premium also necessitates a consideration of the types of jobsthat different groups of graduates enter, and the extent to which they are ableto utilise their graduate level skills, abilities and knowledge within theworkplace. Here a consideration of the demand for graduate labour isparamount.
17 It is important to note that the link between debt and drop-out rates is difficult to establish, because when a student leaves a course the reason for his/her departure is not recorded.
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118. In policy circles, considerable interest has been shown in support of theclaim that a graduate education brings with it significantly enhanced earningpower. The premise that graduates have, on average, significantly higherlifetime earnings than those with lesser qualifications, is the premise uponwhich much of the Higher Education Act, outlined in Section II of this Review,is based. The Future of Higher Education White Paper for example states that:
Our system has successfully transformed itself from an elite system – in which,in 1962, only around 6 per cent of those under 24 participated – to one wherein England around 43 per cent of those aged between 18 and 30 go touniversity. Despite the rise in the numbers participating in higher education,the average salary premium has not declined over time and remains thehighest in the OECD. (DfES, 2003a: para 1.9)
Even though the number of graduates has risen significantly over the lasttwenty years, the gap between graduate and average earnings has notnarrowed at all. If anything, it has increased. And the returns to HE are higherin the UK than in any other OECD country. There are real jobs available andno reason to believe that Higher education will lose its value as more youngpeople are educated to higher levels – especially if the main part of theincrease comes in new and employer-responsive types of degree. (DfES,2003a: para 5.6)
119. This section now explores some of the latest empirical researchevidence in relation to the graduate premium, focusing on the implications ofthe current tuition fee regime and changes in HE and the labour market on theopportunities and outcomes that exist for different groups of universitygraduates. It is divided into 2 sections: The first section looks at the issue ofgraduate earnings, and the second considers the types of jobs that differentgroups of graduates enter, looking at the issue of ‘over-qualification’ and thedemand for graduate skills and qualifications, focusing on Wales wherepossible.
VIa Graduate Earnings
120. Human capital interpretations of graduate employability, which haveinformed much government policy on HE and fed in to debates on fee andfunding regimes, continue to assert the primacy of the ‘learning is earning’argument: More learning or investment in a higher education it is asserted, willsomehow automatically lead to enhanced earning power for all graduates, aswell as in increased opportunities for accessing enjoyable and rewarding‘knowledge work’ within the labour market. However, as the number ofgraduates in the labour market increases, other commentators havehypothesised that the graduate earnings premium will decline. It has alsobeen suggested that within the context of a mass system of HE some degreesubjects will attract higher earnings premium while others will decline, and thatthe distribution of graduate earnings may widen as the range of ability ofgraduates widens. This section begins by considering the research evidencerelating to differences in average earnings between graduates and non-
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graduates, and then considers further the existence of any within-groupdifferences in the earnings of different groups of university graduates e.g. bygender, educational biography (institution attended and subject studied) andsocial background.
121. According to Brynin (2002a), as industry sectors become saturated withgraduates, wage rates fall, and graduates only maintain their premium if theywork in a field where their skills are in short supply. He argues that this meansthat as more graduates enter the labour market, so wages will be depressed,particularly in areas where there is less demand for graduates. According toBrynin’s (2002a) analysis therefore, career starts for many graduates areincreasingly at a lower status point, and overall pay differentials betweengraduates and non-graduates are decreasing. In terms of gender differencesBrynin (2002a) did, however, find that female graduates are earningconsistently more than their counterparts without degrees, even in highgraduate density areas and even in a more competitive employment market.Male graduates on the other hand who work in sectors of high graduatedensity tend to earn less than those where graduate employment is lessdense.
122. Analysis of data from the Labour Force Survey (LFS) by Walker andZhu (2003), in contrast, provides strong evidence to support the view thathigher levels of investment in education continue to result in higher levels ofearnings and productivity, despite the significant expansion of HE. Walker andZhu (2003) show that the average rate of return, in terms of earnings, for anadditional year of education, ranges between 8% for men and 9% for women.Moreover, they argue that there is no evidence that this rate of return hasdeclined over the period 1993 to 2001.
123. More recently Elias and Purcell (2004) have conducted a series ofresearch projects following national cohorts of graduates from the fullspectrum of UK undergraduate provision. Their work includes the examinationof trends in graduate salaries over a relatively long period of time, andsuggests that the average premium attracted by the possession of a degreeappears to have increased rather than diminished in recent years. They show,for example, that the rate of growth of real earnings in the six to seven yearsafter graduation is higher for the 1995 cohort that they followed than it was fora similar cohort who graduated in 1980. Furthermore, using data from twonew longitudinal studies on people who graduated in 1995 and 1999, Elias andPurcell (2004) show that three and a half to four years after graduation, the1999 cohort had achieved higher real earnings than the 1995 cohort (Elias andPurcell, 2004). This suggests a continuing (if not increasing) premium forgraduates over time. However, this positive outlook of the labour market forgraduates stands in stark contrast to the work of other researcherssuch as Brynin (2002a, 2002b) and Brown et al. (2004), who argue that theoutlook for graduates is not nearly so positive as Elias and Purcell’s work
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suggests - particularly for untraditional groups of graduates (e.g. those whohave attended low status institutions, or for those from working classbackgrounds) seeking traditional graduate level jobs18 or recruitment on tohigh status fast track recruitment schemes.
124. In terms of gender differences however, Purcell’s (2002) report for theEqual Opportunities Commission, and Elias and Purcell’s (2004) more recentanalysis of graduate earnings, both highlight the persistent gender differencein graduate earnings. Elias and Purcell’s (2004) comparison of the earnings of1995 and 1999 graduates for example indicated that although there had beenno decline in real earnings in the early career paths of male graduates, and asmall relative improvement in the earnings of female graduates, overall womengraduates were still earning less than their male counterparts (Elias andPurcell, 2004). Figure 1 shows the evolution of the gender gap in pay among1995 graduates in full-time employment: for their first main job after graduatingin 1995 (as long as the job was started before January 1996), at the time ofthe first survey of this cohort (1998/99), and at the time of the second survey(2002/03) (Elias and Purcell, 2004).
