browne – FOLLOWERS OF THE APOCALYPSE

Trial by fire for VCs? a response to http://bit.ly/j8MUo0 ( @timeshighered )

Trial by fire will test our mettle, insist VCs. (The Times Higher, 30th June 2011) – We couldn’t read a headline like that without responding suitably, and with a respectful hat tip to Christopher Lee, Britt Ekland and Edward Woodward and all others involved in one of the greatest cult films ever.

[Final Scene: After days trying to track down data on the application rate amongst students with A-levels predicted at AAB or above, the VICE-CHANCELLOR enters the Great Hall, where the REGISTRAR is preparing for the graduation ceremony. University staff and students in bizarre costumes throng the Hall]

REGISTRAR: The game is over.

VICE-CHANCELLOR: Game? What game?

R: The game of the hunted leading the hunter.

You came here to find new students with AAB or above at A-level , but it is we who have found you and brought you here, and controlled your every thought and action since you were appointed.

Principally, we persuaded you to think that these students were being held as a sacrifice because applications failed last year.

VC: I know applications failed. I saw the matriculation photograph.

R: Oh, yes. They failed, all right, disastrously so… for the first time since we gained degree-awarding powers. The blossom came but the fruit withered and died on the bough. That must not happen again this year.

It is our most earnest belief that the best way of preventing this is to offer to our gods of HEFCE and to the goddess of our marketing strategy is to offer the most acceptable sacrifice that lies in our power.

Post-graduate teaching assistants are fine, but their acceptability is limited.

An entire academic department is even better, but not nearly as effective as the right kind of manager.

VC: What do you mean, “right kind of manager”?

R: You, Vice Chancellor, are the right kind of manager as our painstaking REF-able researches have revealed. You, uniquely, were the one we needed.

A manager who would come here of his own free will.
A manager who has come here with the power of the Privy Council by representing Senior Management.
A man who would come here without experience.
A man who has come here as a fool.

VC: Get out of my way.

R: You are the fool, Vice-Chancellor – Punch, one of the great fool-victims of history, for you have accepted the role of king for a day, and who but a fool would do that. But you will be revered and anointed as a king.

You will undergo death and rebirth – resurrection, if you like. The rebirth, sadly, will not be yours, but that of our Faculty of Humanities.

VC: I am a UUK member, and as a UUK member, I hope for the wisdom of the market. And even if you kill me now, it is I who will have been of value to society, not your damned Philosophy course. No matter what you do, you can’t change the fact that I believe in the market eternal, as promised to us by our Lord Browne.

R: That is good. For believing what you do, we confer upon you a rare gift these days – a market consolidation.

You will not only have experience the market eternal, but you will sit with the bankers among the reviled.

Come. It is time to keep your appointment with The Wicker Man.

VC: (very agitated) Now, wait! Now, all of you, just wait and listen to me. And you can wrap it up any way you like. You are about to commit murder.

Can you not see? There is no public good. There is no education for it’s own sake. Your recruitment failed because your marketing failed. Humanities is not meant to be taught in this institution. It’s against market forces. Don’t you see that killing me is not going to bring back your Faculty?

Registrar, you know it won’t. Go on, man. Tell them. Tell them it won’t.

R: I know it will.

VC: Well, don’t you understand that if your recruitment fails this year, next year you’re going to have to have another blood sacrifice?

And next year, no one less than the Registrar himself will do. If the crops fail, Registrar, next year the University Congregation will kill you on Graduation Day.

R: They will not fail. The sacrifice will be accepted.

[The VICE-CHANCELLOR is led into a Wicker Man, constructed centre-stage and surrounded by garlands in university colours. As the construction is set alight, staff and students commence to sing “Sumer Is Icumen In”]

[Fade to black]

This post represents my personal opinions, and not those of current or former employers, projects, or programmes I am or have been responsible for. This post refers to copyright material for parodic purposes and this thus not available under an open license..

“I want you to know it was I who discovered your secret -. R.A.B.”

This post represents my personal opinions, and not those of current or former employers, projects, or programmes I am or have been responsible for. This post is available under a CC-BY license.

When a politician slips in to the dry, impenetrable terms of governmental accounting regulations, you know that he’s (and it is usually a guy, sorry chaps) trying to get something past you. Such was my reaction when I glanced over David Willetts’ article in the Times Higher a few weeks back. Specifically, this bit:

“This is just part of the Exchequer’s continuing support for higher education. This Exchequer subsidy for loans is known as the Resource Accounting and Budgeting (RAB) charge – a forecast of the amount of money that will not be repaid – and it is going to be at the core of university financing for many years.

I expect that, in the future, as the data accrue [sic], the policy debate will be about the RAB charge for individual institutions”

So what does it mean?

If you’re like me the first thing you did was to google “resource accounting and budgeting” and struggle to find a definition. The phrase in quotes is pretty unique to UK government and most of the “introduction to RAB” stuff (like this) implies you already have a serious understanding of accountancy.

