Peter Scott on the removal of the numbers cap:
“[P]rivate providers were never going to enter the higher education market in big numbers as long as numbers were capped. They couldn’t compete on quality with even the most maligned “post-1992″ university. But they couldn’t compete on price because, without the removal of the cap, there would be too few of them in a market dominated by public institutions.
“So it would be a mistake to dismiss current policy manoeuvring as pre-election froth. The direction of travel towards privatisation is clear. Stage one was the removal of the cap on student numbers to encourage more private providers. Stage two, in case they need further encouragement, will probably be cutting ‘red tape’ – proper control of the use of public money and adequate safeguards of academic standards. Stage three, when the entry of private providers has produced enough downward pressure on average fees, could be removal of the fees cap.”
Professor Scott’s analysis of the direction of government policy toward privatisation is spot-on.
The missing part of the analysis is the government guaranteed loans. The current loan regime makes higher education free at the point of entry and the loan matches the regulated maximum fee—£9000 at public institutions and £6500 at private ones. The real public cost of HE is the default on the loans (estimated at 40 to 50 percent) plus any direct subsidies (~£4 billion for each research and teaching).
The Higher Education Policy Institute (lead by a chief of staff and special advisor to David Willetts, the Minister for Universities and Science), recently argued for simplification of the system to inter alia treat all students and institutions equally—an effective entrée to giving loan backed fee parity to private institutions.
The public guarantee of the loans could remain and either track higher fees or not. Tracking deregulated fees gives no incentive for lower cost quality providers and will create significant leakage of funds from public education to private profit (and marketing expense).
More likely the loan will be capped and institutions charging more will require their students to access private debt markets or their parents, pushing the least risky students into private debt markets. Privatisation of the loan book would occur, likely with a government guarantee on returns, or a change in loan provisions at issue to give a more certain return to purchasers.
The more radical approach would be to remove the public guarantee of loans and require students to access private debt markets or their parents, broadly replicating the US system. This would be a fully privatised system. However, because it provides no state guarantees to the private sector, it is likely to be less palatable to hedge funds and private equity.
Read the full article on The Guardian website.