VAL0058

Written Evidence submitted by millionplus

1. MillionPlus is the Association for Modern Universities in the UK, and the voice of 21st century higher education. We champion, promote and raise awareness of the essential role played by modern universities in a world-leading university system. Modern universities make up 53% of all UK undergraduates, and 38% of all postgraduates, with over one million students studying at modern institutions across the UK.

Graduate outcomes and the use of destination data

2. UK universities have strong graduate outcomes. Data from the Higher Education Statistics Agency (HESA) Destinations of Leavers from Higher Education (DLHE) show that 91% of graduates were in work or further study six months after graduation[1] and over 93% of graduates were in work or further study 3.5 years after graduation.[2] Modern universities work closely with employers to design degrees and courses that meet their skills needs and offer students the opportunity to enhance their employability to ensure that they are successful upon graduation. 

3. Graduate destinations are complex. People take different decisions about career paths and further study patterns for a variety of reasons, and it is difficult to fully represent these diverse outcomes. The collection of data only six months after graduation is too soon to allow students to have a meaningful opportunity to progress with their career aims, whether that be through personal decisions or a competitive employment market. For example, graduates seeking to develop their own business or a creative portfolio as part of a self-employed/freelance career were not well represented in the DLHE survey. This significantly underplays the success of these graduates, and by implication the universities they attended.

4. The changes HESA is making to the collection of destinations data, in its new Graduate Outcomes survey[3] will seek to address some of these issues. It will collect information 15 months after graduation and introduce new questions to ensure that non-traditional career paths (such as setting up a business, or creating a portfolio for self-employment) are properly recognised. 

5. The definition of graduate jobs is out of date and does not take account of modern work patterns, career trajectories and employer decision-making. An arbitrary line drawn across the standard occupational classifications list tends not to recognise several features of either today’s higher education system or the nature of the economy. With far more diverse provision within the sector, particularly in modern universities, and increased employer sponsorship and development of courses, it is difficult to match every degree and course offering to a specific job title.
6. The use of the current Standard Occupational Classification (SOC) groups, and general approach to defining ‘graduate jobs’ creates misperceptions about graduate success. Employers makes decisions about what attributes are necessary for the jobs in their businesses, and it is they who decide that a role is a ‘graduate job’. Equally, graduates decide whether a role is suitable for their career path. The ONS’s review of SOC in July 2016 acknowledged that there were issues to be addressed but it remains the case that occupations not currently classified as graduate level are increasingly graduate occupations.

7. However, perhaps just as important is the fact that those with a higher education qualification are known to be more resilient in the labour market and are better-placed to adapt and respond to changes in technology and new and emerging jobs and markets. Developing flexibility and resilience is therefore a vital component of a future skills strategy, as many jobs in the future are not those that exist today.

Linking outcomes to fees

8. It would damage higher education if a variable tuition fee system was introduced based on either Teaching Excellence Framework (TEF) ratings or graduate earnings. All UK higher education is quality assured (and deemed to be excellent), and the TEF would be a blunt instrument on which to base a system of fee differentiation (and ultimately reduce the unit of student resource).

9. Graduate earnings reflect returns to the individual rather than returns on qualification. Very high salaries are often an indication of social capital acquired by an individual (in many cases, prior to them attending university), rather than being specifically influenced by a degree or university. Graduate earnings, as indicated by the longitudinal educational outcomes data, will be lower for those working in public sector roles vital for society, or those working outside of London and the south-east. These are factors not in the control of a specific university. In any case, graduates who choose to study, live and work in regions which have historically experienced lower growth will add to the economic vibrancy and intergenerational capacity within those regions.

10. Similarly, some data suggest lower average earnings for women (due to decisions to balance work responsibilities with caring responsibilities) and for people from Black, Asian, or other minority ethnic backgrounds. These are societal issues but also reflect employer recruitment and reward practices over which individual universities have no specific control.
11. Salaries earned by graduates after completing a degree are based on a variety of factors and decisions: job sector; region; prior attainment; existing social networks; choices about life and career paths. The more ‘distance’ a graduate has from their university of study, the less influence the latter has on their salary.
12. Basing university tuition fees on graduate earnings would risk lowering the amount of funding universities have to invest in students from a variety of backgrounds. This could lead towards a less socially inclusive student population.