Likierman (1988, Public Money and Management [needs shibboleth]) suggests that:

“Resource accounting is a set of accruals accounting techniques for reporting on the expenditure of central government and a framework for analysing expenditure by departmental aims and objectives, relating those to outputs wherever possible. Resource budgeting is planning and controlling public expenditure on a resource accounting basis”

(If that prompted the question “what is accrual?”, Wikipedia is there for you. But I bet you can tell me all about post-structualism…)

So, fundamentally, RAB takes into account the expenditure and related income over the total life of an investment, and is a superb way of thinking about the “total cost of ownership” of something like a loan. A RAB charge would be incurred where the total expenditure is less than total income – so when Willetts says that the RAB charge of the new student loan system will be 30%, he’s suggesting that 30% of loans will not be paid back – even taking into account the extra 3% above the rate of inflation that students will be paying post 2012 and the sneaky way that interest begins to accrue before they even graduate.

Why 30% – well, quite frankly, why not? It’s just a figure he’s pulled out of the air. Sure, there’s probably complex actuarial calculations behind it, but it’s possible to do those calculations in an almost infinite number of ways. HEPI worked out that at a RAB charge of anything over 47% meant that the government ends up losing money long term, and that merely by decreasing the estimate of ongoing annual salary growth from an almost laughable 4.7% to a still optimistic 3.5% (core salary growth in the UK was 2.1% in March 2011) the RAB would be pushed over that figure.

At this point you’re thinking “Yeah, we know, the new funding model makes bad financial sense for the government, the Followers of The Apocalypse have told us this again, and again, and again … but what’s new?”

Look at the last line of my quote. RAB charges for individual institutions. Rather than pulling a figure out of the air for the whole sector, in future Willetts wants to be pulling a figure out of the air for individual institutions. So the University of Poppleton might have a RAB charge of 40%, Christminster University may have a RAB charge of 10%, the University of Bums on Seats might have 70% – all based on historical graduate first destination salary data (both incomplete and affected by numerous variables), some very dodgy work that the QAA will hopefully not have to do, and the alignment of the planets in the constellation of Capricorn.

This is scary, market-skewing and idiotic in itself – you may wonder why anyone would want to do something like that. But take a step back. Insurable risk against the non-payment of expected dividends from anticipated income. This is hedgeable. Not content with establishing a market in higher education, the government wants to start playing with derivatives.

Remember that come the new funding model universities are essentially private, and thus the government is no longer obliged to treat them equally. Instead it attempts to treat students equally (except of course where Mummy and Daddy are so rich that they don’t need a loan). So if you run, say, an Arts College the government would be less inclined to want to lend to your students as they would see them as riskier. But they can’t be seen to be ignoring arts tuition, so they open up the risk of funding such students to the private sector.

Enter a hedge fund manager. Sure, he’ll fund a risky loan, because he can insure against it (and because the government is involved so he’s unlikely to lose out). In fact, he could load the insurance so he could bet against the repayment of the loan – and would then have a financial interest in students failing to repay their loans. You can write the rest of this dystopian novel at your leisure…

Seriously, there are scary implications to calculating investment risk on an institutional basis. That Willetts floated this idea in the middle of a dense and eminently skippable paragraph about government budgetary regulation suggests that there is something distinctly “off” about it. Hopefully we won’t be dissecting it within the forthcoming White Paper.

UK HE funding fixed in 1,300 words (kinda)

This post represents my personal opinions, and not those of my employers, projects, or programmes I am or have been responsible for. This post is available under a CC-BY license.

It seems that we still haven’t sorted this higher education funding nonsense out, and time is ticking away for the Rt Hon David Willetts to pull something out of his, er, hat. So before piling in with suggestions, here are some home truths:

1. The Browne-Willetts model is basically a graduate tax. No-one pays anything until after they graduate, payment is linked to actual earnings and is deducted at source via the tax system. That to me (and I’m the offspring of a love affair hatched within the Inland Revenue, so this stuff is in my very life force) pretty tax-ish. The difficulties are all caused by the decision to try really hard to make it not look like a graduate tax – firstly it is linked to a specific amount, which is generally perceived as “too much” by pretty much everyone, and secondly it is very narrow – I could be working next to a graduate of the new system at the same job at the same pay and they would be paying more “tax” than me. Which is clearly unfair.

2. The £9,000 maximum is pretty close to what it actually costs to teach a student currently. It’s a bit more, but this extra is scant compensation for the uncertain levels of investment, need for radical restructuring and a grossly extended marketing push. I think we’ve mostly all spotted this by now, but it’s worth restating.

3. Discounting the student “fees” for students coming from a disadvantaged background is not “progressive”. Meeting their living costs would be far more immediately helpful, and much more likely to support widening access. By the time they are earning enough to pay back fees they are earning at least as much as everyone else that is paying student fees. Tax is based entirely on an ability to pay at the point of payment, fee repayments are based on someone’s parents (or whatever) being able to pay for the “fees” 3+ years ago.

4. If you’ve got a system where fees are not coming in until graduates are earning a certain amount, you have a hole in your recurrent budget. This is the hole in the plan which costs the government billions each year. You’ve got a return (of only part of the initial loan) coming in at the very least four years after the spend (and trickling in for years after that). Which has the deliciously ironic impact of massively pushing up government borrowing, given that David Cameron and his team reel off the “labour’s excessive deficit” nonsense as a justification for this system.