Figure 1: Average Annual Gross Earnings of 1995 Graduates by Gender
£0
£5,000
£10,000
£15,000
£20,000
£25,000
£30,000
First main job after 1995degree
Earnings in 1997/98 Earnings in 2002/03
Aver
age
annu
al e
arni
ngs Men
Women
[Source: 7 Years On: A Survey of the Career Paths of 1995 Graduates, Eliasand Purcell 2004, p.16]
125. Elias and Purcell’s (2004) comparisons reveal that the unadjustedearnings gap (without taking account of gender differences in subject studied,social class background, entry level qualifications, class of degree obtained,etc.) has been increasing steadily as careers evolve over the seven and a halfyear period since graduation. Women graduates reported full-time annualgross earnings in their first job after graduation, which were, on average, 11
18 There continues to be much debate about what actually constitutes a ‘graduate job’ however.
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per cent less than those of male graduates. Three and a half years later thishad risen to almost 15 per cent, then to over 18 per cent by 2002/03 (Elias andPurcell, 2004). While they argue that a significant proportion of the 18 per centgender difference in the earnings of graduates working full-time can beaccounted for by gender differences in hours worked and sectoral paydifferentials, a new finding shows that part of the gender difference in earningsis correlated with gender segmentation in the workplace (Elias and Purcell,2004). However, some caution must be taken with these figures. Comparingtwo values over time must consider the relative change in both values overtime. Therefore, proportional change or proportional differentials over time, it isargued, is best calculated using (a-b)/(a+b), where a and b are the two figuresbeing compared (see Gorard 2001 for further explanation). It would appearthat Elias and Purcell have calculated change in pay using (a-b)/b. Thisignores the overall growth in pay over time of both male and female graduates.Consequently, while the figures may appear at first to suggest the gap in payis widening, if we considered the relative increase in pay of both male andfemale graduates we may see a slightly different picture. Without the raw datait is difficult to recalculate these figures in this way accurately, butapproximately they are 1995 – 9 per cent; 1997/8 – 7 per cent; and 2002/03 –9 per cent. If these figures were correct then this would suggest that genderdifferentials in graduate earnings are relatively unchanged, although thegender gap remains.
126. Recent research at Cardiff University19, which has explored the value ofthe first class credential within the labour market, shows significant differencesin the earnings of graduates after 5 years in the labour market according todegree classification. Although differences in earnings between those withfirsts and 2.2s one year after graduation (i.e. for the 2001 cohort) werestatistically insignificant, a consideration of the incomes of the 1997 cohortsuggests that after 5 years in the labour market, the differences in earningsbetween those with firsts and 2.2s have become more prominent, as shown inTable 9.
Table 9: Average Annual Income of Respondents by Degree Class (1997Cohort)
First 2:2 TotalsCount Col % Count Col % Count Col %
Under £19,999 57 26.1% 47 31.8% 104 28.4%£20,000 - £29,999 74 33.9% 67 45.3% 141 38.5%£30,000 - £39,999 41 18.8% 25 16.9% 66 18.0%Over £40,000 46 21.1% 9 6.1% 55 15.0%Totals 218 100% 148 101% 366 100%[Source: Smetherham 2004, p.168]
Notes: P = 0.001 chi-square = 17.324, 0 cells have expected count less than 5 19 These data are based on a sample of 834 graduates with 1sts and 2.2s from UK institutions representing a wide range of status positions. 2 separate cohorts of graduates were surveyed – those from 1997 and 2001. Although this sample does not purport to be fully representative, the findings do give an indication of the premium of having a 1st over a 2.2, at least within this sample.
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127. The data presented in Table 9 show that after 5 years in the labourmarket those with firsts are significantly more likely to be earning over£40,000, and are significantly less likely to be earning under £30,000, relativeto their counterparts with 2.2s. Those with 2.2s are significantly more likely toearn under £30,000. After 5 years in the labour market by far the majority ofthose with 2.2s (45%) are earning between £20,000 and £29,999. Thedifferences in earnings are most apparent at the extremes. Taken together, acomparison of the incomes of the 2001 and 1997 cohorts suggests that afterfive years in the labour market, those with firsts do better than before inrelative terms in terms of earnings, and what is more, that over time thesedifferences become statistically significant. In this respect the financial returnson having a first within the labour market appear to actually grow over time,relative to the financial payoff of having a 2.2 credential. Given what was saidearlier about the educational performance of students (particularly workingclass and financially disadvantaged students) who increasingly have to workduring their time at university in order to afford housing and living costs, andwho therefore may not perform as well and do not have so much time todevote to study, these data raise serious questions about which groups ofstudents are most likely to achieve firsts at university, and who are thereforemore likely to receive a higher earnings premium within the labour market.
128. This same research exploring the relative value of the first classcredential within the labour market also showed significant gender differencesin the earnings of graduates with the highest academic qualifications on entryto the labour market, as shown in Table 9:
Table 10: Average Annual Income of Respondents with Firsts by Gender(2001 cohort)
Male Female TotalsCount Col % Count Col % Count Col %
Under £14,999 47 37.3% 57 49.1% 104 43.0%£15,000 - £19,999 24 19.0% 29 25.0% 53 21.9%£20,000 - £24,999 29 23.0% 14 12.1% 43 17.8%Over £25,000 26 20.6% 16 13.8% 42 17.4% Totals 126 100% 116 100% 242 100%[Source: Smetherham 2004, p. 202]
Notes: P = 0.034, chi-square = 8.648, 0 cells have expected count less than 5
129. The data in Table 10 show clearly that on entering the labour market,women are at a substantial earnings disadvantage compared to their first classmale peers – moreover these differences are statistically significant (p =0.034). Men with firsts in the sample are significantly more likely to be earning£20,000+ than their female peers with firsts on entry to the labour market.Few women with firsts in the sample who graduated in 2001 were earning over£20,000 at the time of the survey: in fact over 70% of women with firsts whograduated in 2001 are earning below £20,000, compared to roughly
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50% of similarly qualified men. These data suggest that women remaindisadvantaged in terms of earnings on entry to the labour market compared totheir equally well-qualified male peers – even with the highest level of degree-level qualification.
130. Table 11 compares the incomes of men and women with firsts from the1997 cohort, and thus gives an idea of any changes that may occur over time,although it must be borne in mind that these are two separate cohorts ofgraduates. Given that they had had 5 years in the labour market the originalincome data were recoded into a smaller number of bands.
131. The data in Table 11 show first of all that the earnings of those withfirsts do improve in absolute terms over time, for both women and men.Furthermore, although the differences between the genders are statisticallyinsignificant after 5 years in the labour market, looking at respondents’average annual income by gender after 5 years we still see the familiargendered pattern, with women with firsts being more likely than their malecounterparts to earn both under £19,999 and between £20,000 and £29,999.Thereafter the position is reversed, with men faring relatively better at the£30,000 upwards mark 5 years after graduation, and at each subsequent stepof the income ladder racing progressively further away from their femalecounterparts with firsts. In contrast to women with firsts, men with firsts are alot more likely to be earning over £30,000 after 5 years in the labour market.
