10 things you might have missed about the Green Paper

After letting the initial coverage of the Green Paper digest for a few hours, here are 10 critical points you may have missed.

1. There’s not much incentive for universities to focus on teaching excellence.

The Teaching Excellence Framework promises to introduce three or four levels of teaching excellence, which would determine a specific maximum tuition fee for each institution. The government believes this will lead fees to ‘increasingly differentiate’.

We anticipate that government would set a maximum fee cap to correspond to each TEF award level, i.e. a maximum fee an institution can charge if it is assessed as level 1, level 2 etc. The government would not pre-set a formula for this fee uplift, but would set the uplift each year, maintaining the current model of basic and higher amounts, and not exceeding real terms increases. Institutions would be able to charge fees up to the maximum of their current TEF level fee cap…We do not envisage the fees charged to individual students changing during their course. (p. 30)

But this would seem to mean that even institutions achieving the highest TEF level would see their fees be bound by inflation. What fraction of inflation would TEFs 1, 2 and 3 attract?

Consumer Price Index is currently below zero, indicating negative inflation. That may go lower next month – the tuition fee increase of 2012 finally works its way out of that calculation, removing 0.2 percentage points of ‘upwards pressure’ from the measure.

How will such a tiny reward compare to the administrative costs of submitting to the independent panel of TEF experts?

2. University finances will be eroded by inflation-indexing

The headlines this morning concentrate on tuition fee rises this parliament, but in fact those increases may not be high enough. As the Office for Budgetary Responsibility has noted repeatedly: higher education needs to have its income linked to earnings, not CPI inflation, because it is a labour-intensive sector.

As earnings tend to rise faster than CPI, the pressure on university budgets are likely to increase unless we see concerted efforts at pay restraint.

The government thinks that the TEF “should change providers” behaviour and sets out an idealised model:

Those providers that do well within the TEF will attract more student applications and will be able to raise fees in line with inflation. The additional income can be reinvested in the quality of teaching and allow providers to expand so that they can teach more students. We hope providers receiving a lower TEF assessment will choose to raise their teaching standards in order to maintain student numbers. Eventually, we anticipate some lower quality providers withdrawing from the sector, leaving space for new entrants, and raising quality overall. (p. 19)

But any increase in tuition fee is likely to be absorbed by pay offers to staff.

If the rewards from TEF are insufficient then universities are more likely to increase income through over-recruitment than improving the student experience.

The Green Paper summarises student feedback:

Clear priorities while at university were ‘having more hours of teaching’, ‘reducing the size of teaching groups’, ‘better training for lecturers’ and ‘providing better learning facilities’. (p. 11)

But an extra handful of students per seminar rewards the institution far more than the proposed TEF incentives that result from scoring well in any small group or contact hour measures.

3. There’s no mention of part-time or mature students

The Green Paper clocks in at over 100 pages. There’s no mention of part-time students. Numbers have collapsed here since 2010/11, from over 250 000 to 110 000 in five years.

Fulfilling Our Potential opens with the theme of increasing productivity. If the government were serious about productivity, they would be looking at barriers to retraining later in life, rather than obsessing about the choices ‘young people’ make at 17 and 18.

The failures of higher education and industrial policy are entwined here. A smart government would overhaul current ELQ restrictions and look how it can intervene to promote part-time study. This is where more choice is needed.

4. BIS looks likely to take responsibility for distributing teaching grants

Although the Office for Students is a merger of HEFCE and the Office for Fair Access, HEFCE’s core funding activities have to pass elsewhere. What happens to the REF is covered elsewhere on Wonkhe.

The Green Paper outlines two options for residual teaching grants: BIS ministers would outline their strategic priorities and determine a formula that achieves those ends. “This will enable ministers to strengthen incentives for higher education provision that supports the needs of the economy.”

The alternative appears to be to devolve the formula and calculations back to Office for Students. In both cases, the distribution of any funds to institutions would be done by the Student Loans Company.

Many sections of the Green Paper are vague, but the intimation is that the old banding system that allocates grant to subjects that are costly to deliver is also likely to be jettisoned. This is in tune with the overall tenor of the current iteration of England’s fee-loan regime: funding will increasingly follow the creditworthiness of institutions and individuals, rather than the costs of course delivery.

5. Sharia-compliant student loans will be introduced

The government’s consulted last year on a ‘Takaful’ scheme to finance undergraduate study, but nothing further had been seen since its formal response in September 2014. The Green Paper announces that a scheme will be introduced through legislation.

The Alternative Finance model’s underlying principle is one of communal interest and transparent sharing of benefit and obligation, with the repayments of students participating in the fund being used to provide finance to future students who elect to join the fund. This ensures that all members of the fund benefit equally from it. This type of mutual fund model is familiar to Sharia scholars and many British Muslim families, who use a similar concept to raise funds between cooperating relatives. (p. 40)

The scheme would operate on co-operative or mutual principles with the graduate offering a charitable contribution to a fund that will be established and managed for this purpose. This is a welcome development that may have wide appeal amongst Muslims and non-Muslims.

The Green Paper emphasises though that “repayments and debt must be identical to that of a conventional [income contingent repayment loan], so that students who chose the alternative finance product would be in no worse or better position than those who took out a traditional loan.”