5. A market with variable and uncompensated returns is not a good way to drive up quality in a system that needs sustained, long-term investment in infrastructure and staff. The smart thing to do in such a market is to lower ongoing costs (less full-time staff, less ongoing commitments) and bash unexpected surpluses into cheap shiny things that look impressive. It’s to cut choice by concentrating on renumerative areas of provision. We’ve seen the same thing happen in the privatisation of the rail network – to watch it happen again to another once-proud national system is pure stupidity. Pure markets don’t work. And David Willetts knows this, which is why he is intervening in pretty much every aspect of this planned new one.

6. Allowing systemic growth by letting the ultra-rich do whatever they want is obviously not a good idea. Didn’t do the economy much good either. It’s allowing expansion based on prestige rather than quality, disadvantaging students who can’t afford to pay the premium, and would only have led to elite institutions basically leaving the mainstream undergraduate market altogether. The fact that that an ex-member of the Bullingdon Club had to step in to point this out does not fill me with with confident that Willetts and BIS know what they are doing.

7. Students are not consumers. Education is work, and a student in any decent form of education is working on their own capacity. This is student as labourer-consumer and is basically a separate blog post.

OK, so that’s where we are. Students want an affordable education that meets their needs, universities want stable funding streams and the chance to invest in staff and infrastructure, academics would prefer to be valued and remunerated as skilled professionals if it’s all the same, employers need staff who can look beyond current assumptions and the government would like to be borrowing less. And with the current proposals, no-one is getting what they want.

To coin a phrase, “We can’t go on like this”.

Here’s the proposed Followers of the Apocalypse solution. Pragmatic, un-ideological and meeting the needs identified above:

(note this isn’t my – personal – dream solution. It’s just me exasperatedly trying to sort out all the problems identified above so that everyone is happy. So it’s not endorsed by anyone – even me)

A: Graduate tax, not fees. On all graduates, not just the new ones. This means that everyone is contributing to the cost of their university education (for those that have already paid fees – basically for 1998-99 and onward commencements – there could be a small lowering of the general rate) Such would be the additional take for this tax that the threshold of repayment commencement could be raised – a genuinely progressive move – or more of the living costs of non-traditional students could be covered.

B: Employer tax. Browne shied away from this, but I’m not going to. Employers getting the benefit of UK graduates should be contributing to the costs of producing them. Period. Whether this is through direct payment for the training of specific graduates (sponsorship), or indirectly through a small increase in corporation tax, should be left up to the employers in question.

C: Keep as much of the current model of HE funding distribution as can be kept. It’s mostly good, it mostly works, and offers the stability that institutions need. It supports a world-class system that actually runs a small profit, whilst educating a record number of students. There are tweaks that could be made around the edges, there could be a nicer method to sustainably support institutional growth and contraction for instance, but these are matters for the experts in HEFCE ASG who actually understand this stuff, rather than public policy.

D; Penalise institutions using large numbers of temporary teaching staff. PhD students should not be taking on large amounts of teaching, and bright graduates should be encouraged to consider academia as a career. It only works as a career (and such is the nature of academia you really need careers to build up the required level of knowledge) if the terms and conditions are such that you don’t need to take another job to make ends meet. For post-graduates and recent entrants to HE, this is very often not the case. The current model basically requires that you have private means to enter HE teaching or research, which cannot be a positive development.

E: Be up-front about what HE is. It’s hard work, with no guarantee of benefit. Rather than change HE to do something it isn’t designed to do, scale up alternatives (and there’s no reason HEIs couldn’t participate in these markets too if they have the resources and skills).

F: More central planning. It’s a truism that in Higher Education Conservative governments add constraints in the name of encouraging innovation, and Labour governments remove constraints in the name of system-wide efficiency. Work with this. Use additional student numbers more intelligently, with employers and analysts, to get what we need out of HE. Me, I’d be investing in paying for people to learn how to design and support a society with a vastly reduced energy availability and reduced levels of global economic activity – but your mileage may vary here.

Maybe this is a little tongue in cheek, but what I am trying to get at is that what is on the table at the moment is a bad deal (and in many cases the worst possible deal) for everyone. Pretty much *anything* would be better than the Browne-Willetts model.

MarginCore and the dumb hand of the market.

This post represents my personal opinions, and not those of current or former employers, projects, or programmes I am or have been responsible for. This post is available under a CC-BY license.

So, the hints coming out of the HEFCE annual conference regarding university funding were, firstly, the immanent appearance of the much delayed White Paper (now a running joke within the HEFCE exec), and, secondly, further tweaks to the Willetts-Browne funding model to avoid the now universal embarrassment that this model costs substantially more (we’re now up to £1bn in the mainstream press, it’s more than that as we know) than the current one.

What we seem to be groping blindly towards is something called a core/margin model, and that I’m going to call MarginCore. This should come as no surprise to readers of this blog, as we called it back in December (see about 6 paras from the bottom). We also said it wouldn’t be a very good idea.

