Augar stirs up the system: The ripples will go far beyond his remit

The Augar review is the first comprehensive review of post-18 education since Robbins in 1963. The surprise is that the Augar bucket did not entirely leak out its contents. It is detailed and starts to reverse the outcomes of the sixty four page Browne review of 2010; that looks feeble by comparison. Browne led to uncapped student numbers, increased fees and loans that spiralled out of control. That decision, along with removing maintenance support for students, now looks like a poorly planned expansion of HE. The Augar report concentrates on the expansion of FE at the expense of HE and student fees but has serious hidden consequences for university finances. These will affect jobs, research output and the range of courses on offer; particularly in the STEM area, where limiting top up grants can control student numbers in these more expensive subjects. Augar may have unleashed many unintended consequences rippling well beyond his remit and across research effectiveness. It is therefore essential that a wider funding review is carried out with considerable urgency.

The eagerly anticipated and overdue Augar report emerged early today to a flurry of media interest. Many of its deliberations were already leaked and anticipated well in advance. However, it still yielded a few surprises and potential ‘bear traps’. One being the depth of analysis and evidence presented. This commentary comes as a result of reading the report once and it will take further analysis to take it in more comfortably. There are no less than 53 recommendations arising from the chapters. The government will have its work cut out to model the proposal’s costs into its impending spending review later this summer. However, Augar’s modelling efforts have provided a few clues about how this will pan out.

The Post-18 review of education and funding: independent panel report is 216 pages long in eight chapters without the additional annexes. It is comprehensive and represents a considerable effort from what was a relatively small panel of only six people. The secretariat support must have been substantial and is acknowledged by Philip Augar in the Forward. There were also nearly 400 responses to the call for evidence noted but these are not listed.

Many and varied reactions.

There has been considerable response from various organisations and the media. Many of the media had a head start on TEFS in seeing the report in advance of the embargo deadline.

The National Union of Students responded with its president, Shakira Martin offering a qualified welcome to Augar and in particular the reintroduction of maintenance grants. However, she rejects the “premise of ‘low value’ and ‘high value’ courses”. On the other hand, Universities UK is less enthusiastic and its Chief Executive, Alistair Jarvis, wants a guarantee that university funding shortfall will be made up by saying "On the face of it the fee-level recommendations may look good for students, but unless the government gives a cast-iron guarantee on full replacement funding, it could prove to be a wolf in sheep's clothing” An unfortunate, possibly deliberate, faux pas bearing in mind that Janet Wolf was on the Augar panel. 

In an official response, the University and College Union (UCU) were less than enthusiastic and stated that the “review had missed an opportunity to explore radical alternatives to the status quo and risked delivering an even worse version of the politically toxic system it was supposed to improve”. In a separate and personal www site post, the newly elected general secretary of UCU, Jo Grady, goes much further. She openly challenges the independence of the review panel itself with “although it presents itself as ‘independent’, this is a Tory review.” Hopefully, this is not the first of many more such mistakes.

Along with reporting in newspapers and media such as the BBC, there are excellent and more in depth analyses from Times Higher Education, the Higher Education Policy Institute and WONKHE. The WONKHE founder and editor, Mark Leach is not so circumspect with ‘Government to Take Back Control as universities get their most thoughtful kicking to date’ and perhaps articulates the pain that many university managements will feel soon.

Was Augar Independent?

It seems that his background as an investment banker might lead some to suspect his motives in apparently backing a Conservative agenda. However, this is naïve and too simplistic. Over a year ago, TEFS with, ‘The review of post-18 education and funding: Who is Philip Augar? (TEFS 19th February 2018) noted his background in economic history. He is also no stranger to criticising the financial sector with books such as ‘The Death of Gentlemanly Capitalism’ where the merchant banks are “class and attitude ridden” and further in ‘The Greed Merchants’ where the general public “unknowingly line the investment bank’s pockets”. In 2000, the guardian observed that he was known in banking circles as ‘Doctor Death’. He may well have been selected to give our profligate university managements a “good kicking” and perhaps he will become known as ‘Doctor Assassin’. However, students may come to see him as ‘Doctor Equaliser’ in time.

The title of the report itself stresses that it was an “independent panel” from the outset. Yet the combination of leaks and statements from government sources implies that it was under significant and unwelcome external pressure. This may be nearer the truth.

Theresa May’s Legacy.

