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Unless we act now our universities face the prospect of falling behind

By Esmond Birnie

There is some cynicism about the frequent use of public consultation. Is this just a way of postponing difficult decisions or even of sharing responsibility for tough decisions? However, I do feel sympathy for the position the Employment and Learning Minister Dr Stephen Farry finds himself in.

As the funding allocation to DEL has been pared back, he has had to pass on funding cuts to Queen's and Ulster universities of £16m in total in 2015-16.

Even more fundamentally, the minister has identified a funding gap compared to England, which is equivalent to £1,000 to £2,500 per student. Basically, the DEL cannot afford to fund the Northern Ireland universities and it is unlikely that the Executive will decide to cut spending on some other department in order to subsidise higher education. Hence, Dr Farry's announcement on September 15 of a Big Conversation about how to best ensure the sustainability of university education. This should encourage a wider input of views and provide some honesty about what will be hard choices about the future.

Before looking at what those options might be, let's look at the context. Higher education is partly an economic investment. Money spent on universities, to an extent, translates eventually into higher GDP. At the same time, university education isn't just a means to an economic end. Education and scholarship are also, to an extent, ends in themselves.

Now, I'm not naive enough to think that more university education necessarily makes people into better citizens or contributes to nebulous goals like "world peace". Sadly, the history of international terrorism or mid-twentieth century totalitarianism provides plenty examples of political fanatics who were also graduates or even had PhDs.

At the same time, university education is partly what economists called a merit good - a good thing for society to have. So, we should have people in Northern Ireland studying, say, German or Russian. That is not just because we want to do sub-supply work for German engineering firms or to sell cheese to Moscow, but also because it is worth understanding the poetry of Goethe or the novels of Tolstoy.

A further very important point of context is that the evidence suggests most (though not all) graduates benefit financially from being a graduate, as opposed to someone whose education stopped when they left school. In other words, for most courses of study, there is a "graduate premium" whereby the lifetime earnings of a graduate exceed those of someone whose education ended at A-level. This was confirmed by a recent study by the Institute for Fiscal Studies (IFS).

So, let me as an economist try to draw some conclusions. There is a strong case for saying university education should be partly subsidised by the taxpayer - this is because it contributes to the growth of the economy and general well-being. However, in terms of both equity and efficiency, there is also a strong case that those who benefit from such education should make some financial contribution to its cost.

What then are the options facing us in terms of funding higher education in Northern Ireland, bearing in mind none of these are easy ones:

1. Look again at the total number of students:

In a few generations, we have moved from higher education being an elite aspiration to a mass experience. Northern Ireland has been close to reaching what was at one time a UK government's "target" of having one half of the 18-21 age group go to university. We should ask, is that proportion too high? Is university necessarily the best option for everyone? We are already seeing a revival of the professional apprenticeship career route. We may see more of this in the future.

2. Raise taxes to pay for higher education:

The Executive could decide to raise domestic rates, introduce water charging or increase a range of other public service charges and use some of the receipts to subsidise the universities. The reader can judge how likely it is that this might happen in the medium term.

3. Take in more non-EU students:

The universities have some ability to raise revenues from other sources. One of the most important, to the extent that they have capacity to teach more students, would be to recruit more students from outside the EU who pay much higher level fees.

4. Raise tuition fees:

These remain at about £3,800 annually compared to a maximum of £9,000 in England. Four years ago, the Stuart Review reported to DEL on the question of the level of tuition fees and recommended an increase to about £5,750 to close what was already a considerable funding shortfall.

The English experience is that student support can be designed in such a way that higher fees need not mean a reduction in the numbers of students coming from a low income background. At the same time, the problem of bad debt has been growing.

Unless something is done, the universities here face the prospect of progressively falling behind their English counterparts. There is a danger of a piecemeal shutdown of university departments as each institution struggles to balance its books. An open, public debate, followed by a more strategic approach, is more likely to promote our economic and general well-being.

In next week's Economy Watch, we hear from Andrew Webb of Webb Consulting

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