For those of you who don’t read links in blog posts, here’s a recap:

Each course, within each institution, has a set number of students it can recruit to it (the core allocation). Depending on how lucky they feel, institutions can then bid for Additional Student Numbers (ASNs) which are extra students they are allowed to recruit that year. If they do recruit them (and keep doing so, and meet various other requirements) their core is eventually reassessed.

You may be impressed that I’ve got a whole actual acronym in there already, but this is for a very good reason. HEFCE ALREADY DOES THIS. Seriously. No word of a lie, this is how we currently do student number controls.

As a Plan B goes, doing something we are already doing is fine with me, usually. But it doesn’t work in Browne-Willets land.

Their tweak is that we allocate extra numbers to cheaper courses. As criteria go, it’s a bit rubbish. Currently, we allocate ASNs according to strategic subject priorities, and assess ASN bids based on ways in which the institution supports widening participation, meets student retention targets and generally has an ability to manage extra students. So you can see why “x is cheaper than y, therefore x should have more student numbers” is a bit rubbish. We can allocate student numbers for more sensible reasons than that, with a greater chance of successful outcomes.

A MarginCore model based on price just accentuates the dumb effects of the markets – we are completely competing on price rather than any other metric. Welcome to Tesco Value U.

The other option on the table is the Big Scary Teaching Funding Clawback, viz. the nasty Treasury takes away some of the money allocated to central (HEFCE) teaching spend under the new model. That won’t work either, mainly because all the central funding under the new model goes to band A and B subjects… courses in lab-based sciences and medicine. So – as the headline writers will clearly spin it – these cuts hits our future healthcare professionals disproportionally.

Or I suppose you could claw back money already awarded to student numbers in the current model. That’s going to be popular with a student body that already seems to be the most active and the most politically engaged in a generation.

Basically, this model of funding isn’t going to work. If the coalition wants to come out of this whole sorry episode with any shred of credibility they need to pull out now, before academics lose jobs and courses close in some idiotic “market”-led rationalisation.

The Winning Move Is Not To Play: Game theory and the Willetts funding model.

The opinions expressed within this blog post are my own, and not those of my employer, or of projects or programmes I am responsible for. This post is available under a Creative Commons Zero (public domain) license.

The very little I know about the application of game theory on educational policy I learnt from my inspirational former colleague, Professor David Turner at the University of Glamorgan. The bits that I have got wrong are, however, entirely my own fault.

During a speech at the Universities UK Spring Conference, David Willetts (UK Secretary of State for Universities) reiterated his warnings about the high potential cost to the taxpayer of universities electing to charge fees reflecting the full range of that which is permitted to them. It is now an open secret that the new funding model for universities is certain to cost the taxpayer more within this parliament, and is very likely never to cost any less than the current model. Bearing this in mind, Willetts has warned senior university staff that money may be taken from other university income streams (for instance the research budget) in order to be able to fund the additional loans that would be required to meet these fees.

Tough talk. But it unfortunately betrays an inability to understand his own policies around competition and an “open market”.

The table above outlines my analysis of the situation. The only chance that institutions have of even maintaining their existing funding is to charge above £7,500 and hope that enough of their competitors choose not to in order to avoid triggering the threatened cuts in research funding. Were the expected lower levels a revenue neutral (including inflation and additional costs incurred for the move to the new system) situation, it may be rational to broker a sector-wide compact (or cartel, if you prefer) to ensure that no-one steps over whatever line the government has drawn in the sand.

But the minimum (and even the implied “normal” maximum) mean that institutions would lose money as against the current system. When you combine this with the decade of incentives encouraging the sector to compete, we are very likely to see a rush to the top. Based on my analysis, above, this is the only rational choice for institutional managers looking to maintain or increase income.

This is a “non-zero-sum” game, as there is no way to maintain a position. Institutions will either win or lose – and a lower price than the rest of the sector means that they will lose heavily. The same goes for private institutions, incidentally. What motive have they got not to seek the maximum possible income?

I’ve said it before (many times), I’ll say it again. This model of university funding is unworkable.

You could make your own game theory analysis of the two models of HE. On one side you have the new model, where students, institutions and the tax-payer all lose out. On the other the current model, where they don’t.

HE Funding… another thread unravels.

The opinions expressed within this blog post are my own, and not those of my employer, or of projects or programmes I am responsible for. This post is available under a Creative Commons Zero (public domain) license.

So, as you do on a cold Thursday evening in February, there I was reading the HEFCE Model Financial Memorandum (as updated July 2010). And it struck me… with HEFCE funding becoming an increasingly rarefied component of institutional funding, how far can HEFCE actually mandate that institutions do stuff?

The main lever that they’ve had so far is the (partial) withdrawal of funding – they’ve also got the right to request changes in governance structures and personnel. And with these levers, they make institutions do some fairly interesting things. But what I spotted that did surprise me was that:

It is a condition of grant for an institution in receipt of HEFCE funding to subscribe to the Higher Education Statistics Agency (HESA)
It is a condition of grant for an institution in receipt of HEFCE funding to subscribe to the Quality Assurance Agency (QAA).