Many observers have indicated that the Augar review may be Theresa May’s main legacy in time. But it has a very shaky origin. She initiated the review last year after removing the very able Justine Greening from her position as Education Secretary. Working class and state school educated, Greening was replaced by independent school and an Oxford PPE graduate, Damian Hinds. It later emerged this year that Greening was looking at ways to scrap tuition fees. It seems that the establishment had closed ranks (as discussed in TEFS 25th January 2019 ‘Entering the Lion’s Den: Can the Conservative establishment be tamed?’) and Theresa May thought better.

When Theresa May appeared on the BBC this morning speaking in defence of the review, there was a certain irony inherent in the cuts to fees that she was defending. Alongside Philip Augar and the Education Secretary, Damian Hinds, she spoke as if she owned the review. However, much of her presentation was more a stark admission of failure of government policies that she had been a part of. She came across as presenting a policy paper in which she had set Philip Augar “a clear and ambitious challenge”. There may be no getting away from the perception of government influence; regardless of how Augar conducted the review. The failure of government to date in relation to access to universities by the least advantaged students comes across with, “But improvements are slow and the challenge remains large – the number of young people from working class families who apply to and take up places at universities is still a long way from reflecting the country in which we live.” 
Yes, and it is too late to claim a legacy.

What’s in it for students from less advantaged backgrounds and the betrayal of a generation.

Augar quotes from the Social Mobility Commission report of 2017 that “In higher education, it will take more than 80 years before the participation gap between students from disadvantaged and more advantaged areas closes.” From a TEFS perspective, it seems that there is some good news in Augar as it moves in the right direction. However, the changes are only planned to start in 2021/22 for those applying in 2020/21 and further initiatives will be needed to speed up progress. This means that a generation of disadvantaged students have been betrayed and abandoned with no maintenance grants and high fees. The lowering of fees to a maximum of £7,500 will help students to feel more confident in their futures apart from those burdened within the current system. This must be addressed as a matter of urgency.

From 2021/22, the least advantaged can expect a means tested maintenance grant that tapers “to £0 at a £50,000 household income threshold”. This is a high threshold and will catch many in its net. The most advantaged will have to pay back most, if not all, of the loan in 40 years; that is most of their working lives. The threshold for payments is lowered but still remains relatively high. A criticism levelled at Augar is that students who go on to earn less will not obviously see the benefit of a maintenance grant. Conversely, and in the spirit of more optimism, those that go onto earn much more will certainly appreciate the lower loan repayment burden put upon them. Removing additional interest payments above RPI whilst in studies is welcome to all. However, an interest of RPI +3% overall still seems excessive.

The political environment and student demand.

The current political environment for Augar has shifted in a year and could not be more febrile. He has served up difficult proposals that will have to be fed into the spending review  ‘meat grinder’ modelling this summer. But the situation is in need of quick resolution if the new scheme is to start for those applying in 2020/21 to start in in 2021/22. Many students will already be considering deferring a start in 2020/21 in the hope of getting a maintenance grant the following year. Some from this year may be prepared to wait two years. This muddle is a product of poor government timing and delayed tactics. The uncertainty surrounding Brexit and the nature of a future government all adds to the muddle facing the treasury in its quest to balance the books. They may instead seek a big delay as a consequence and strike an interim budget that leaves students confused.

Meanwhile, a new Conservative leader may not command a majority if the DUP don’t like what they see. Equally, they may all fall behind a hard Brexit leader. In the first case a new government is inevitable after an election. On the present polling it is possible that a hard Brexit Conservative rump forms a coalition with a Brexit party administration and the DUP. The views of Farage (independent school and no university experience) on Universities are ‘rabid’ and damaging. Comments such as “One of the good things to do would be to stop the constant bias, prejudice and brainwashing that is going on in British universities” imply a very rough ride ahead under his leadership that looks more likely by the day (See Times Higher Education 29th May 2019 ‘Universities in firing line as Farage builds populist movement’). A rainbow coalition of the Liberal Democrats, Labour, the SNP and Alliance may be the only way to counter this possibility. Or parliament may seek another referendum, if Labour is serious about this, and muddle on in the face of very vocal opposition and potential endorsement of Brexit again. In most scenarios, it looks like Augar may not get off the ground

The legacy of Robbins.

Augar points out rightly that “The present government’s review is the first since the Robbins report in 1963 to consider both parts of tertiary education together.” (see the Robbins Committee on Higher Education Report, 1963). Like Augar, the Robbins report emerged at the tail end of a Conservative government in terminal turmoil. The new Labour government was left to pick up the trail and proceed in the midst of  a worsening economic crisis. It may well be that history is repeating itself and Augar might regret mentioning Robbins. There the resemblance ends. Robbins was tasked with seeking to expand post-18 education and progress in this quest was chaotic at times. However, it did give me the opportunity to enter Higher Education in 1973 and for that I am grateful. On the other hand, Augar is part of a move to reel in the unfettered expansion of Higher Education since 2012 brought about by the Browne Review of 2010 that heralded high fees, bigger loans and expanding student numbers. It is mentioned later in the report in less than flattering terms.