Institutional Funding Regimes

13. A review of annual grant letters from the Higher Education Funding Council (HEFCE) illustrates the instability in funding for teaching as compared to research for the 2010/11 – 2017/18 period (Appendices A and B). The analysis does not account for the removal of Aim Higher funding in 2011 which at the time of its abolition was worth £78m per annum.
14. Nor does it account for the savings which the government made as a result of adjusting and reducing individuals’ eligibility for disabled student’s allowance, the net result of which was to largely transfer the responsibility to fund reasonable adjustments to universities. We would draw the Committee’s attention to the following:

a)    The reduction in teaching capital was/is significant

b)    The funding system for teaching is marked by instability in comparison to research;

c)     The relative stability around research provides an obvious advantage to those universities which are in receipt of more of this funding (both revenue and capital);

d)    The stability around research capital benefits students as well as researchers e.g. new labs, research facilities are rarely only used by staff (nor should they be);

e)    After the period of teach-out during which the 2012 system sits alongside the pre-2012 (lower) fees and teaching grant system, the residual direct teaching grant that remains (£652m) relates largely to high cost subjects. This tends to benefit one part of the sector - or at least those universities which are historically more engaged in STEM.

15. Universities which are more reliant on income from teaching have been required to manage a more volatile funding system (compounded by changes in student number controls). Fee, WP and university income is therefore deployed to cover, a wide range of activities, including: teaching costs (which are rising); improving the student experience and innovation in course design and delivery; inflationary pressures;, borrowing requirements in respect of estate and other investment (e.g. new student record systems, improvements in ITT); extended hours including 24 hour opening of libraries and learning resource centres; outreach and student success; welfare and hardship funding; compliance with QAA; and other regulatory and professional body requirements (soon to be extended to payments to OfS) .
16. It is also perhaps worth noting that under the 2012 regime, universities only receive SLC payments twice a year. If the student leaves the course late in the academic year (often for perfectly sensible reasons), universities have to cover a much higher proportion of the teaching costs than previously. 
17. During this period the sector has also been required to manage fluctuations in the international market, teacher education and more recently the funding of professional healthcare students.

Social justice in higher education and support for disadvantaged students

18. Modern universities continue to play leading roles in delivering opportunities to students from a wide range of backgrounds. These universities make up 49% of the sector in England and educate 1.07 million students per annum on a wide range of programmes, from undergraduate provision to PhDs. 68% of the students who study at modern universities are from areas with lower levels of HE participation. 66% of all black students, 50% of all Asian students and 50% of all students from mixed and other ethnicities who study for a higher education qualification do so at a modern university.
19. HESA enrolment data for undergraduate and postgraduate students in 15/16 confirms that there were 13,415 black students at Russell group universities. The combined total of black students at just four London universities - the University of East London (UEL), London South Bank University (LSBU), Middlesex and London Metropolitan was 15,615 - considerably more black students than all the 24 Russell Group institutions combined.  
20. There are two important points to make about funding regimes and social justice. First, it is widely accepted that schools working in challenging circumstances, with large cohorts of students from disadvantaged backgrounds (e.g. speakers of English as an additional language, students on education health and care plans, student from lower income families), require additional investment and support to help them to be successful and progress to the next stage of their education. The progress made by schools in London and the pupil premium policy are both testament to this. The latter has achieved significant improvements in educational progress and student attainment. It seems illogical to suggest this approach should not apply to further and higher education.
21. Second, there is a strong case for equity in funding per higher education student. It is the right of every higher education student to have the same level of resource invested in their educational experiences. Any policy that introduces a differential fee decided by government (rather than by an independent, autonomous decision by a university) will introduce inequality into the system and imply that some students are less worthy of investment than others. If the consequence of an approach like this is that students from under-represented groups or disadvantaged backgrounds are those that receive lower levels of investment, then the government’s attempts to improve social justice will be undermined.
22. It is vital that all universities are properly funded to deliver high quality higher education for students wherever they study. Any reduction in the maximum tuition fee level would mean universities having less funding available to invest in high quality teaching and facilities for students i.e. the unit of resource would be significantly reduced. However, this could be avoided if direct grant to universities was restored to make up the difference. This would enable the government to reduce the headline tuition fee payable by university students while also being able to maintain investment in higher education. The Organisation for Economic Cooperation and Development in its latest review of education confirms that investment in higher education delivers significant benefits to individuals and the economy.[4]
23. Universities that wish to charge above the lower fee cap of £6,165 (from 1 September 2017) are required to sign an Access Agreement with the Office of Fair Access. These agreements require universities to invest some of their tuition fee income to deliver improvements in participation, retention and outreach work with schools and colleges.
24. While these agreements were required prior to 2012, funding for initiatives to improve participation was previously also supported by government. For example, prior to its abolition the Aim Higher programme funded a wide range of collaborative partnerships to support access and participation in further as well as higher education. Similarly, Student Opportunity Funding (SOF) administered via the Higher Education Funding Council for England and worth £380m in 2015/16, provided additional resource – particularly for those universities with the most socially inclusive student profiles. This funding stream has been reduced and refocused.[5]
25. The funding scenario has made more complex by changes to student numbers and by amendments to student number controls and then by the complete deregulation of student numbers from the 2015/16 academic year. Overall undergraduate teaching numbers fell by 6.89% in 2012, resulting in a cut in institutional income for all three/four years during which the 2012/13 cohort would have studied.
26. Subsequent fluctuations in demand include a 28% downturn in the participation of part-time students and a 19% drop in mature students in England (21 years and over) from 2011/12 to 2015/16 - declines which show no sign of abating. This has impacted adversely on those, mainly modern, universities which have historically recruited a more inclusive student cohort by mode of study and age, and on individuals already in, or hoping to return to, the workforce with new skills and career options. The significant increase in tuition fees after 2012 is also a potential disincentive for small employers who might otherwise have supported employee part-time study via tuition fee contributions or sponsored bespoke courses.
27. Since 2015 further changes to the student support regime have increased the loans and the costs of higher education for students, from the most disadvantaged backgrounds. In the Summer Budget of July 2015, George Osborne, then still Chancellor of the Exchequer, referred to student maintenance grants for full-time students as being ‘unaffordable’ and announced that they would be replaced by maintenance loans from the 2016-17 academic year. This change affected nearly half the new undergraduate student population in England from 2016-17. Prior to this change, full-time students who progressed to higher education from families with an annual income of £25,000 or less were eligible for the full grant of £3,387 while students from households with an annual income of between £25,000 and £42,620 were eligible for a means-tested partial grant, which tapered in amount depending on household income.
28. The new maintenance loan increased the total amounts which students from low-income households could borrow to £8,200 for those living away from home (or £10,702 in London). As a minimum, the abolition of maintenance grants has increased debt on graduation from a three-year course by an extra £13,500 (before interest) if full entitlement to maintenance loans is taken up. The Institute of Fiscal Studies (IFS) estimated that students from the poorest 30% of households will repay an average of around £3,000 more overall (2016 prices) because of the switch from grants to loans.