No-one ever mentions HESA, which is a shame as it is pretty awesome (and will be more so when they start getting in to releasing more open data). They collect information about the HE sector, which informs HEFCE funding and central planning. But it did merit a passing allocation of new work in the Browne Review, working with OFFA (another quango in a similarly interesting situation). Of course the QAA (who do a damn good job too) was enthusiastically (and implausibly, given that it is a UK wide organisation) mashed into HEFCE by Browne at that point.

Neither body is unduly expensive – the QAA costs the UK about £12m (£7m from funding councils – mainly HEFCE, £4m from institutions), HESA costs HEFCE around 200k (yes, really!) with institutional subscriptions and data purchase contributing the most of rest of the charitable body’s £4.3m annual income.

But the point is that both of these organisations are bodies with statutory responsibilities given to them by HEFCE – they are doing jobs that actually need to be done to run HE in the UK. They have to be paid somehow. But with decreasing HEFCE grants (many institutions losing more than 90% of their funding) it will become increasingly difficult to insist that universities and colleges subscribe as a condition of grant – they could just not take the grant, or ignore HEFCE and take the (proportionally tiny) cut. You could make it a condition of fee receipt, but I can’t see BIS insisting that these new private bodies subscribe to the QAA (or jump through any other hoops). And have “Student Finance England” really got the infrastructure or legal clout to do this?

Given that the overall level of funding coming in to HEFCE is dropping so substantially, it seems unlikely that HEFCE will be able to support the full costs of these bodies directly. Indeed this would mean top-slicing what remains of institutional grants, something unlikely to be politically popular.

How else can they be supported? BIS are currently doing everything they can not to end up spending more on HE support than they are currently – to the extent of threatening to cut research funding and student number allocation (wasn’t the whole point of Browne not to put limits on institutional growth?) if tuition fees tend too high (can they even do this legally?).

The limited appeal of the Browne model and Cable-Willetts adaptions comes only when you consider direct tuition costs as the only requirement of funding. The model ignores indirect costs such as infrastructure on a national and institutional level. Rather than engaging with the ongoing TRAC debate, Browne chose to ignore it and have all funding follow students directly and explicity, with the expectation that other costs would somehow sort themselves out. Already we are seeing discussions about students “paying” for £9,000 worth of services – how do you convince a student that using some of their fees to pay for the QAA, or HESA or another institutional subscription is worthwhile?

QAA and HESA are not going to disappear, they are too important. Other subscription-supported organisations may be in more trouble. But a new model of funding that appears to forget that any of these organisations need to be actually funded in order to do any good is a worrying development.

Declawing OFFA

Today sees the much trailed publication of the “guidance letter” to the Office of Fair Access regarding institutional access agreements and the right to charge amounts above the basic level of fees. In this post I am comparing this new guidance to the initial guidance offered in October 2004. I’m ignoring the draft letter of last year, and David Lammy’s letter of 2009.

Many ministers, in particular David Willets, have previously described the process of getting agreement for higher fees as becoming more arduous, with the expectation that the full £9,000 fee will be charged only in exceptional circumstances. In his ministerial statement, today, he says:

“The guidance to the Director sets out significantly increased expectations for the priority that institutions should be giving to fair access and widening participation, focusing more sharply on the outcomes of outreach and other activities, and less on the inputs and processes. In particular the government believes that progress over the last few years in securing fair access to the most selective universities has been inadequate, and that much more determined action now needs to be taken“

(If you love irony, here he is talking about this document the morning before it was released)

It is important to remember that the acceptance of an Access Agreement is, and always has been, analogue not digital. By this I mean that either an institution has an approved agreement and can charge up to the higher level of fees (soon to be £9,000), or it does not and can charge only the basic amount (£6,000). There is no middle ground where an institution can only charge up to £7,500 for a less impressive agreement. It’s all or nothing.

So how are OFFA to keep fees away from the maximum?

(para 1.7, 2011) “We have consistently said that we believe graduate contributions of £9,000 should apply only in exceptional circumstances. Institutions would need to charge considerably less than this to offset reductions in HEFCE funding, and higher charges impose higher costs for the public purse because of generous subsidies in the loan system. […] It is of course not within your legal powers to impose any quota for how many institutions charge what level of graduate contribution […] But if the sector as a whole appear to be clustering their charges at the upper end of what is legally possible […] we will have to reconsider what powers are available, including changes to legislation, to ensure there is a differentiation in charges. We intend to keep this under very close review for 2012/13.”

That’s it. If every institution (as they do currently) successfully has their access agreement approved, there is no way they can be prevented from charging the maximum fee level. And the government has said nothing beyond keeping things under review. This is shameful.

(incidentally – institutions would need to charge about £8,000 to replicate their governmental income with respect to student tuition. This includes the current HEFCE grant and current fees. Lovely little slight of hand there.)

So given this, you would expect a substantially beefier set of requirements for access agreement approval.