Table 11: Average Annual Income of Respondents with Firsts by Gender(1997 cohort)
Male Female TotalCount Col % Count Col % Count Col %
Under £19,999 25 20.0% 31 34.1% 56 25.9%£20,000 - £29,999 42 33.6% 31 34.1% 73 33.8%£30,000 - £39,999 27 21.6% 14 15.4% 41 19.0%Over £40,000 31 24.8% 15 16.5% 46 21.3% Totals 125 100% 91 100% 216 100%{Source: Smetherham 2004, p. 203]
P = 0.078, chi-square = 6.804, 0 cells have expected count less than 5
132. Perhaps more importantly with regard to the debate over studentfunding, the data presented in Table 10 show that even after five years in thelabour market well over a quarter - 34% - of women with firsts from the 1997sample are still earning under £19,999. Even a fifth of men with firsts from theolder cohort are still only earning under £19,999 after 5 years in the labourmarket, which is not what we would expect within a knowledge economywhere the returns on a university degree are supposedly high financially.
133. A recent paper by Chevalier and Conlon (2003) furthermoredemonstrates that the financial returns associated with degree levelqualifications vary substantially according to the type of HEI attended, thesubject studied and the social class of graduates. Relying on a technique that
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pairs students of similar characteristics in different university types, they findthat graduates at Russell Group and old universities earn, respectively, up to6% and 2% more than those from modern universities. Raw wage differentialsfor the 1990 cohort in 2002 prices are £29,000 for those from Russell Group,£26,500 for old and £25,500 for modern universities20. Chevalier and Conlon(2003) also show that even after accounting for personal characteristics,graduating from a Russell Group institution adds between 0 and 6% to a malegraduate’s earnings compared to graduating from a modern university, and2.5% for women in the younger cohorts. However, they are unable toconclude whether increases in earnings are temporary or permanent.
134. Chevalier and Conlon (2003) use their findings to argue that byimplementing a unique price of HE (i.e. the present single fee for universities),the government currently subsidises graduates attending more prestigiousinstitutions more generously than others, and that there is, therefore, somejustification in the claim that institutions should be allowed greater freedom insetting their tuition fees. However, as other commentators (e.g. Bowers-Brown and Harvey, 2003) have argued, introducing top-up fees at the ‘bestuniversities’ may pose considerable potential problems for fair access forstudents from disadvantaged socio-economic backgrounds, or the resurrectionof a hierarchy of universities based solely on top-up fees.
135. As well as gender and institution attended, the subject studied at HElevel has a very significant effect on the additional earnings gained bygraduates. Walker and Zhu (2003) for example find that people with Arts,education, languages or social science qualifications tend to have relativelylow earnings premiums - if at all. At the other end of the scale those with Law,health, economics, business or maths degrees may earn up to 25% more thantheir equivalents with 2 or more A-Levels (Walker and Zhu, 2003).
136. Elias and Purcell (2004) also show that degree subject studied is apowerful predictor of later earnings. Those who took on an arts degree earn17% less than law, social sciences, engineering, business studies or educationgraduates. According to their data humanities and language graduates alsocontinue to show a lower graduate premium relative to these groups. Incontrast, maths and computing graduates and those who studied engineeringrecord annual earnings which are 10-12% higher than the reference groups.
137. Such research on graduate destinations strongly indicates thathumanities graduates, along with those who studied arts degrees, tend to havegreatest difficulty in accessing employment that makes use of their 20 The Russell Group is an association of nineteen major research-intensive universities of the United Kingdom. Formed in 1994 at a meeting convened in the Hotel Russell, London, the group is composed of the vice-chancellors/Principals of the following universities: University of Birmingham, University of Bristol, University of Cambridge, Cardiff University, University of Edinburgh, University of Glasgow, Imperial College of Science, Technology & Medicine, King's College London, University of Leeds, University of Liverpool, London School of Economics & Political Science, University of Manchester, University of Newcastle upon Tyne, University of Nottingham, University of Oxford, University of Sheffield, University of Southampton, University of Warwick, University College London (http://www.hero.ac.uk/inside_he/russell_group3706.cfm?menu=true).
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undergraduate degrees and among those most likely to be in jobs for whichthey do not receive a graduate earnings premium. Many of these graduatesmay, of course, begin work in the public or voluntary sector, where the returnto society compensates for an initial lower, personal financial return.
138. Furthermore, the latest research suggests that for a numerous reasonsa significant number of graduates, particularly ‘non-traditional’ graduates, areunlikely to benefit fully from greater earnings over their lifetime than those withlesser qualifications (Brown et al. 2004). Brown et al. (2004) argue that the‘over-supply’ of graduates within the labour market means that manygraduates will not find jobs that repay their investment in HE. They also showthat widening HE access has done little to help working-class graduates (alarge proportion of whom attend new universities) get ‘elite’ jobs and on to fasttrack training programmes21. This is because the focus has been more on thesupply of graduates than on the demand for particular types of graduatelabour; different groups of graduates have different orientations to the labourmarket; and, employers continue to discriminate against certain ‘types’ ofuniversity and candidate.
139. Other research on the relative value of the first class credential withinthe labour market (Cardiff University) shows that after 5 years in the labourmarket, looking at the 1997 cohort, those with firsts in the sample weresignificantly more likely to be in a job for which a degree was a formal entryrequirement, compared to those with 2.2s, although even a large minority ofthose with firsts remained in jobs for which a degree was not a formal entryrequirement. Nearly half of all respondents with 2.2s, even after 5 years in thelabour market, were in a job for which a degree was not a formal entryrequirement (see Table 12).
140. A recent report by the IES (Pollard et al., 2004) also suggests thatstudents from families with no experience of university do least well aftergraduating. The IES researchers drew on the experiences of 1,500 peoplewho applied to enter HE in 1998, the first year of tuition fees, and who weresurveyed for a third time in 2003, two years after graduating. According to thisreport, many graduates were surprised at how difficult it was to find work, anda substantial minority went into temporary or low-quality jobs. Although forsome this was for ‘breathing space’, or to start to pay off debt, for others it wasdue to ‘a lack of viable alternatives’. Those earning the higher salaries, inwhat they perceived to be good quality jobs, tended to be male, from highersocio-economic groups, and from families with higher incomes – i.e.‘traditional’ graduates. Those in poor quality jobs tended to be from ‘non-traditional’ backgrounds – poorer homes or areas – and to have done less wellat university. The report states that “those who moved to study and work werethe most likely to find ‘good’ jobs; those who returned to their home region tolook for work had a particularly difficult time”. They argue that this in turn
21 Elite job is defined as ‘managerial and professional employment with leading blue-chip companies’ (Brown et al. 2004).
