Date Uploaded: 26/10/2010
After the events of the past two weeks, few would cast Lord Browne of Madingley and the chancellor, George Osborne, in the role of fairy godmothers. But Browne's tuition fee review and Osborne's comprehensive spending review have granted higher education's small private sector its dearest wish – "a level playing field".
Under Browne's recommendations, students in publicly funded universities will be paying similar fees to those on privately run programmes. Programmes will be more diverse, with more online, distance-learning and shorter degree courses of the kind now offered predominantly in the private sector. Part-time students, who dominate most private provision, will be eligible for the same support packages as full-time students. And public institutions will have to pay close attention to the exact cost of a course and how much they can charge for it, just as private providers do now.
"The Browne report has signalled that the private sector should be treated the same as the public sector," says Carl Lygo, chief executive of BPP, an American owned company, which this summer became the first for-profit organisation to be granted degree-awarding powers in the UK. "It's a level playing field, if what it says goes ahead."
Last week's spending review suggested the likelihood is it will go ahead. Osborne confirmed that universities would be allowed to charge higher tuition fees "broadly in line" with Browne's proposal, while his speech stressed the need for the private sector to fill the gaps left in public sector spending. And with a 40% cut in the teaching budget for higher education the comprehensive spending review left quite a gap.
The result will be an inevitable increase of private sector involvement in UK higher education, says Geoffrey Crossick, vice-chancellor of the University of London and author of a recent report for Universities UK on the growth of private providers.
For him, the only solution is for universities to embrace the private sector and work with it. "If they start competing I don't think it will be good for the future of higher education," he says.
Not that universities have been slow to embrace the private sector already. More and more use private companies to organise their recruitment of foreign students, provide accommodation and put on specialist courses. The University of Nottingham launched the latest of these last week – a new module designed collaboratively by its chemistry department and the pharmaceutical company GlaxoSmithKline for third-year chemistry students, expected to mark the beginning of a longer-term alliance.
Top research universities such as the London School of Economics and Warwick already rely on public sector grants for only a small proportion of their income, thanks to increasing involvement in consultancy, spin-outs and collaborations with industry, and there are regular rumours that some leading universities will choose to become independent of public money altogether.
Andrew Oswald, an economist and professor of behavioural science at Warwick Business School, says these rumours have gained more credibility since Browne. "I certainly expect to see a number of large private universities of the kind that can rival the best on the east coast of America in my lifetime," he says. While he suggests Oxbridge could be reluctant to jump first, he expects it to happen among institutions near the top of the league tables.
Others see private involvement likely to grow in institutions at the other end of the league tables, which could struggle to demand the kinds of fees proposed by Browne, and among those already in financial difficulty.
Lygo says BPP has already been talking to a number of institutions about what opportunities there might be for getting better value for money. A handful of these have their own degree-awarding powers and discussions have focused on areas such as shared purchasing. "Browne and the comprehensive spending review have created a sense of urgency, where those in the university sector need to take steps to address their cost base," he says. He disputes Browne's assumption that universities would have to increase their fees. He argues that with better management of back office costs that is not necessarily the case.
Another private provider looking to expand in the UK is Kaplan, owned by the Washington Post Company, which offers degrees accredited by the University of Essex, preparatory courses for international students, and has recently started teaching external degrees for the University of London. Kaplan now delivers HE programmes to 2,000 students with partner institutions and in three years time, expects this to increase to 5,000 students.
Peter Houillon, chief executive of Kaplan UK, says while Kaplan would be interested in acquiring the running of an institution that was struggling, its strategy is to concentrate on collaborations and partnerships rather than setting up new institutions, which could find it difficult to establish a brand identity. "But I would never say never, because it is going to look very very different in five years' time," he says.
One way in which it could look different is the range of providers, including universities from overseas. Houillon suggests that within the next five yeas students wanting to study in the UK may be able to choose between a UK university, an international university, a private provider with its own degree-awarding powers, or a private provider working with either UK or international universities.
Not everyone welcomes this model. The University and College Union warns that private providers tend to operate on tight margins, without the pay scales and pension provisions of public sector institutions, and often put pressure on staff to recruit students whose language and other skills levels may not be up to taking a degree.
It highlights problems over mis-selling that have been seen in the US, where the Obama administration has been investigating the sector and is in the process of introducing tighter regulation. A UCU spokesman says: "It is ironic that Obama is now looking at regulating the sector just when the UK is thinking of de-regulating."
Crossick says his worry is that private providers might try to undercut the new higher fees proposed by Browne because they do not have to do the things that public universities have to do, such as widening participation, research, engaging with business and providing priority subjects. "They would find it easy to come up with a business model that would allow them to charge less, which creates a lot of volatility in the system," he says, arguing that the only way to counter this is for public universities to work with them.
However, Nick Barr, professor of public economics at the London School of Economics, sees little danger in greater private provision, so long as it is tightly regulated, with institutions forced not only to meet robust quality assurance standards, but to be fully transparent and accountable, in return for their students receiving public loans – something on which much private sector provision depends.
How far and how fast the private sector encroaches on higher education in the UK may depend on the details of the higher education white paper, expected in the spring. Houillon anticipates that this will iron out many of the bureaucratic difficulties faced by private providers, such as problems getting a listing with the Universities and Colleges Admissions Service (Ucas), and some of the complicated VAT arrangements involved in collaborations.
But whatever the white paper comes up with, the private sector is expected to grow. "I wouldn't have said it 10 y ears ago," says Crossick. "But I think it's unstoppable."
Journalist: Harriet Swain