How to Pay for Excellence

Daniel Cowdrill
Honorary Member & Former Treasurer

Leading research universities are facing a major funding gap. The cost of world-class teaching and research far exceeds government subsidy. This is why the Russell Group are lobbying hard for an increase in the tuition fee. 

Like in 2004 their lobbying looks set to pay dividends. The Government’s review of higher education will report in 2011 and an increase in the fee to £5,000 is the likely recommendation. 

Student groups have cause to be concerned. From 2013 the average student is likely to graduate with a debt of at least £30,000 (excluding living expenses). Furthermore, higher fees will inflate the student loan book and increase the scheme’s service cost. The likely outcome is the phasing out of the rate subsidy on student loans.

There is, however, a more innovative and responsive solution. What if leading universities were free to set their own fees on the condition that they operate a ‘Needs Blind’ admissions policy, by which students are admitted on academic merit alone? Those who require financial support would have their fees and maintenance waived. Students with parents earning less than £50,000 per annum would be entitled to full support with a sliding scale thereafter. The funds would come from university endowments.

This is where we can learn from the American model. The extraordinary performance of U.S universities in global rankings is hardly surprising given their accumulated wealth. Thirty U.S universities have endowments of over $1 billion – Harvard alone has accumulated over $20 billion. In contrast, only Oxford and Cambridge in the U.K have endowments which exceed the one billion mark. 

The key is their autonomy. It has been shown that increased autonomy leads to higher alumni donations. This is because private individuals tend not to support state-aided institutions. Furthermore, over time altruism becomes reciprocal. Alumni who have benefited from bursaries are more likely to donate in the future, and in greater sums.

This is a good option from a number of angles. First, students would be admitted on merit alone and the cost waived. Second, the funding gap would close altogether. And third, universities would be encouraged to replenish their endowments. Under such a system we would avoid a uniform increase in the tuition fee and avoid indebting future generations. 

More broadly, if we are to begin to repair society, we should start by strengthening institutions. Independent, well-endowed universities are the only way that the benefit of world-class teaching and research can be brought to people on the basis of merit and merit alone.

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10 thoughts on “How to Pay for Excellence

  1. I agree that the vision of 50% of 18 year olds lolling around at uni for three or four years without racking up significant debt is history.

    Whilst I am all for autonomy, there are a few problems with your proposed solution. Firstly, in terms of alumni-giving we are starting from a very low base. It’s miles off being the source of funding for students whose parents earn less than £50k and so this type of solution is at best a medium term one.

    I think that a more realistic route towards affordable higher education for the masses lies with innovation such as intensive courses/weekend study etc.

    PS – I might add that it is not that difficult for high earning parents to arrange their affairs so that they earn less than £50k whilst their children are at uni.

  2. I certainly think this is the end of Labour’s utopian dream.

    As for practicalities, the idea comes from Oxford and Cambridge. They are in the process of raising billions each in order to operate a ‘Needs Blind’ admissions policy. Their model is Harvard.

    Having said that other universities like Birmingham are starting from a low base. Birmingham’s endowment stands at about £90 million. However, the university would only be free to charge fees if and when it is able to meet the cost.

    Autonomy itself increases donations. As a Birmingham graduate, I would be prepared to make annual donations if the university was not in receipt of substantial public funding.

    As for rich parents fiddling the books, some will but most won’t.

  3. I think the LSE, UCL, Kings and Imperial are also well placed. Their endowments stand at about half a billion, with some looking to emulate the Harvard model.

  4. I can personally agree with the reciprocal altruism point. My father benefited from the standard student grant that was given to all students – I think (?) – of his generation. This enabled him to read Law at Hertford College, Oxford. Without the support provided he simply would not have been able to go.

    A few weeks ago, a current student at Oxford rang us at home – several times I may add – so as to talk to Dad. When she finally managed to call when he was at home, she talked to him about donating some money to Oxford so as to support young people from disadvantaged backgrounds. Convinced by her argument he has now agreed to donate £30 per month for life.

    This is solid evidence that the theory you described really does work. I, of course and quite rightly, don’t receive any bursaries or grants from University of Birmingham or indeed Student Finance England but nevertheless, in the future I would definitely consider giving to this university in order that people not as privileged as myself have the opportunity to study at this great university.

  5. The RNLI are good example of an organisation becoming independent from state subsidy and then receiving sufficient donations to survive. In fact they do far more than survive with an annual budget of £130 million.

    You mention Oxford. Their most recent fund-raising effort has a minimum target of £1.25 billion. Within twelve months the university has already raised £750 million.

  6. Believe it or not, I also have personal experience of RNLI fundraising.

    Every year my mother goes door-knocking in my local area to collect money for the RNLI and, even during the current economic climate, donations this year (in our area at least) were up on last year.

  7. I guess we try and do our bit. Was having a discussion at the party last night about why people give time and money to charity. I don’t think of my parents as particularly charitable but there are certain things that we as a family think are very worthy causes.

    Btw, keep your eyes peeled for a blog post relating to another little debate initiated last night – is a university education a right or a privilege?

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