The 2004 letter handily offers a set of minimum requirements for an access agreement:

(para 5.1, 2004)

The 2011 letter explicitly does not:

(para 5.1, 2011)

“Judgements on the details of these requirements in individual circumstances are for you to make as Director of Fair Access. At this stage, and in accordance with current arrangements, we are not proposing any minimum requirement in this area”

(in accordance with current arrangements they say… hmmm….)

Okay, so maybe it’s all about the big stick. Surely this new guidance will beef up the sanctions that OFFA can make for institutions that don’t play by the rules (whatever the rules turn out to be). From a 2004 starting point:

So, we’ve got a refusal to renew (which would mean that they couldn’t, legally, charge higher fees without some comeback), suspension of the relevant part of the main HEFCE grant, and a small punative fine. For a beefed up measure you would want to maybe look at degree awarding power suspension rather than grant suspension (especially given the grant cut) and a larger fine. You’d also expect that there would be something in the 2011 letter to cover institutions no longer in receipt (or never in receipt) of HEFCE grants.

But instead:

(2011, para 7.1) “The major sanction available to you is not to approve or renew an Access Agreement, when it is reviewed each year. This would remove the institution’s right to charge its students above the basic level. You also have available to you sanctions should an institution breach or fail to deliver its access agreement, viz:

to impose a fine (via the funding body) of a maximum of £500,000

to require restitution if students have been disadvantaged or commitments have not been honoured.”

At best, this is the same deal as currently – except that they seemingly no longer have the option to reduce a grant from HEFCE. And the non-approval of an Access Agreement… how would this affect a HE degree-awarding institution that is not in receipt of HEFCE funding, for example an entirely private institution, or an arts college? Such a situation has not been considered in this document, surprisingly as this was one of the hopes around the expansion of the availability of degree awarding powers.

And has the maximum fine been adjusted for inflation since 2004 – no it has not.

You’ve probably guessed by now that this isn’t the document we were hoping for, and it isn’t the document we were promised. But it is worse than that – this document has actually taken away the minimum access standards set out in 2004, and has not updated the sanctions available to OFFA to suit a new model of Higher Education funding.

Questions should be asked.

This is not a document about widening access, it is a document about cutting state funding for Higher Education. And it doesn’t even do that very well.

How to read a funding council grant letter (and how to constrain government financial exposure)

This post represents my personal opinions, and not those of current or former employers, projects, or programmes I am or have been responsible for. This post is available under a CC-BY-SA license.

“There will, of course, be an overriding need to manage within public expenditure constraints, given that the student finance regime will continue to be subsidised from public funds. This will require developing a new approach to constraining Government financial exposure at the sector level, without restricting student choice of institutions. Lord Browne offered one imaginative solution; we are considering other possibilities and will say more in the White Paper. Meanwhile, we would welcome the Council’s active engagement and ideas for how our policy goal can be achieved in 2012/13 and beyond.”

(Paragraph 16, Grant Letter from BIS to HEFCE, December 2010)

When I first went to work at HEFCE in 2003, my Dad sent me an amazing present: The Complete “Yes, Minister”. I still would (and do) recommend this to anyone working in policy in whatever field or whatever level.

Many of you will have spotted why I thought of Yes Minister when reading the above paragraph of the recent HEFCE grant letter, and may be wondering precisely how far Lord Browne’s stock must have sunk to have an idea described as “imaginative” in a public document! At least they didn’t say “courageous”…

Anyway, for both Sir Humphrey and HEFCE, all the power is in the drafting. I don’t think anyone outside the organisation appreciates quite how much drafting goes on; but in order to understand any of what is published it is vitally important that you understand what isn’t. Something like a funding circular will have at least 10 drafts behind it before it sees the light of day, if you are looking at a policy document, at the very least double that. It’s a very “old school” civil service way of working, and it leads to very strange documents indeed.

I’m increasingly beginning to believe that such documents are not written to be read; rather, they are written to have been written. When you read a HEFCE document, the sound of the words in your head is not important. Imagine it instead as a series of quotes in a news item.

“HEFCE have said that…”

“HEFCE maintain that…”

“HEFCE are in favour of…”

and so on. Thought of like this, every word and phrase count because they can all be used in a variety of contexts. Like an x factor finalist, HEFCE are almost touchingly aware of their own media profile. The individual words and phrases in a funding council document are far more important than the overall sense of the document.

So why am I writing about HEFCE documents in a post about a letter they got from BIS? Well, it’s a pretty open secret that HEFCE will have seen this document a long time before any of us did. They’ve been involved in the drafting of the letter for weeks, if not months. So every word, every phrase, every inference of the letter is in there very, very deliberately. And some of the odder things may be evidence of discussion and compromise between BIS and HEFCE.

Let’s take an example, from paragraph 16, note “we are considering other possibilities and will say more in the White Paper. Meanwhile, we would welcome the Council’s active engagement […]” and compare:

paragraph 3: “We will set out our overall thinking and plans for HE in more detail in a White Paper, and will value your advice in preparing it.”

paragraph 18 “We will say more in the White Paper about our priorities for targeted funding and would welcome the Council’s advice“

At first glance, these three quotes seem to be saying the same thing. BIS are writing a White Paper, they would like HEFCE’s input. But if you look deeper, there is more in there.