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reinforces the deprivation trap, because increasingly youngsters are tending tostudy at their ‘local’ university and live at or near the family home to savemoney: “Costs were a significant issue for many”. They found that theaverage graduate debt of the graduates they surveyed was almost £10,000 –with those on low family incomes and who studied away from home having thehighest debt.
Table 12: Whether a degree was a formal entry requirement forrespondent’s current job by degree class (1997 cohort)
1st 2:2 TotalCount Col % Count Col % Count Col %
A degree was a formalentry requirement 150 75.4% 72 51.4% 222 65.5%
A degree was not aformal entry requirement 47 23.6% 60 42.9% 107 31.6%
Don't know / not sure 2 1.0% 8 5.7% 10 2.9%
Total 199 100% 140 100% 339 100%[Source: Smetherham 2004, p.181]
P = 0.000, chi-square = 23.013, 1 cell has expected count less than 5
141. According to the most recent AGR graduate recruitment survey (AGR,2004), graduate starting salaries are expected to increase by 3.9% in 2004,compared to the salary rates paid in 2003. The predicted median graduatestarting salary for 2004 is £21,100. However, the range can vary enormously,depending also on sector and region.
142. According to the AGR (AGR, 2004), the highest starting salaries in 2004will be for graduate positions in investment banking, consulting, and solicitorsor barristers, where employers paid premiums of between £7,500 and £15,000above the median salary for 2003. The lowest graduate salaries reported werefor positions in purchasing, science, research and development, and retailing.The premium is also different for graduates who work in the public, not-for-profit and private sectors, along with their widely differing pay levels.
143. Regionally, there were very noticeable variations in the salary levelspaid in different parts of the UK (AGR, 2004). London offers graduates thehighest median rate of £24,000, although this does not include any Londonweightings or allowances that employers provide. Salaries in the South Eastof England are also above average, but rates paid elsewhere in the UK aregenerally below the median national salary of £20,300. Positions in Yorkshire,the North East of England, Wales and Scotland are the lowest paid. This couldbe very significant to the impact of tuition fees in Wales since relatively lowgraduate earnings in Wales could either prevent students from participating inHE or could increase the number of graduates who leave Wales foremployment.
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144. It is often argued that students should contribute more towards thecosts of HE because of the extra income, on average, they will earn by virtueof having a degree. However, promoting ‘average’ benefits is in many waysunhelpful for potential students, and is misleading for a number of reasons.For a start, the employment market is too complex to enable the calculation ofan ‘average’ graduate premium. Furthermore, the research evidencepresented in this section demonstrates that there are differential rates of returnfor different groups of graduates, and that not all graduates benefit from HEequally in terms of earnings. ‘Average’ earnings mask considerable variationin the additional earnings gained by graduates in terms of gender, socialbackground, degree subject, institution attended, region and sector of work.Furthermore, the idea of an average premium neglects the reduced earningpotential of more mature graduates or those who are likely to take careerbreaks.
VIb The Demand for Graduate Skills / Graduate ‘Over-Qualification’
145. As well as considering the earnings premium related to the possessionof a degree, a consideration of the demand for graduate skills andqualifications (particularly in relation to Wales) is crucial, as is a considerationof the types of jobs that different groups of graduate enter.22
146. ELWa report findings (Felstead, 2002, reported in Ashton et al., 2003)that, over the period 1992-97, skill levels in Britain as a whole have been risingwhilst skills in Wales have declined on all measures. They argue that therehas been (i) an increase in the proportion of jobs for which no qualificationswere required; (ii) a decline in the proportion for which graduate qualificationswere required; (iii) an increase in the proportion of jobs requiring less than 3months training, and; (iv) a decline in the proportion requiring more than twoyears training time23.
147. Ashton et al. (2003) suggest that in two out of three measures to assesswhat broad skills and qualifications employers require, Wales was located atthe bottom end of the UK regions. Only the Eastern region and the EastMidlands had lower scores than Wales. On the training time index (whichmeasures the length of time it takes to train for the job), only the East Midlandshad a lower score than Wales.
148. The latest AGR graduate recruitment survey (AGR, 2004) shows that interms of location, there were more graduate jobs at AGR employers in Londonand the South East in 2003 than all other parts of the UK together (AGR, 2004:Table 2.5). Over 40% of vacancies were in the capital, with noticeably fewerjobs available in the Midlands, the North West, and the South West ofEngland. Fewer than one in twelve graduate positions were to be found inScotland, Wales and Northern Ireland.
22 As mentioned previously, there continues to be much debate about what constitutes a ‘graduate job’, and what being ‘over-qualified’ actually means however. Furthermore, the relationship between skill and income continues to pose significant problems for researchers.23 These data are preliminary and should be treated with caution.
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149. Brown, Hesketh and Williams (2003) state that over 300,000 graduatescompeted for less than 15,000 ‘elite’ jobs in 2001:
The idea that the ‘more you learn the more you earn’ has a degree of validityas long as other people are not learning the same things, otherwise one isrunning to stand still (Brown et al., 2003 p.9).
According to Brown et al. (2003), accepting a job that does not require agraduate qualification is de-motivating and can leave many graduates with thefinancial debt incurred through studying, alongside an income that cannotsupport repayment. For them, the problem is based on an intensifyingproblem of mismatch between supply and demand.
150. Kivinen and Ahola (1999 p.197) also support the notion that thegraduate advantage has been weakened by increased participation in highereducation:
It is advisable for each individual to proceed as far as possible in formaleducation, in order to minimise the personal risks. Yet as the number ofgraduates increases, the benefit offered by a degree diminishes.
151. Brynin (2002b) presents evidence, using BHPS and LFS data, tosuggest (i) that an upgrading of labour does not adequately describe recentchange in employment, and (ii) that over-qualification is not a temporary factorresulting from changed employment practices. He therefore argues that over-qualification should be viewed as having some sort of structural causation, andsuggests that the social demand for education may be causing a ‘bunching ofqualifications’ at higher levels, with the result that employers cannot easilydiscriminate between different apparent skill levels. As a result, he argues,they reduce the rewards for such skills (Brynin, 2002b). According to a recentreport by Purcell et al. (2002):
Many employers were questioning whether the possession of a degree was anappropriate or necessary prerequisite for the jobs they wanted to fill’, and ‘forthe more general management, admin and service occupations … [employers]were more likely to regard graduate status as a proxy for potential … Largeemployers who offered traditional fast-track graduate trainee schemes told usthat even on these, many of the jobs graduates did in their organisations didnot require a HE background (Purcell et al., 2002 p.10).