6. Higher Education Corporations will disappear from the landscape

The 2011 White Paper promised to make it easier for universities to adopt a corporate form of their choosing. When no Higher Education Bill was forthcoming in 2012, that intention was stymied. The Green Paper returns to the theme but with more detail than previously.

Higher Education Corporations were created when the Polytechnics, under Local Authority control, were privatised in the late 1980s (bar those under the Inner London Education Authority which have always been Companies limited by Guarantee). The legal form has since been used as other large institutions, such as institutes and colleges, have come into the HE sector over the last two decades.

The government sees the form as “out-dated and unnecessarily restrictive”. This is for two reasons:

Firstly, HECS are still quasi-public. They do not have the fundamental feature of private ownership – the ability to dissolve the HEC does not lie with its governing body. Only the relevant Secretary of State can dissolve a HEC. Institutions have to apply to the government. For example, Vince Cable dissolved Leeds College of Music in 2011.

Second, there is a lack of clarity around a HEC’s ability to engage with certain forms of private finance, such as bonds.

7. What comes after a Higher Education Corporation dissolves?

The crux will be: what happens after HEC dissolution? The legislation currently requires the assets and undertakings of the dissolved HEC to pass to a successor institution, designated as a company limited by guarantee. Leeds College of Music was dissolved but became Leeds College of Music Ltd, a subsidiary of Leeds City College.

The company limited by guarantee is a not-for-profit legal form. If the government legislates to drop this successor requirement then it would become possible for a post-92 university to move directly to a for-profit corporate form.

In the 2011 White Paper the government discussed the question of assets at this point:

4.36 We would ensure that, as the assets of a university have been acquired over time, partly as a result of direct public funding, the wider public interest will be protected in any such change of status.

The new Green Paper reads as follows:

In recognition of the maturity and autonomy of the HECs and the need for them to be able to make decisions themselves as to their future delivery model, the Government proposes to remove the power of the Secretary of State to dissolve a HEC and transfer its assets and, in future, allow a HEC to dissolve itself and transfer its assets.

“To provide some protection to those who are likely to be affected by the voluntary dissolution of a HEC, for example those who might have an interest in the assets because they have donated funds or land for a particular purpose, HECs will be required to publish details of the proposal for dissolution and to inform the regulator of the resolution to dissolve and the dissolution date as soon as possible. (p. 67)

There’s no mention of the ‘public interest’ now which leads us to the next point.

8. The government intends to review the principles of ‘public interest’ relating to university governance

The Green Paper announces that it will review the principles set out in February 2006 on how the government views the public interest in relation to universities. A new Ministerial letter will then be issued “explaining the options and including detailed guidance on how to deregulate governing documents and the process and timing for doing so”.

Currently there are four defined areas of public interest as set out by Bill Rammell, then minister for universities, in a 2006 letter to university vice-chancellors:

• degree awarding powers and university title,
• powers and charitable objects,
• academic freedom,
• and governance structures.

It is the charitable objects that may be the focus here. The Green Paper emphasises the commercial imperatives of universities:

Providers would not be required to seek approval to individual changes to their governing documents and would be free to make changes as and when best suited them to meet their business needs. (p.68)

In 2013, a government report on HE as an export suggested that universities should consider whether charitable status (and ‘objects’) had outlived its usefulness.

UK education institutions have a noble history, rooted in the charitable impulses of past generations. To this day, many schools, universities and colleges have charitable status. They consider that this is an important part of their identity, and they discharge their obligations willingly and diligently. Although this model has many strengths, it does not lend itself to rapid growth. The governance structures and obligations of charities, or of bodies of similarly ancient pedigree established by Royal Charter or equivalent instruments, were not designed to grow rapidly, or to run a network across the world.

The challenge will be to ensure that decisions are not taken by default. A positive strategic commitment to remain at a certain size is one thing. A reluctant ossification and decline, caused by an inability to see how to change a structure that is thought to have outlived its usefulness, would be quite another.

9. Universities may become exempt from Freedom of Information requests

There are a number of requirements placed on HEFCE-funded providers which do not apply to alternative providers. Many derive from treating HEFCE-funded providers as ‘public bodies. This is despite the fact that the income of nearly all of these providers is no longer principally from direct grant and tuition fee income is not treated as public funding. Alternative providers are not treated as public bodies. As a result there is an uneven playing field in terms of costs and responsibilities. For example, the cost to providers of being within the scope of the Freedom of Information Act is estimated at around £10m per year. (p. 68)

10. Jo Johnson appears not to understand how degree classification works

In this BBC article, Jo Johnson is quoted as saying:

“We want to encourage a system which provides greater information to employers about where attainment really lies. It needs to sit alongside, rather than replace, the honours degree classification, so that people don’t lose that continuity of information.

“But there is a very big band, the 2:1 band. It disguises very considerable differences in attainment. You can be at the top of the band and then be 50 percentage points below and still be getting a 2:1.

“And students who worked hard should be able to signal to employers that’s what they’ve achieved.”

If 50 per cent of students get 2:1s, that does not mean that the 2:1 band is 50 percentage points wide (it’s normally ten points, 60 tom 69 on a 100 point scale). That’s a worrying mistake.

McGettigan’s first law of TEF: Those most in favour of learning gain fail to demonstrate their own.