Paragraphs 3 and 18 use the “we will say more in the White Paper” construction. This implies that HEFCE will be told more about the governments plans for those particular areas of policy in the White Paper, and that in the meantime they will be asked for advice when needed. Given that we are expecting a White Paper in January you would hope that BIS have already sought all or most of the advice they need from HEFCE by this point. But the words are important – BIS are actively “setting out their thinking”, HEFCE are passively giving “advice”.

In paragraph 16 both participants are actively engaged, HEFCE emphatically so! This is the paragraph regarding how to constrain the overall government cash exposure to a market-based system. Clearly, BIS are much keener to get advice here, quite possibly because they haven’t got a clue how they are going to do it. So, this particular hot potato has landed in HEFCE’s court, as Jim Hacker may have said.

But Government departments don’t ask quangos for advice unless they are pretty sure what they want to hear. What other clues are in paragraph 16?

“There will, of course, be an overriding need to manage within public expenditure constraints, given that the student finance regime will continue to be subsidised from public funds. This will require developing a new approach to constraining Government financial exposure at the sector level, without restricting student choice of institutions”

Notice what is not being said here: student numbers. The government can’t afford to be seen to be calling for constraints on student numbers – the whole idea of the market system is to let the market decide the size and shape of the sector. So we get the euphemistic “constraining Government financial exposure”, with a little extra tag on the end making sure we know that this isn’t restricting student choice (I’ll come back to “of institutions” presently).

There would only really be one way of doing this… setting an upper limit to the total government cash commitment to HE, and bringing in some kind of a system to keep spending under this cap.

Here’s one way of constructing such a system (which won’t work): allocate funding to institutions in respect of students sequentially from the cheapest to the most expensive, firstly for “core” numbers (based on current intake) and then for “additional” numbers (new intake)

So if you charge lower fees you are more likely to get all the students that you want to enroll, if you have more expensive courses may be subject to not getting all of the students they’d like. The positive side effect of this is that it would drive prices down, the negative would be the perception that the most able students (applying to “the best”/most expensive) universities) would be less likely to get places than students with less good A-level grades. It’s pretty rough, but you could sort it out into something tidier fairly easily, maybe adding regional or subject elements.

[I’ll work this out further in future blog posts if anyone would be interested. If HEFCE are interested, I’ll work this out in a research report for £50,000 :-)]

But “of institutions” is the killer – one of the most out-of-place aspects of the Browne Report was the idea that no institution should go out of business… even though everything else in the report seems designed to make exactly this happen. HEFCE even got the promise of a small budget to prevent this from happening (“The Council will have powers to provide targeted funding to prevent institutional failure from taking place“, Browne, p47) which greatly upset the poor darlings as they felt they were doing an excellent job of this anyway (they are, as it happens). So HEFCE, is here, for the first time, instructed to work against the effects of the shiny new market – not to support wider subject choice, or a choice of mode of delivery, but to protect actual institutions.

At least some heartening news for an increasingly bleak midwinder.

[This is my last post this year, I’d like to end by saying thanks all for reading, commenting, retweeting and disagreeing, so:

“I wonder if I might crave your momentary indulgence in order to discharge a by no means disagreeable obligation which has, over the years, become more or less established practice in government service as we approach the terminal period of the year — calendar, of course, not financial — in fact, not to put too fine a point on it, Week Fifty-One — and submit to you, with all appropriate deference, for your consideration at a convenient juncture, a sincere and sanguine expectation — indeed confidence — indeed one might go so far as to say hope — that the aforementioned period may be, at the end of the day, when all relevant factors have been taken into consideration, susceptible to being deemed to be such as to merit a final verdict of having been by no means unsatisfactory in its overall outcome and, in the final analysis, to give grounds for being judged, on mature reflection, to have been conducive to generating a degree of gratification which will be seen in retrospect to have been significantly higher than the general average.”

Thanks, Sir Humphrey]

My favourite part of the HEFCE teaching funding method, and how screwed we are if we lose it

This post represents my personal opinions only, and not those of my employer, or of programmes or projects I am responsible for. It is made available under a CC0 (Public Domain) license.

The current HEFCE funding model has a number of quite marvellous features which I would be happy to expound upon at great length, but my personal favourite must be the “tolerance band”.

This is technically defined as an allowance for the difference between the standard resource (the funding available for the number of students enrolled on particular courses that the institution has indicated to HEFCE each year) and the assumed resource (which is the funding available for the students that have actually enrolled on particular courses each year). Because HEFCE is wise and noble it allows a 5% difference either way between these amounts before it starts either clawing back funds or reducing student numbers for the following year.

This 10% band of tolerance is the thing that keeps institutions stable. It allows for fluctuations in student numbers, and permits an institution to receive an expected amount of funding every year, allowing for an accurate budget and long term planning.

Under the new funding model, the majority of the financial support (80%+) that used to come from HEFCE will come from a new organisation, Student Finance. This allocates funds based directly on student choice, and – crucially – does not include a compensatory function. So the stability of funding levels, year-on-year, is lost.

