Peter Watson outlines his radical agenda for higher education funding

The dramatic increase in the number of students at university over the past five years has placed the topic of funding higher education high on the political agenda. So far as the Government is concerned, other educational priorities such as nursery and further education mean that the taxpayer is unlikely to provide more funding.

The universities on the other hand argue, with some justification, that trying to squeeze still more from an already pressed system will be too much for United Kingdom universities, which have been the envy of the world, and quality will suffer. The funding debate has, therefore, come to centre around how to get students to pay more for their university education. The MORI poll commissioned by the THES has shown that a significant majority of the public now thinks that students from better-off families should contribute towards the cost of tuition fees.

However, the focus of this discussion has been too narrow. There are two critical issues which have received little or no attention. The first is whether higher education is organised in such a way as to allow students to make their own decisions on the pattern of university education in relation to the costs involved. The second is the relationship between the way in which universities are funded and the activities which they carry out, primarily the teaching or education of students, and research.

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University education has traditionally been seen as following school, undertaken over a three-year period, full-time and living away from home. While this may indeed be the most desirable pattern, when funds are short it must be a matter of debate as to whether greater flexibility would be advantageous. Is it sensible that funds provided by the taxpayer are structured on the assumption that most students will live away from their parental home?

The cost of a residential place is more than Pounds 1,000 per annum. Might not this be better spent reducing tutorial sizes? Similarly, it costs more than Pounds 2,000 per annum to feed and clothe a student. If degrees could be completed in two rather than three years, something which the independent University of Buckingham has shown is feasible, students could avoid burdening themselves with unnecessary debt by being available for the job market a year earlier.

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Finally, why do part-time undergraduate students pay tuition fees while their more privileged full-time equivalents do not? Elimination of this artificial distinction would enable students to switch without financial penalty from full to part-time study and support their own studies by working. There may be educational benefits to the three-year full-time degree, but it is important not to exaggerate them in defending the status quo. It is also possible to acquire an education by other routes and the above suggestions would offer a wider choice to students enabling them to balance relative advantages against their costs.

In providing universities with funding from the taxpayer the government, through the Treasury, has naturally been concerned to ensure that the amount spent was kept under reasonable control. This has led to a funding regime which has distributed funds to universities, broadly related to planned, as opposed to actual, student numbers. A relatively recent innovation has been the use of separate formulae for distributing teaching and research funding to universities. Research funding is distributed on a more selective basis to universities with good publication records based on the number of academic staff active in research in a particular subject.

The critical point in relation to the funding of both teaching and research is that the amount of money received by universities is not directly related to the level of current activity.

Companies receive "revenues'' directly related to the quantity of goods and services they sell. Universities are "funded'' by the taxpayer on the basis of a planned number. Good management practice emphasises the need for clear alignment between activities and reward. Indeed the Government's apparent interest in performance-related pay suggests that it recognises the importance of this link.

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However, performance-related pay, and it is doubtful if it is appropriate in education, is unlikely to be successful in overcoming the profound disadvantages of absence of relationship between performance and reward at an institutional level. Indeed from the point of view of the individual academic, it may well have seemed over the past few years that there has been an inverse relationship between activity measured in terms of student numbers, and reward.

What is the way forward in this difficult area? Institutions should be funded for teaching on the basis of numbers taught, partly paid by the taxpayer through the local authorities, and partly by students. Institutions would be allowed to fix their own fees. Treasury sensibilities would be salved by an element of self-regulation in the form of a student fee and by a cautious approach to fixing the taxpayer's contribution to fees. An augmented and government-funded set of research councils would buy from selected universities time for speculative blue-sky research. The funding councils would be abolished and their functions distributed appropriately. Academics would be expected to keep up to date on their teaching subjects.

These are radical suggestions, and their purpose is to stimulate genuine debate on a topic of serious interest for anyone concerned with the future of the UK. Universities are at a crossroads. No one should imagine that it would not be possible for the ill-informed to ensure that even greater numbers of students pass through universities, but the hidden costs of doing so are likely to be immense. If generating controversy prevents this happening, this piece will have served its purpose.

Peter L. Watson is executive pro-vice chancellor of the University of Buckingham.

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