Quality and effectiveness of teaching

29. The UK’s higher education sector is a global leader but its strength is in its diversity. It is therefore vitally important that all UK universities and their students/graduates are supported and championed. Basing notions of ‘excellence’ on past-measures of success will only ever provide one part of the full picture of what is currently being delivered by UK higher education. Meeting the needs of the future jobs market will require more innovation, greater diversity, and a willingness to challenge orthodoxies to break new ground. All universities should be empowered to do this.

Apprenticeships

30. Modern universities have long traditions and expertise in delivering professional, vocational and technical education to meet employer needs. As such, they are able to play a key role in supporting the government’s policy objectives for apprenticeships. However, many universities and sector representatives have voiced concerns about the implementation the policy. Two key areas of concern are in the delays experienced in the procurement process for new training providers and in the approval of apprenticeship standards. Both delays undermine the capacity of universities and other providers to work with employers to establish and deliver high quality apprenticeship training that gives individuals in the workplace the necessary skills and opportunities.
31. Investing in higher education, whether for school leavers and older learners, for people about to enter the employment market or for those already in it, makes economic sense and generates growth.
    A successful, innovative and competitive economy needs highly-skilled individuals with the resilience, flexibility and problem-solving attributes to cope with the demands of 21st century workplace.
32. Since April 2017, the government has collected the apprenticeship levy as a tax from businesses with a payroll above £3m per year (at a rate of 0.5%). Since September 2017, employers have been able to use this levy to pay for apprenticeship training. Those businesses that do not pay the levy are supported by the government for 90% of the costs of apprenticeships. The policy has been implemented to boost apprenticeships take-up, with a target of 3 million starts by 2020 and a significant emphasis on higher-level and degree apprenticeships.
33. Recent figures, however, demonstrate that apprenticeship starts have fallen by 41% since last year[6], and there is a clear need to address this stark decline. Greater flexibility is needed in the system, and modern universities should have a prominent role to play in this agenda going forward.
34. A competitive economy needs to harness the ability of universities to support businesses in developing their workforce. Modern universities have long-standing traditions of offering more flexible study routes, accrediting workplace learning and developing multi-disciplinary, vocational, professional courses. However, the 2012 tuition fee and funding reforms exacerbated a decline in the part-time enrolment that enabled people already in work to learn while earning, and improve their existing skills.
35. Opening and promoting higher education to students of all ages, particularly to those already in the workplace, will benefit individuals and employers. Increasing skills and knowledge of employees will increase productivity and output, which in turn adds economic value to the UK and, because universities are dispersed around the country, contributes to more dynamic regional economies.
36. Building on the existing expertise of universities can achieve this, and should ensure that employers and employees are incentivised to take up opportunities for part-time, work-based professional development. This would enable employers to sponsor degrees and other learning opportunities to upskill their workforce. Successive governments have used tax credits to incentivise businesses, particularly SMEs, to invest in research. The same approach should be taken with continuous professional development, and the industrial strategy provides an opportunity to do that. There is also a strong case to provide new funding for those not in the workplace to update their skills.