Capping numbers and restricting minimum entry grades.

This was a genuine fear of many institutions in the light of the leaks. But it did not emerge as a strong proposal. However, it also did not go away. The statement below leaves the government with plenty of room to work on the issue.

"Were a minimum entry requirement introduced, it should apply only to students under the age of 25, after which work experience, rather than Level 3 qualifications alone, would be the appropriate entry criterion. The policy should apply only to Level 6 courses: any young person with Level 3 attainment below the threshold would still be eligible for student finance to study at Levels 4/5, and could then use their qualification at those higher levels to progress on to, and therefore receive finance for, Level 6 in the future. Introducing high-quality alternatives to degree study will be crucial to addressing the problems of low-value degrees set out above."

If this is not used as a mechanism to restrict student numbers, it is unlikely that a return to the practice of fixing of grade boundaries, as used in the 1970s, will happen. It would be too toxic for public consumption (see TEFS 17th August 2018 ‘A-Level Playing Field or not: Have things changed over time?’). This defined my academic career in a dramatic way back then. 

The end of cross-subsidies and a contraction of universities.

It is more likely that the system will start to regulate itself on numbers as the government exerts more control. The idea that there are low cost and high cost degrees has been around for a very long time. But setting the same high fees for all degrees brings with it the complaint that students on ‘lower cost’ arts and humanities degrees are subsidising those in science and engineering STEM degrees where expensive facilities and technical staff are needed. Augar gets around this by advocating a ‘top up’ teaching grant that Theresa May described with, “The top-up funding would come from an increased teaching grant, with funding distributed in a way that reflects each subject’s reasonable cost and value.”

However, more serious is the idea that student fees are paying for staff to carry out research at the expense of teaching. Augar does not go there. Students might expect to contribute to some research, but this may be seen as excessive of they are paying for staff they do not see who are replaced by fixed-term casual teaching staff. This approach has infected nearly every university as managements keep one eye on protecting REF income. As someone who was on the planning and finance committee and served on the governing body of a Russell Group university, I can almost hear the discussions in my mind now.

The fear will be that the government caps numbers in expensive STEM subjects by a funding attrition. Thus, universities with good facilities and reserves may feel that they can compete for this funding and will be well prepared. But they may also opt to contract in some areas. Others may opt out of many STEM subjects altogether and contract to cope with lower fees overall. In crossing a critical funding threshold, there may be a significant loss of valuable staff in these areas. When Damian Hinds warns against ‘scaremongering’ over university finances in the run up to the Augar Report, he is using this as a smokescreen that tries to obscure what will be real consequences. In the midst of all of this, academic staff can expect redundancies as institutions reposition themselves. In a reversal of attitudes, those valuable as teachers may survive better. Those currently tasked with promoting research at the expense of teaching, and who don’t attract significant research funding, may end up as ‘dog meat’. Management will also have to cut their excessive pay packets or face mutiny.

A more comprehensive review of university funding, including research, is needed.

TEFS has argued in the past that the remit of Augar was too limited and that it has consequences beyond student fees. It is certain that he fully understands this, but his political masters clearly do not. With the statement “Funding for research is outside the scope of this review. It is for government, business and other interested bodies to fund this adequately and directly”, he opens up a massive ‘can of worms’ that will reverberate around all research funders. The simple fact is that much time for research is conducted on student fee income and that this is also cross subsidised. Bigger projects are picked up by research councils that moved to a ‘full economic costing' (FEC) system from 2005. However, the ‘sting in the tail’ is that they routinely restrict the funding for investigator time costs (I have managed several large grants and served on some research council committees when FEC was introduced)  and only pick up 80% of the FEC (Discussed in TEFS 29th November 2018 ‘Follow the money. UPDATE: The illusion of a graduate levy on employers’). EU grants, should they continue, will only offer around 20% in overheads. This already presents a major financial burden on our best research active institutions that will be exacerbated further by loss of fee income. This issue, more than anything else, will cause a major internal perturbation in those universities. Indeed, it risks the whole research enterprise that currently prevails. It is therefore essential that a wider funding review is carried out with considerable urgency.

The shift to FE and HE resistance.