152. A recent IES study (Perryman et al., 2003) to inform regional efforts toretain and recruit graduates for the benefits of the South West economyhighlighted the importance of the demand for graduates and suggested thatthe movement of graduates out of the region, and the reasons they give forgoing, is due primarily to the lack of adequate job opportunities. The mostpopular destination for those expecting to leave the South West was Londonand the South East followed by the Midlands and Wales. However, moreresearch needs to be undertaken in order to identify the true extent ofemployer demand for graduates within Wales in particular.
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153. In terms of subject-based differences, Dolton and Silles (2001) foundthat arts/humanities or language graduates were more likely to be ‘over-educated’ than graduates of other faculties. They also argue that graduatesbearing high financial debt commitments upon leaving university have poorerprospects in terms of employment-education match than their better off peers.Geographical mobility plays a significant role in allocating graduates to goodjobs, with graduates who relocate being more likely to find workcommensurate with their educational qualifications. They also show thatgraduates with degrees in non-graduate jobs earn, on average, no more thanworkers with no qualifications in the same job.
154. As Keep (2003) argues, there is no proven direct correlation betweennumbers of graduates and economic success within an apparently‘knowledge-driven economy’. The Future of HE White Paper stated that‘demand for graduates is very strong, and research shows that 80% of the 1.7million new jobs which are expected to be created by the end of the decadewill be in occupations which normally recruit those with higher educationqualifications’ (DfES, 2003a). Labour market studies, however, do notnecessarily bear out that assertion, indicating that although there will certainlybe a demand for more skilled workers at technician level, forecast of futuregraduate demands are not so certain (Keep, 2003).
155. Other researchers, in contrast, point out that globalisation has fostereda new typology of graduate jobs (Elias and Purcell, 2003). Within the UKalone there is now a wider range of occupations and new occupations that canabsorb graduates, and although a number may be underemployed at theinception of their careers, almost all are assimilated into the labour marketwithin seven years. Purcell notes that:
There is little evidence to support the argument that there is an oversupply ofgraduates. Over the past 25 years the number of jobs that can accommodategraduates has increased by three million. Forecasts suggest this trend willcontinue. (Elias and Purcell 2003).
156. According to Graduate Prospects (2004), those from old universitieswere more likely to be in jobs for which a degree was required, which theybelieved to be appropriate and which used their graduate skills andknowledge. They were also more likely to be satisfied with their careerprogress to date, and less likely to have experienced difficulties in obtainingappropriate employment. However, those who had done vocational courses orcourses with a work experience component were more likely than others to bein career-related employment, regardless of where they studied. The ‘milkround’ activities of large graduate employers continue to target more ‘elite’institutions in their search for ‘the best talent’ however.
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157. The doctorjob.com student survey (2003) highlights that manygraduates are disillusioned and ‘feel betrayed’ by the current system, and thattheir expectations have not been met. In particular, the survey says thatgraduates from new universities feel most let down by the recruitment processand the selective recruitment methods of employers.
158. Despite much research into graduates and the labour market in generalin the UK, there is a relative lack of research specifically on Wales, focusing onthe graduates of Welsh institutions and the demand for graduates by Welshemployers. Clearly the unique make-up of Wales’ economy (the largerproportion of SMEs for example) means that the skills needs of Wales and ofWelsh employers may differ in some quite significant ways from those of otherparts of the UK. There is also the important question of the proportion of(Welsh) graduates who study in Wales and subsequently go across the borderto England – or even further a-field – for employment, and how this varies fromregion to region and institution to institution. Clearly these cross-border issuesneed further investigation.
159. Despite the contradictory nature of much of the evidence in relation tothe ‘graduate premium’, the question of personal versus social rates of returnis central (Watson, 2004). The key question is the point at which publicinvestment (or shared risk) reaches its optimum level, and personal obligation(or individual risk) kicks in. This issue has become hugely politicallycontentious, not only in the UK, and as discussed in this review, the evidencepoints in different directions and is often contradictory. For a start there arethe ‘wider benefits’ of learning. There is also the evidence of unsatisfieddemand for higher-level skills. Yet at the same time there is evidence of thegrowing penetration by graduates of occupations where there have never beengraduates before. And then there the hugely varied and speculativeextrapolations of a graduate premium of enhanced lifetime earnings discussedabove.
VII The Future Financing of Higher education
160. According to the government, the principle upon which the Highereducation Act is based is fairness. That is, the Westminster governmentbelieves the proposals to be the fairest way in which higher education isfinanced, for the foreseeable future. However, there are a number ofalternatives that the government might have considered, and these form thebasis of this section of the review.
161. The DfES (2003b and 2003d) considered a number of alternatives tothe current proposals, including a pure graduate tax system and a system offixed fees:
� Graduate tax has some similarity to the proposed deferred feesystem, but instead of repaying a loan through the tax system,graduates would pay a specific tax rate for graduates. The featuresof the system might include a supplementary tax rate for graduates,
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the use of tax thresholds, tax periods, and a tax for tuition andsupport costs to cover the government meeting tuition costs andreintroducing maintenance grants.
The DfES assumed the reintroduction of maintenance grants and governmentmeeting the costs of tuition in its consideration of a graduate tax. It proposedthat graduates would be subject to pay an extra 3p in the pound on all incomeover £6,575 (the standard rate of tax threshold) for 25 years (in whatever waythis period might be defined)24. This model could be varied in a number ofways, including keeping maintenance loans or adjusting repayment thresholds.
One of the apparent advantages of a graduate tax system is fairness. Higherearning graduates would subsidise those earning less. Contributions are alsodeferred till after graduation and an individual is in employment andrepayments can be based on what is affordable to the individual. Repaymentthrough the tax system also means that the debt might not be perceived in thesame way as if it were an outright loan. However, there is no guarantee thatrevenue would be hypothecated to the HE sector, which the current proposalsensure. Moreover, the government would not cover its initial outlay for 20years. Other disadvantages include some paying much more for their coursethan others; and there is no mechanism to allow differentiation of contributioneither between socio-economic groups or by HEI and degree subjects.According to the DfES (2003b), there would be no method for paying feesearly either. It is difficult to see, however, why this option could not be providedfor, although it would be potentially divisive, with only the most affluentstudents able to take advantage of this system and thereby able to savemoney in the long-term. Nevertheless, the Fabian Review (MacLeod 2003)suggests that students should be offered a number of different options tocontribute to tuition fees.
