Let universities throw off shackles of the state

Labour's review of higher education must create the conditions for adequate funding, says Richard Brown

Higher education is vital for the future wealth and social development of the UK. Yet universities and colleges have been underfunded by successive governments. Half of them are in deficit, and the backlog of under-investment in teaching and research infrastructure is £7.8 billion. Academic salaries have fallen 40 per cent behind those in other professions. It is a tribute to everyone in higher education that the sector has been so efficient and able to attract large numbers of overseas students on the basis of totally inadequate funding. Given the importance of higher education in underpinning a more competitive and socially progressive society, the government and the taxpayer, including businesses, must all invest in the future. The government should urgently inject at least £1.5 billion a year and keep up that level of investment.

Graduates benefit greatly, financially and in other ways. They should contribute some of their earnings premium towards the investments needed. They earn different amounts depending on the institution attended and subject studied. The costs of different courses also vary. Students should not all be charged the same amount. Restoring the ability of higher education institutions to charge full-time students what they think appropriate would place responsibility where it belongs - with institutions. To encourage the build-up of endowment funds, tax rules should encourage more of the US culture of corporate and personal giving. Such funds would underpin bursaries for those from the poorest backgrounds.

No one should be deterred from higher education by fear of debt. So graduates should pay out of subsequent earnings above an earnings threshold. Those universities that want to charge premium fees should have to set aside some of the extra income for bursaries. And the government should introduce a system of higher education maintenance allowances focused on those most in need.

Some have argued that the government cannot afford to repair past underinvestment and also to expand the sector to achieve a 50 per cent participation level. Quality is certainly a priority. But all the skill surveys show that employers will in future need people with higher level capabilities. Any expansion should not be "more of the same" or, worse, "dumbed down courses for dumber middle-class kids". It should be focused on addressing the skills shortage that exists at advanced vocational level. It should encourage learning in the workplace, including shorter courses, as part of lifelong learning.

This may mean more higher education taking place in those further education colleges that have shown that their quality processes are secure. This expansion must also be fully funded, and the premium for attracting and supporting those from non-traditional backgrounds should be increased, as the Commons education select committee has argued.

Freeing universities and colleges to charge differently while raising the overall unit of government resource and the widening participation premium should be part of a general move to reduce the shackles of the state and offer greater long-term financial security. Institutions can then plan for the long term. They must be able to run their own affairs and meet the needs of their customers, clients and partners. Businesses spend £20 billion a year on training and development, but higher education captures a minute share of this. Both sides could work closer together to mutual benefit.

Universities are not part of the public sector - they should not be told how many full-time students they can enrol and at what price. Nor can they be excellent at everything - they should not be tempted by myriad government initiatives and "guidelines" to pursue a range of sometimes conflicting aims. In a freer market, they would be better able to set long-term strategies and develop appropriate partnerships and other initiatives. The role of the state and the funding council would be to support the process of partnership, not to plan it.

Universities and colleges can be exciting, creative and collegial businesses that can point the direction for many other sectors. They need the financial security and framework within which to manage their own affairs. The 1992 review looked at the structure but not the funding of the then-expanded sector; the Dearing review looked at the funding but not the framework. It is vital that the review to be published imminently looks at both and sets the path down which autonomous institutions can tread and take full responsibility for each step.

Richard Brown is chief executive of the Council for Industry and Higher Education. The council's submission to the strategic review is at www.cihe-uk.com