Artwork for FTWeekend Comment - issue dated 04.04.20
© Jonathan McHugh 2020

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Are universities too big to fail? As Covid-19 sweeps the globe, some UK universities, highly dependent on foreign students and summer courses for income, are looking into the abyss. Allowing a university to go bust would be devastating for students in the middle of their courses, and for some local economies. Higher education has been central to urban regeneration, and has grown almost as fast as the tech sector. Manchester university has 39,000 students; University College London has 38,000, twice as many as a decade ago.

Nevertheless, the sector’s demand for a £7bn bailout feels a bit rich. A good university is an immeasurably precious thing. It can foster the spirit of inquiry we are seeing among the scientists battling coronavirus. But the universities have been playing a dangerous game. Many have pursued a high-risk strategy of expansion, indebting themselves to attract overseas students’ fees, and treating students as cash cows.

It is not axiomatic that UK taxpayers should now take on the financial risk of bridging what will be a shortlived hit to revenue — or not without a quid pro quo.

Nor is it entirely universities’ fault that they are in this position. They were encouraged by evangelists for undergraduate tuition fees to act like businesses. Facing the loss of other government revenue alongside rising costs, they sought to become part of a market.

Unfortunately, too many decided this meant paying vice chancellors hefty salaries and hiring expensive senior managers. Between 2005 and 2018, the number of university marketing and public relations staff rose nine times faster than the number of academics.

Professors became bit-part actors in an arms race to attract lucrative customers — overseas students can be charged two or three times the domestic rate. To find them, some universities have even resorted to paying agents’ commission. A quarter of all students at UK universities are now from overseas, according to the Higher Education Statistics Agency.

While it is right to seek the best and brightest, the effect on standards of expanding undergraduate numbers has been dubious at best. There has been an explosion in unconditional offers made to teenagers in UK schools, leading to fears that some students fall shy of what they could achieve at A-level. Pre-degree “foundation years” for students with lower grades are another source of additional income for institutions. The 2019 Augar Review of post-18 education recommended abolishing them, since similar courses already exist in further education colleges at a fraction of the cost.

Many institutions have never really made the transition to understanding their customers, in spite of the transition to a market model. Some cram in students, and offer far too little contact time with academics. Fewer than half of UK undergraduates say they get good value for money, according to the Higher Education Policy Institute, and that’s probably more than a comment on the beer in the student union bar.

When I mentored a London university undergraduate a few years ago, I found that she often struggled to know what she was supposed to be working on. Her course was full of jargon, her supervisor changed frequently, and the mental health support was minimal. It was a dispiriting experience. The first in her family to go to university, she deserved much better.

The irony is that tuition fees were supposed to make universities more responsive to undergraduates, with student choice driving up standards and producing a wider range of options. Yet far from seeing a profusion of differently-structured courses at different prices, we have seen an almost uniform rush to maximum fees for the traditional three-year degree beloved by parents.

Instead of investing in teaching, many institutions racked up debt to build new facilities: sports halls, libraries and student flats — many no doubt welcome but not all necessary. Borrowing by universities trebled to £12bn between 2010 and 2018, with universities continuing to leverage up even after the uncertainty of the Brexit vote.

While policymakers run in ever tighter circles to improve the chances of bright kids from deprived backgrounds in the UK, the easiest way for institutions to improve their finances is to reduce the overall number of Brits.

The pandemic has already wrought huge uncertainty among this year’s A-level candidates about their grades and university offers. It would be even more upsetting if their preferred institution was to close its doors. That is more likely to happen if higher-status universities seek to cannibalise the market, poaching from other institutions lower down the pecking order to fill places left vacant by foreign students.

This exposes the central dilemma: either there is a market, in which universities compete for students and some may go to the wall; or universities work together through this crisis. The sector cannot have it both ways by simply demanding a bailout.

In 2018, Michael Barber, head of the Office for Students, the higher education regulator, warned universities not to expect bailouts, after a report that three were on the brink of bankruptcy. While a pandemic is an unforeseen emergency, Sir Michael would be right to demand that any institution which gets support invest in its offer to students, not in marketing. With four universities ranked in the global top 10, I have no doubt that Britain’s future rests on being a global research powerhouse. But we need the teaching to match.

The writer is a senior fellow at Harvard University and an adviser to the UK Department of Health and Social Care

Letters in response to this article:

US universities are operating more like luxury brands / From Leonidas Kalai, London, UK

Students’ dreams are too important to be left to ‘markets’ / From Andy Sawyer, Southampton, UK

Demand for university places will simply back up / From Dr Jonathan Hopkin, Associate Professor, Dept of Government, London School of Economics, UK

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