� A fixed fee is what is argued for by many of those who oppose thecurrent proposals. The main sticking point for many of those whooppose the current proposals is the introduction of a system ofvariable fees. It has been mentioned previously that variable feesintroduce elements of marketisation and privatisation into the highereducation system. There are however a number of other argumentsmade by those opposed to variable fees, and defences made bythose who support them; many of these are rehearsed in SectionIIIa. However, as a major concern for many, it is worth outlining thepros and cons of fixed and variable fees in a specific way.
Variable fees allow universities to decide their own fees. Those proposingfixed fees suggest that fees should be fixed at the same level for alluniversities and courses. This means that students would pay the same forwhatever course they studied and at whichever HEI they chose to study.Those in support of variable fees argue that:
24 The current proposals allow debts to be cleared in an average of 13 years (DfES 2003b).
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* A fixed fee would be arbitrary and not appropriate to differentcourses at different HEIs;
* A fixed fee set too low would be detrimental to the future of HE inthe UK and fees set too high would threaten the viability of somecourses, faculties and HEIs;
* A fixed fee might not reflect the ‘true’ value of the course studied ordegree taken (diploma, foundation, honours);
* Current and past systems of fixed and no fees have not facilitatedwidening access to HE;
* HEIs with strong traditions and commitments to public educationmight have to reconsider their strategy in the face of increasingfinancial burdens;
* Variable fees would no more introduce a two-tier system thanalready exists, but would allow access to better information oncourses;
* Variable fees already work successfully for part-time, post-graduateand overseas students in the UK and at all levels in other parts ofthe world (e.g. New Zealand, Australia and Canada);
* Variable fees allow universities more freedom to manage their ownbusiness, to compete more effectively, and to force standards up.This reliance on the mechanisms of the market to improve thesituation with regard to resources and performance relies onparticular market conditions however, which has importantimplications for fairness.
The supporters of fixed fees voice a number of concerns about variable feesand suggest that fixed fees are better in a number of ways (DfES 2003d,Bradley and Whitehead 200325):
* It is claimed that variable fees would mean poorer studentsattending cheaper courses at low status HEIs. However, such isthe level of under-funding that all HEIs might be forced to chargethe full rate of £3,000 for all courses, which has implications forfairness This is refuted by the government. The possibility thatpoorer students might become even more entrenched in lowstatus universities also has consequences for their earningpotential. The government claims, however, that it has madesufficient provision to mitigate these concerns in a system ofbursaries and through a watchdog to encourage students fromlow-income households into high status HEIs. Nevertheless, someclaim that this provision will benefit the few at the expense of themany;
* Fixed fees would remove price from the equation when studentschoose a course, but it is claimed by the government that price isnot the only and defining concern for students when choosing acourse;
25 Bradley and Whitehead (2003, p. 5) have proposed a fixed fee rate of £2,500; ‘convert support for low incomestudents from bursaries to maintenance grants of up to £5,000 p.a.; and, introduce an ‘equalisation’ mechanismthrough which to redistribute excess fee income from relatively cash-rich universities with lower levels of lowincome students to those with higher levels and therefore higher maintenance grant costs.’
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* Fixed fees mean that all HEIs would benefit equally from higherfee income, whereas under variable fees some HEIs would benefitmore than others. There is a concern, however, that some HEIsmight not be able to justify the level of a fixed fee in what theyoffer;
* The transition to variable fees will create more upheaval than fixedfees; the latter amounting to a simple rise in the current standardfee.
162. More generally, the IFS (2004) highlight that the current proposals willnot save the taxpayer very much money, but that this does not mean theprinciple of top-up fees is flawed. Further, the proposed loan system is verygenerous to students and is quite progressive, as those who benefit less fromthe graduate premium will receive a larger subsidy from the taxpayer thanthose who benefit most. The IFS warn that alternative fee proposals must beviewed against the loan system available alongside them. If all students paidfees, for example, the extra revenue could be used to pay for more generousgrants. However, if poor students were allowed to borrow more to pay feeswith no reduction in what they can borrow to support living costs, then revenuetowards more generous grants would be halved.
163. Others have contributed to the debate on ways to finance highereducation in the UK. In an article for the Guardian newspaper, Peter Lampl(2004, p.23) of the Sutton Trust suggests that current arrangements and thoseproposed are ‘a disaster for social justice and the funding and competitivenessof our universities’26. Lampl argues that because deferred tuition fees offersuch favourable terms the taxpayer will continue to subsidise 80 to 100 percent of the cost of an individual’s education. Similar claims are made forinterest free income contingent loans. In another article, however, Lamplargues in support of the government’s proposals (DfES 2003d).
164. An article for the Economist (2003) criticises the government’sproposals – albeit in an indirect way – and suggests it should be moving closerto the system adopted in the US, which relies on private income but is diverseand caters expertly for different needs. The piece also criticises programmesfor widening access as detrimental to the quality of the higher educationsector. The main point, however, is that universities should be able to chargefees, but at a level set by the universities. The average tuition fee in the US is$4,500, which is less than that specified in the UK’s current proposals. Byallowing universities to set fees, it is argued that quality is ensured (throughhigher levels of university funding); universities are more competitive; and,students (customers) are more highly motivated (because it is their money)and are more likely to receive high quality teaching (customer service).
165. There are however, many concerns about moving closer to the USsystem. Dill (2003) questions the ‘superiority of the US market-orientedsystem’ and the appropriateness of market competition for higher educationand the broader public interest. The NUS (2003) argues that in the US a third 26 The Sutton Trust is a charity that makes grants to projects providing educational opportunities for those from un-privileged backgrounds, including access to university.
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of students base their choice of institution on tuition fee charges and financialaid offers. Others highlight that only 10 per cent of students from the poorestsections of society access one of the top 100 universities in the US, and thatthe cost of going to university for low income families has increased from 13per cent of family income to more than 25 per cent (MacLeod and Mooney2004). Further, only 66 per cent of HE students graduate, compared to 82 percent in the UK. In short, it is claimed that the system adopted in the US isdestroying public higher education and widening social divisions (MacLeodand Mooney 2004).
166. Universities UK has mooted the idea, too, that universities should havemore freedom to set their own fees, but broadly welcomes the government’sproposals. The main concern of Universities UK is that ‘the sector is placed ona sound financial footing’ and that the proposals for financing HE should be fairto institutions and students (Warwick 2002). A number of vice chancellors(VCs) are, however, opposed to what is proposed. In an article for theGuardian, Gillian Slater, Bournemouth University’s VC, would like to seehigher education funded entirely from taxation, but accepts that this is largely a‘non-starter’ (Crace 2004). However, the main stumbling block for the fifteenVCs opposed to the Act is the use of variable fees, rather than fixed fees.