The graph above shows what would happen if the fluctuations in student number are uncompensated, assuming the rate of fluctuation linked to student choice remains similar to what we see currently. Already, you can see that a reliable level of funding is not possible, and that an institution must take a lower level of funding as it’s basis for budgeting.

But, of course, other factors come in to play in a purer market, the most significant of these being the enhanced importance of marketing and communications for institutions. Though marketing can offer great recruitment gains if done well, it must be remembered that there are multiple actors in the market, all of which will be engineering their own enhancements. You could imagine one-year-only cut-price deals, collusion and horse-trading, marketing “blitzes” on priority areas. (There’s a whole other post coming on how cool it is going to be to work in university marketing over the next few years.)

So something with much higher peaks and deeper troughs would be expected, meaning that the “base” level of institutional resource is substantially lower, and that the institution must be capable of quickly scaling particular courses substantially up or down depending on recruitment.

This is a similar scenario to seasonal changes for demand in manufacturing, and manufacturing companies have responded to these pressures in one main way.

The casualisation of labour.

Rather than keep enough staff permanently on their books to meet peak demand, it is more likely that a factory would keep only the staff that they would need for periods of low demand, and draw on a pool of casualised (short-term contract, hourly pay, semi-skilled or unskilled) labour to cope with peaks.

Universities are already starting to do the same thing. Staff on “atypical contracts” (a lovely HESA euphemism) already make up more than a third of university staff – and return accuracy for this category of staff is notably poor – it is likely to be far, far higher.

The new model of funding only makes this situation for staff more likely. It may be that the age of the “career academic”, of tenure and of teaching plus research contracts is dead.

It is possible that this is simply an unintended consequence of a policy that has been notoriously poorly conceived and understood. But (and I am moving into tin foil hat territory here) we have already seen how the new model costs the taxpayer more than it saves, adds a significant extra burden to students, and (at best) offers institutions a similar amount of funding to what they get currently. So what is it for?

Is it this? A straight-ahead attack on the academic profession? A new world of casual, teaching-only, HE tutors, juggling multiple short-term contracts just to stay afloat? I dunno. But if it quacks like a duck…

An open letter to David Cameron.

The views expressed below are either my own, or exaggerated for the purpose of my argument. They are not the views of my employer, or of any projects or programmes I have responsibility for. This text is available under a CC0 (Public Domain) license.

>Dear David,

You may wonder why I’m writing to you, why I’m not bothering Nick Clegg like every other student and academic in the country seems to be. Surely I don’t think I can appeal to your better nature, or sense of social justice?

Well the thing is, I can kind of understand where you are coming from. Primarily, you want to save money to reduce the deficit. It’s likely you also want to bribe the vice-chancellors of famous universities to take the fee increase and not care about anything else, and let the private sector compete directly with publicly funded provision. You pretty obviously couldn’t care less about lecturers or students – I comprehend that position, even though I (obviously) disagree with you.

>With Nick – bless him and his little hangdog face and the dead eyes – I don’t know what he wants, other than (apparently) to lose his seat in 2015. So I can’t make a cogent argument to him and have any idea of how he’ll respond to it. He’s not making any sense at the moment, so I can’t use sense to argue with him.

Anyway, David, this reform of the funding of Higher Education thing. You’ve always been keen to link it to deficit and debt reduction. On 11 November 2010, in China, you said (during an interview on student fees where you condemned students doing to CCHQ what the Bullingdon Club have done to countless Oxfordshire restaurants):

“I think the will of the public was expressed at the time of the election when they rejected debt and deficit and putting off these difficult decisions under Labour, and they chose a new approach and we’ve got to be true to that and stick to that“

I want to hold you to that promise. To work to reduce the deficit. I’d like you to comment on my new proposal for higher education funding that will save you at least £5bn within this parliament on what you are currently proposing. Remembering the commitment of your Chancellor to “eliminate the bulk of the structural current budget deficit over a parliament” (24 Feb 2010).

The proposal is this: leave things exactly how they are. Don’t change anything.

And that’s at least an extra £5bn in the coffers, helping you hit your deficit target. It also has the pleasing side effects of keeping students and academic staff happy, making the university sector more sustainable, offering them fiancial stability and ending nearly a month of civil unrest. But forget about all that hoodie-hugging liberal stuff (you already have? excellent.) – it saves the country money. Keep hold of that idea.

You’ve linked the new proposals to the deficit so often you may be in danger of starting to believe your own spin. But in retreating from your policy you would be following the advice of the independent Office for Budgetary Responsibility, who note:

“For the November forecast the OBR has scrutinised and certified estimates of the additional loans [the loans in respect of increased student fees] that have been produced by the Department for Business, Innovation and Skills (BIS) for England. As the table shows, the impact on the CGNCR [Central Government Net Cash Requirement] is estimated to reach £5.6 billion by 2015-16, cumulatively adding £13 billion to PSND [Public Sector Net Debt] over the forecast period.” (pp123-124, in “Box 4.3”)