Financing the Universities
By STEPHEN TOULMIN TREASURY Ministers under pressure enforce. economies which in calmer moments they regret. The Government's rebuff to the Uni- versity Grants Committee—their refusal to pay even the minimum estimated cost of university expansion—will have the very opposite results from those they desire. In the first place, it will frustrate their short-term policy of multiplying undergraduate places, just when Sir Keith Murray's patient work 'Educating the Educators' was beginning to bear fruit. In the second place, it will throw out of gear the delicate administra- tive machinery on which, at present, British university finance depends. For the policy of expansion has had to be fought through the universities against a substantial minority of protesting professors, who have seen it as a threat to academic standards; and in persuading their reluctant colleagues vice-chancellors have been able up to now to rely on one thing alone— namely, the confident assurance that a word from the Chairman of the UGC was as good as a cheque in the Bursary. Mr. Henry Brooke's announcement has destroyed the very instru- ment by which, hitherto, the Government has disarmed the latent opposition of university senators and Sir Keith's credit will never be the same again.
For many people in the academic world find their present status, as State pensioners, a humiliating one. While the flow of golden eggs continued, they could scarcely spur their col- leagues into rebellion, especially as so many of them had come—by some sentimental mirage— to regard the UGC as a 'typically British' com- promise, an endearing anomaly like the con- stitutional monarchy. But the Treasury's sov- ereign powers (as they have now been forcibly reminded) are not, like the Monarch's, merely nominal; and dons at Redbrick and Oxbridge alike will now have to take another look—a long, hard look—at the whole UGC system. How have the universities come to be so com- pletely dependent (in most cases, for more than 75 per cent. of their incomes) on direct Treasury grants? And is there no alternative, more rational method of footing the national bill for higher education?
No one ever meant the UGC to play so pre- ponderant a role in university finance. It does so through a historical accident. Established in the aftermath of the First World War, it sur- vived to help impoverished Redbrick through the slump years, but massive annual grants to all universities have been necessary only since the Second World War. Why is this? The answer is often overlooked, but quite simple. Since the inflation of 1939-45, the universities have never charged fees for their degree courses which conic anywhere near to covering the expense of providing them. Because they are offering higher education at below cost, every extra student they accept increases their deficits. And how much does it in fact cost to provide this teaching? Nobody knows. For twenty years, nobody in British universities has attempted to 'cost' teaching services, and by now only rough estimates are possible. But the fees charged cer- tainly cover little more than one-fifth of the expenses incurred: the other four-fifths come direct from the UGC. Britain is—in short— covering 80 per cent. of the price of university education by a government subsidy to the 'producers.'
Is this a sensible arrangement? In most sectors of national life, any liberal-minded government would unhesitatingly say, No. Certain general economic truths apply to goods and services alike. For example: universities cannot teach more and more students better and better, un- less their extra costs are found from some- where. (This is not a criticism of the dons, but a cold fact of economics, such as in other spheres would be accepted as common sense.) Again, experience elsewhere has shown the hazards of subsidising the providers of expen- sive goods and services, rather than the re- cipients. If you want to encourage suppliers to improve the quality and amount of their 'product'—whether this be education, or any- thing else—it is prudent to increase the 'buying- power' of the potential 'consumer' for that par- ticular product: if, instead, you keep prices artificially low, by giving block grants to 'pro- ducers,' you remove all direct incentives to ex- pansion and improvement.
Since the Treasury is now refusing to pay by way of subsidy the full cost of the higher edu- cation it demands, the universities should insist on resuming their abdicated right to run their own affairs in a realistic way. How could this be done? I offer the bare outline of one alterna- tive scheme—if only to demonstrate that the present system of recurrent Treasury grants is not a 'law of nature.' Let the universities (i) resolve to dispense with all Treasury sub- sidies whose effect is to keep fees artificially low, (ii) produce for themselves systematic budgets, which establish the total costs (overheads in- eluded) of their various activities and then (iii) charge fees which more than cover the rele- vant expenses—as any other professional body would do. Such an arrangement will not hit the pockets of 90 per cent. of students, whose fees are found for them out of the rates and taxes: on the other hand, it will compel a bookkeeping change within the Treasury, diverting some L50-£60 million a year out of UGC recurrent grants and into grants to individual students for study at 'an approved institution of higher education.'
Suppose this change to be made. This will have two immediate effects on university educa- tion. (The question of finance for university re- search calls for another separate argument.) First: it will compel the Government to back their declared policies with cash. If they want 100,000 more students to go to universities, they will have to pay 100,000 more `student-grants.' At the same time, universities will be given a positive inducement to expand: every additional, student will represent so much extra income. And the fastest-growing universities will actually —wonder of wonders—build up a small surplus, with which they can pay for educational ex- periments and innovations!
This is not just a possible alternative to the present system of annual Treasury grants. It is one which, if the universities display courage and enterprise, can have great advantages for them. Proper costing and accounting, together with economic fees, can not only put them in a far stronger bargaining position vis-a-vis the Ex- chequer: it can also help them to win back the old spirit of independent self-government which fifteen years of growing dependence on the Treasury have largely destroyed. (As new mem- bers of a Redbrick Senate soon learn, a univer- sity's capacity to shape its own destinies is, these days, severely restricted. The Chairman of the UGC exercises his power—one need hardly say —in a most gentlemanly fashion. But this power is very great and, by the time his wishes reach Senate, the velvet glove which greeted the Vice-Chancellor at the Athenivum has acquired the force of chain-mail.) If the universities insist on having their financial self-reliance restored, they will in the process recover also their effec- tive freedom of decision. Those universities which are ready to expand quickly can at last be con- fident that they will recover their extra costs, and more. Those which prefer to consolidate at their present size, exploiting the special and authentic (though not, of course, unique) merits of the smaller institution, can refuse to be bullied or cajoled into changing their character against their own inclinations. And those which want to branch out in novel directions, unheard-of by the UGC, will no longer have any reason to feel that they must 'ask permission' first.
Such a new relationship between the univer- sities and the Government should not mean the end of the UGC. On the contrary, by being relieved of its growing burden of routine, the Committee would be freed for more urgent and important tasks of endowing new univer- sities, financing special projects which the Government has particular reasons for subsi- dising (Oriental languages, say, or computing machines), and helping with the cost of new buildings. It will become practicable once more for private citizens to band together and found new colleges, as easily as they can now start schools. (And why should the founding of Britain's next priv'ate university be left to the Mormons?) The charitable foundations, again, will have a new motive for re-entering the academic field, instead of pulling out of it, as they are doing at present. (The Carnegie Cor- poration announced the other day that they will no longer help to pay for university build- ings, seeing that the only effect is to reduce the Treasury's own contribution.) We might at last see in Britain some of the variety and richness our academic world now lacks---British counterparts to Swarthmore (say) and to the Princeton Institute for Advanced Study. Or is this too much to hope? Certainly, under the existing system and the present Gov- ernment, it is. For Mr. Brooke has made it painfully obvious that this Government is not prepared--in any shape or form—to face its proper responsibilities for higher education in. Britain.
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