The review essentially seeks to shift resources from Higher Education to Further Education and plug a skills gap in the economy. Investing £1 billion in FE infrastructure is welcome, but HE institutions will probably resist this as they see their options narrowing. Another consequence may be that institutions with less research activity will seek to take over courses previously under the remit of FE. This may reflect a partial return to the mixed mission of the former polytechnics in order to survive. I would expect partnerships between some universities and FE colleges to emerge and this may be a good thing as the situation settles down. However, a perverse effect might be the further exacerbation and emergence of a new two tier system whereby poorer students gravitate to FE and the advantaged ones continue to dominate HE.

Elsewhere in the UK and ‘Barnett consequentials’.

It will not have escaped Augar’s notice that the financing of universities varies greatly across the jurisdictions of the UK. Tuition fees are currently capped at £4,160 in Northern Ireland, with loan repayments made when income rises above £17,335 per year. But the government top up falls well short of the £9,250 fees gathered in by GB universities. Queen's University Belfast is in the difficult position of performing as a Russell Group university with far less funding than its peers. It is, however, demonstrably more efficient on many measures. Augar will have observed this and reducing fees to £7,500 in GB will level the playing field as far as Northern Ireland universities are concerned

Universities in Wales also charge £9,250 a year in tuition fees. However, students from Wales can apply for fee grants of up to £5,190 to help cover these costs anywhere in the UK. In Scotland, there are no university fees but numbers are capped and less is available for maintenance costs. However, the universities are funded at a similar level to other GB universities to compensate. With fees reduced to £7,500 in England, they can expect to see a similar financial hit from the Scottish Government to even things up.

Overshadowing all of this are the so called ‘Barnett Consequencials’ (nothing to do with stress and hair loss). Any change in public funding in England has some Barnett consequence in the rest of the UK. The Barnett formula is a mechanism that goes back to 1978 and automatically adjusts the amount of public expenditure allocated to Northern Ireland, Scotland and Wales to match changes in spending levels allocated to public services in England and across the UK. Its function was to enable convergence of public spending across the whole of the UK. But with divergent devolved government policies, it seems that this is very unlikely. Its wide ranging influence applies to nearly all of the devolved governments' budgets. In Scotland this covers about 85% of the budget. Augar was quick to spot this and notes in the report that, “Funding for devolved administrations under the Barnett formula is estimated to add an additional cost of approximately £0.9bn”.

This effectively means that implementing Augar will send a £0.9 billion windfall to the devolved governments. It will be interesting to see if they ramp up FE support with this funding as in England. However, more likely is that Barnett will eventually come to an end.

Assumptions made.

There are a number of critical assumptions and caveats that emerge mainly in the Annexes. These become alarming with closer scrutiny.

In Annex Methodology for Assessing Costs of Panel Recommendations a key assumption is “No behavioural change in student participation”. However, if the government aspiration is to markedly increase the uptake of university places by disadvantaged students from their current level, then costs will rocket beyond those predicted.
In Annex Assessing the Impacts of HE Student Finance Systems by earnings decile. Calculations are made using assumptions about projected inflation measures using the Retail Price Index (RPI) only and RPI + 3% interest. This is also assuming that RPI remains stable and relatively low. However, the impact of a no deal Brexit will surely fuel inflation in the UK to the high levels seen in the past and this possibility is avoided.

In Annex Estimating the changing cost of the English Higher Education system to taxpayers and students the calculations are predicated on lowering the current RAB charge of 45% to a more reasonable 30%. The RAB charge is the estimated cost to Government of borrowing to support the student finance system and is the proportion of student loan outlay that is expected not to be repaid. To calculate this forward in time a discount rate of RPI+0.7% is used based on 2016/17 student numbers. At the core of Augar is “a rebalancing of student loans towards a bigger graduate contribution, and thereby retaining the overall balance of contributions.”

In Annex Estimating the lifetime contributions of example borrowers, an attempt is made to convince us of the progressive nature of the scheme as graduates earn more and more “reach the point where repayments exceed the interest,” But the assumptions still apply.

Is Augar paving the way for a graduate tax?

In contrast to Augar, Labour’s policy is to remove tuition fees and fund this by increasing National Insurance and Corporation Tax in a National Education Service. But Augar’s proposals could be seen as paving the way for further fee cuts and a more progressive graduate tax system. In extending repayments for 40 years, this takes in most of a graduate’s working life to retirement. Augar states that “This would bring the system closer to other state contribution systems such as national insurance, but borrowers would still be protected by the other features of the student finance system, in particular the income-contingent basis of contributions and the termination of payments once the loan is cleared.”

This is not so far away from a graduate tax.

Mike Larkin, retired from Queen's University Belfast after 37 years  teaching Microbiology, Biochemistry and Genetics.