167. The Conservative opposition opposes fees of any description. TheConservative Party (2004) proposes that university tuition top-up fees areabolished; admissions targets of 50 per cent are scrapped; and the proposalsfor an access regulator (Offa) are dropped. The Conservatives propose toenhance and expand vocational and technical education, and leave the rate atwhich the university expands to an admission policy that recognises ‘merit andpotential’. This, it claims, would render unnecessary the government’s plans tointroduce top-up fees. While the plans to expand vocational and technicaltraining are in many ways commendable, it seems implicit within Conservativepolicy that the party believes that fewer than 50 per cent of young people inthe UK have the potential to access HE. The Conservatives do not outline howthe HE sector would be financed, but focus instead on limiting its expansion inorder to make it more affordable. The Liberal Democrats (2003) too wouldabolish tuition fees, and have helped achieve this in Scotland, which nowoperates a GES. Similar pressure to abandon up-front fees is being applied inWales. Plaid Cymru (2003) have committed to working within the‘unfavourable context’ of top-up fees.
168. The NUS (2003) argues that HE should be financed from publicexpenditure and calls for: the abolition of all forms of charging for education;the introduction of a cost-of-living non-means tested grant; the maintenance ofcurrent interest rates on loans; and the restoration of benefit payments tostudents. The NUS (2003) propose that the HE sector be financed fromtaxation and that employers should make greater contributions, too. Ithighlights that since 1979 corporation tax has been cut by 23 per cent and thetop rate of income tax by 43 per cent; returning to increased levels of taxationwould help finance FE and HE.
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169. In 2001, the Rees Report (IIGSHAF 2001) made a series ofrecommendations on financing and funding Higher education in Wales to theWAG and to the UK government. These highlighted the need to devote moreresources to higher education and recommended that the individual andtaxpayer should contribute to funding post-compulsory education and training.A central recommendation was for the abolition of up-front tuition fees and theintroduction of some kind of graduate endowment contribution, as well as theintroduction of targeted maintenance support. The latter was introduced inWales. The Cubie Report (ICISF 2000a) in Scotland made similarrecommendations, and a system of GES and targeted bursaries has workedrelatively successfully in Scotland for a few years now. Richards (2002, p.61)however, suggests that the way the GES works in Scotland ‘made the poorestfamilies worse off than before and the richest families better off’, by reducingthe total support received – despite the use of bursaries to redress thebalance.
170. Chapman (2001) provides a useful analysis of different tuition feecontribution schemes, including different types of up-front and deferredpayment schemes and no charge systems. For Chapman (2001), flexibility inarrangements is the key to a fair system of student contributions. A system ofno charge is dismissed for reasons of equity and as unquestionablyregressive, considering the privileged backgrounds of most HE students.Criticisms are also made of up-front contribution schemes, which in variousways deter students from disadvantaged backgrounds (in terms of capacity topay and aversion to debt). Income contingent charging systems tend,however, to fulfil criteria in terms of access and equity, but demand theaccurate recording of students’ incomes over time and an efficient way ofcollecting repayments to make them workable (Chapman and Ryan 2002).
171. Others suggest that universal HE be financed by ‘encouraging existingnot-for-profit universities to open for-profit campuses, at which the emphasis ison high-quality and convenient undergraduate teaching, with little or noresearch, and a concentration on high-demand, low-cost disciplines’ (Chipman2002, p. 126). More generally, on the international stage there is a shift to costsharing and diversification of revenue sources in the funding and financing ofhigher education (Johnstone 2002). Johnstone (2002, p.35), moreover,recommends to governments and HEIs that they must continue to find ways toexpand non-governmental revenue to higher education – but:
…they must remember… the limitations, complexities, and unintendedconsequences of diversifying sources of finance, and maintain highereducation as a priority requiring a continued commitment of public attentionand public tax revenues.
VIII Conclusions
172. The executive summary (p.6-9) summarises the main points from thisReview of research. We take this opportunity, therefore, to reflect upon theimplications of the research findings reviewed here for higher education inWales.
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173. The first point to note is that although research is increasing into theimpact of funding on HE and student participation, there are still many gaps inknowledge. There would appear to be three key weaknesses of the researchreported here.
174. The first is that there is little overall synthesis of findings andconclusions that considers and compares the different impacts reported. Forexample, the research reviewed here often report contradictory findings. Anexample of this is Callender and Wilkinson’s (2003) research which, concludesthat the number of students having to pay full contributions towards their tuitionfees is rising. However, this review then goes on to show that the proportion ofstudents do not have to contribute financially to their tuition fees is unchangedbetween 2001/02 and 2002/03. Of course both findings could be correct27, butthere is often little attempt in the research literature to synthesise suchapparently contradictory findings. Furthermore, there is little attempt to providean overview of the impacts of changes to HE funding by contrasting theiradvantages and disadvantages. Although the lack of synthesis does not makethe research any less valid, it does make it very hard to draw any firmconclusions.
175. The second weakness of the research reported here is the difficulty inidentifying its relevance to higher education in Wales. Either there is noresearch or data directly applicable to Wales, or it is difficult to transfer andgeneralise from findings of research undertaken in contexts different fromWales. This is because we have a limited knowledge of the Welsh context tobe able to make comparisons or that research conducted in other contextsoften does not report enough details about their particular context (both in timeand space) to enable accurate comparison with Wales.
176. The third main weakness of the research literature relates to thedistinction between provision of higher education in Wales and highereducation opportunities for Welsh students. The significant flows of studentsbetween Wales and England (Table 5) mean that legislative changes in Walesand the rest of the UK could have important consequences for all HE studentsin the UK. It is also important to recognise, therefore, that changes to thefunding of HE in should Wales consider the repercussions for studentsattending Welsh HEIs (i.e. Welsh students and non-Welsh students) and forWelsh students attending non-Welsh HEIs.
177. Clearly higher education in Wales is at a critical juncture. Key decisionsare to be made in both the future targets for HE participation and in the fundingof HE for future generations. This review has reported the recent increase instudent numbers, the rising accountability and marketisation of highereducation, the changing nature of employment (graduate and non-graduate)and incomes, the relatively low levels of funding per capita and as a proportionof GDP in the UK, the recent introduction of tuition fees payable by somestudents, and the potential break-up of UK wide HE policy due to devolution.