The role of the Office for Students

37. The Office for Students has been clearly established as a regulator, rather than a funder, even though it will have a role in allocating funding to higher education providers. A key focus of the Higher Education and Research Act 2017 it to introduce greater marketisation into the higher education sector, stemming from the government’s belief that a) there is not enough competition in the sector and b) increased competition will solve concerns the government has with the system.
38. The first role for the Office for Students is to operationalise the relevant sections of the Higher Education and Research Act 2017, where it applies to the work of the Office for Students. It will therefore only relate to provider activity related to teaching, access, participation, qualifications and outcomes. It will not cover research activity by universities.
    On 19 October, the Department for Education published the consultation on the regulatory framework on behalf of the Office for Students (which does not yet legally exist).
39. There are at two immediate tensions contained within the provisions of the Act that the Office for Students will need to balance. Firstly, there is the need to act as a market regulator and promote competition between providers in the higher education sector. This will involve encourage new providers to enter the market, and to allow providers to exit the market (or in lay terms, fail). Secondly, there is the need to uphold the public interest. These two duties have the potential to conflict with each other – it may be market logic for a course or institution to ‘fail’ but it could be in the public interest for the OfS to maintain provision because of a need (e.g. the course or institution plays a vital role in society or the economy). The challenge for the OfS will be to balance these two conflicts.
40. As a market regulator, the OfS will have a role in assessing the risk to students of studying a course, or at an institution. In this area it needs to be careful to recognise the possible unintended consequences of this role. By the very nature of higher education, universities create risk by offering students the opportunity to study based on potential. There are no guarantees. Often, the individuals who have the potential to make the most progress and gain the most benefit from a higher education experience are also the ones that are most at risk of withdrawing from courses. The OfS must avoid encouraging by its operations and language, universities ‘de-risking’ their provision by enrolling only students most likely to succeed.

Conclusion

41. Current debates about the funding of higher education in England and the Committee’s own Inquiry have centred on how to and who should pay for the costs of higher education. It is indisputable that, regardless of the funding regime adopted, higher education is a cost to government and therefore to taxpayers. The detail of the funding regime itself will impact on student and graduate perceptions of value or focus attention on specific aspects of the funding regime at the expense of other wider considerations.  In fact, higher education also has outcomes and benefits for the Treasury, the individual, society and the economy, which need equal consideration. Any ‘value for money’ assessment therefore needs to take the economic costs but also the wider benefits of higher education into account.
42. There are different sources of value and a wide range of both economic and non-economic benefits accruing from degree level attainment. From the individual’s perspective, the economic benefits include monetary benefits, such as enhanced earnings and employment outcomes and reduced benefit dependency. These are complemented with non-economic benefits which include the greater probability of undertaking and completing further learning, as well as the wider benefits relating to increased self-confidence, self-esteem, intergenerational and social mobility, and engagement in community activity or voluntary work.
43. From the Exchequer perspective, graduates expand the tax base as a result of being more likely to be in employment, as well as increasing tax receipts as a result of their enhanced earnings. There are other wider Exchequer benefits associated with degree level provision, such as the reduced demand for NHS services, and reduced interactions with the criminal justice system.[7] However, despite being significant, there are a number of benefits to the UK economy that are in general not given full consideration. These include the impact of degree level provision on firm level productivity, competitiveness and profitability (over and above employee wage gains); and the spillover effects of having highly trained workers working alongside less qualified colleagues.[8]
44. As a result of the enhanced earnings and employment outcomes compared to the next best alternative, a UK higher degree remains an exceptionally good investment for both the individual undertaking the qualification, as well as the Treasury funding their provision - and therefore, by default, the taxpayer. Given this, any reduction in participation rates will not only have consequences for individuals, and the Treasury, but will also impact on the volume of exports generated by the education sector and reduce the positive spillovers that arise from having a more qualified work-force.
45. Any review of the detail of the current funding and student support regime in England must take these wider considerations into account. It should also be borne in mind that the period since 2010 has been marked by instability in funding regimes for teaching in comparison to research. It remains our view that the outcome of any funding regime should be judged against an overriding principle – namely that all students have the right to a high quality well-funded higher education wherever they study, whatever course they study and whatever their age, background or their chosen mode of study (full or part-time).

October 2017

Appendix A

Appendix B