What's the point of tuition fees?

There's no news hook for this, but I'm starting an internship next week that's not going to be compatible with publishing opinions about education policy. So here is a short rundown on why the UK tuition fees system is so contorted that it doesn't really deliver on any of the theoretical merits of student fees.

First things first: all the funding for university education comes, in the first instance, from the government. The debate is only about what revenue-raising method the government should use to recoup that money. One option is general taxation, which broadly charges everyone but takes more from the better-off. Another option is a graduate tax which specifically targets people who attended university. A third is some kind of fee/loan system, in which students are specifically responsible for a set part of the cost and repay the government that amount over time.

Why do the third one? There are a few reasons, which often get run together.

People who can afford services shouldn't get them free from the government
This is probably the argument that floats around the most: why should Dave, stereotype of a hard-working taxpayer, have to chip in for the Cambridge education of a kid who went to Eton? There's nothing essentially wrong with it, but it has to have limits because in structure it's just an argument against any universal government provision.

Obviously we don't give (say) unemployment benefits to everyone and then ensure equity by higher general taxation on the wealthy. (Though that is the thinking behind the increasingly-popular universal basic income ideal.) On the other hand, we don't means-test access to the NHS or have a fee/loan system for state schools. Even more relevantly, the tuition fee system in theory gives loan terms - income-linked repayment, full write-offs, and so on - that are better than what you could get privately. Why should students with wealthy parents who could finance their education get these government-funded concessions?

At some point there is a trade-off between making the design of your policy workable and narrowly targeting the class of people it benefits. The current system tries to square this circle by giving loans to everybody but adding in a bunch of features - like differential interest rates and repayment rates, depending on income - to reduce how much better-off people benefit. But then, as a revenue-raising system, it's starting to sound a lot like progressive taxation...

People should pay for things that benefit them
It's a bit different, still, because it targets well-off people who went to university rather than all well-off people. That's a good thing if you think that the ones who benefit from a programme - be it a university education or a new highway - should bear the cost of it. This is another reasonable-sounding policy that's impossible to consistently apply to the operation of the government. Do the recipient of disability benefits have to pay for that policy?

One way of distinguishing these is by bolstering the principle with some economics. University education delivers a range of benefits. Some of these are spillover benefits to the whole society, which is why even in the fees system the government directly funds a portion of the cost, but others are taken by the individual student, who gets access to a wider range of life and job opportunities, and gets a wage premium. In theory it's only efficient for someone to go to university if those benefits are greater than the cost of their education, and you can ensure that by making students bear the cost. (You don't spend £10 on a t-shirt unless the benefit of having it is worth more than £10 to you.)

The existing fees system, however, is incredibly poorly-suited to achieving this efficiency goal. The private benefit students get from their degree varies widely depending on what they study and where. The same goes for the cost of education, which depends on the mode of teaching and whether the subject demands more resource-intensive labs, fieldwork and so on. But fees are mostly just set at the maximum level, currently £9250, with limited variation between universities and almost none between degrees at a given institution. This is not a necessary feature of a fee/loan system - in Australia, different subjects have different regulated fee levels: arts subjects are cheapest, business more expensive, medicine and law the priciest - but it is a feature of the UK's policy.

This setup is necessarily not doing a good job at charging people for the benefits they get, or at promoting efficiency by charging the actual costs of an education. Throw in the features I mentioned already that make the system function more like progressive tax than something that charges you a set amount, and it's clear that tuition fees just aren't very good at satisfying this principle.

Universities need their own secure revenue stream
This argument doesn't feature as much in public debate, but is quite popular with specialists and university vice-chancellors. The idea is like the BBC licence fee: universities will run better if there's a source of funds earmarked for them, because governments won't have to make funding decisions, so there will be a stable source of revenue immune from the vagaries of politics.

I think it is fair to say that tuition fees have not worked out on this front.

Is that too glib? I honestly don't think it is! Maybe there was a stable point before 2010 when nobody was arguing that much about fees and the system was serving this purpose. Now, though, students have been in revolt about fees for years while vice-chancellors are arguing fees might have to go higher. The party that introduced fees is now dead against them; the party that in 2010 promised to abolish them is now in love with them because they are very centrist. The Tories promised to abolish fees in 2005 then tripled them when they got into government, on the rule of saying and doing whatever seems convenient at the time. In general, the politics of university funding is in complete chaos and it seems almost certain that the 2012 fee rise has laid the groundwork for a more-or-less radical change in the next few years. Immunisation against the vagaries of politics has not worked very well.

To conclude - I think these arguments are all okay, and don't have any deep passion for abolishing fees. But defenders of fees should acknowledge that the arguments don't work that well, because the current fees system is infuriatingly byzantine in some places and inappropriately uniform in others. Given those shortcomings, it's hard to see how shifting away from fees towards more revenue from progressive taxation is that dramatic a change, let alone one it's worth fighting tooth and nail against. That's probably why the fees issue is receding, with an assist from the fact that Labour's internal feuding no longer needs it as a symbolic rallying point because, well, everybody loves to argue about Brexit.

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