27 This could be due to the simple distinction between absolute and proportionate figures.
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178. The review has begun to discuss the impacts of recent changes to HEpolicy in Wales with the introduction of the Assembly Learning Grants (ALG)and financial contingency funds (FCF). It is worth noting that the WelshAssembly Government reported that 50,000 students in higher and furthereducation would be eligible for an ALG, but only 18,810 students have appliedsuccessfully to date. This low award rate would appear to be due to the lownumbers of applications (since only 1,260 have been unsuccessful to date). Itmay, therefore, be still too early to see the impact of these changes to thesupport system for Welsh students, and it is worth noting that the number ofapplications has risen by 18 per cent over the last few years (although thisbrings with it the almost inevitable problem of even greater numbers ofunsuccessful applications).
179. The success of ALG is more apparent in the HE sector, since 72 percent of successful applications were made by HE students. However, it isworth noting the slight discrepancy in the proportion of ALG grants beingawarded to Welsh students attending HEIs in Wales (72 per cent) against theproportion being awarded to Welsh students attending HEIs in England (22 percent, compared with 38 per cent of Welsh students attending English HEIs).
180. This review highlights the low level of ALGs being awarded to studentsfrom socio-economically deprived communities, which are also areas of verylow rates of HE participation. Unfortunately, we cannot calculate whether HEstudents from these areas are more likely to be awarded ALGs than HEstudents from other areas. But in terms of absolute terms, the low number ofALGs being awarded to students from such communities must still be of someconcern.
181. The review also reports a number of concerns about the introduction ofhigher and variable tuition fees. Unfortunately, few arguments used can bedirectly related to the Welsh context, and neither do they tend to offer abalanced review of the possible impacts. Indeed, perhaps conversely to manyof these observations the number of applications to HE institutions hascontinued to increase since the introduction of tuition fees for students.
182. Concerns about student debt are perhaps correct. Student debt iscertainly increasing, but this is inevitable given the shift from maintenancegrants to student loans about ten years ago and then the more recentintroduction of student tuition fees. The degree to which student debt isoccurring and the impact of this is still uncertain. One of the problems with thisis that ‘average debt’ is often used to convey the changing impact of studentloans and tuition fees. However, both student loans and tuition fees aretargeted to particular students. In neither case is there really an ‘average’student from which the ‘average debt’ can be calculated. For example, it is notclear what the level of debt is for students originally from low income familybackgrounds, for whom tuition fees are not payable.
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183. There is little discussion in the research literature about the nature ofHE provision in Wales, and particularly in comparison with the rest of the UK.This would include institutional funding, the provision of Undergraduate andpostgraduate courses and subjects, the levels and quality of research, and theregional economic contributions of HEIs in Wales. There is no apparent‘mapping’ of HE provision in Wales to provide the necessary information tounderstand and appreciate the context in which changes to funding andstudent support will take place.
184. The review provides some very useful insights into the internationaldimensions of HE funding and student participation. For example, it has shownthat per student funding and HE funding as a percentage of GDP is relativelylow in the UK in comparison to other post-industrial countries. Again, there islittle or no information as to how funding in Wales compares to that in England,Scotland and Northern Ireland.
185. The international comparisons are useful in contrasting different highereducation funding systems. Again however, few of these research reportsprovide the necessary contextual information to enable useful comparison withthe HE system in Wales. The factors that could determine differences in thefunding systems may include differences in provision, participation, social andcultural needs, the economy and labour markets.
186. The review reports that student participation rates in Wales are muchlower than for England and Scotland. However, it has also been shown thatparticipation rates are rising in Wales. There are also a greater proportion ofWelsh students from low socio-economic backgrounds participating in HE thantheir equivalents in England. Again, these calculations are slightly problematicas they all tend to mix their definitions of who constitutes ‘Welsh’ and ‘English’(potential) students. Given the significant number of students who cross theWales-England border, in both directions, the figures may not be accuratelycompared.
187. Participation in Welsh higher education (i.e. the number of studentsattending Welsh HEIs) is heavily directed towards three institutions: CardiffUniversity, the University of Glamorgan and the University of Swansea. Oncethe merger between Cardiff University and the University of Wales, College ofMedicine is complete the new institution will accommodate just under a third ofall students in Welsh HEIs. It would be useful to ascertain the proportion ofeach HEIs’ student population from Wales.
188. The review has also highlighted the variation in participation rates fordifferent areas of Wales. In particular, the poorest areas of Wales have thelowest levels of participation in HE. Although participation rates are increasingat a faster rate in these areas than elsewhere they have a long way to go toreach similar levels of participation. A number of factors can affect this. Themost reported are the financial constraints that would appear to discourageparticipation among the most disadvantaged communities. However, two otherfactors are probably just as important, if not more important, in limiting HE
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participation. In Ireland, where participation rates fell when tuition fees werescrapped, research shows that it was not financial concerns that preventedparticipation but actually a more general socio-cultural indifference towardshigher education among the most disadvantaged areas and families. The otherkey factor influencing participation relates to examination grades achieved atschool. Although there is little analysis of this, it is very likely that participationin higher education among socio-economically disadvantaged groupscoincides with low levels of achievement at school. Without the necessarygrades, students from such backgrounds will neither consider HE or be offereda place at a HEI.
189. The review considers the student experience, including the cost ofbeing a student and graduate earnings. However, there is little or no data orresearch that examines the student experience in Wales specifically. Wherethis is achieved it is based upon small-scale surveys that only contribute inmodest ways to our understanding of the bigger picture in Wales. What isrequired is large-scale research on the experiences of Welsh students and thestudent experience in Wales.
190. Possibly the most useful insight into the student experience is ingraduate earnings and the graduate premium. The review reports that this isoften used to support the introduction of higher or variable tuition fees.However, it is important to note that graduate earnings are lower in Wales thanfor other regions of the UK. If potential students did consider this when makingtheir choice of HEI, then this could directly affect the cross-border movementof students.
191. This review calls for greater research into higher education in Wales.This should address the issues facing Welsh HEIs (such as provision andfunding) and issues that affect the participation of Welsh students into highereducation (such as school examination grades, social and culturalperspectives of higher education, and student finances). Where research isundertaken, it is also important to try to synthesise the findings with those fromexisting research and with other Welsh studies addressing different HE issues.By providing such a meta analysis there, will be even greater value to thisresearch for practitioners and policy-makers.
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Additional ReferencesThe literature review was conducted for the Review group, to inform itsdeliberations at the start of its work in July 2004. Since the Group began itswork, further items of interest have been published, or have been identified byGroup members. Because of time constraints it was not possible to update theliterature review, but the following list of additional references gives details ofsome of the more recent literature that was consulted by members of theGroup between September 2004 and April 2005. It does not include officialpublications or newspaper articles circulated to the Group, but these werenumerous. References to some important official documents and sources aregiven in the main report.
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