Andrew Oswald: Why the Government must accept higher fees

A novel form of government coalition calls for novel forms of thinking. Times are hard. Fuelled by over-optimistic beliefs about the value of their homes, we have, as citizens of the United Kingdom, borrowed and spent too much. The UK has to pay its long-postponed dues: the country must find ways to spend less on public services, or raise taxes, or some mixture of these two.

In the area of higher education, as the forthcoming Browne report may say, the new Conservative-Liberal alliance would be advised to take the following two actions. One is to allow our universities to set a higher level of university fees. Another is to take a slice of the extra revenue that will then flow in, and use that slice to fund a new and generous grants scheme – not loans scheme – for young men and women from hard-up homes. It would also make sense to listen to the Russell Group universities when they recommend that graduates be able to pay back the current loans earlier and at a higher interest rate.

Such policies would be fair, efficient and liberal. They would require well-off people to pay for the education from which they benefit while allowing youngsters from poorer homes to go to university for almost nothing. Our nation's universities would be encouraged to concentrate on getting right their own particular quality and price; the result would be healthy diversity. Citizens and universities would be left alone to choose and compete without, as at the moment, the hand of the state doing things such as fining popular universities which take on more students than dictated by a bureaucrat's rule.

We should also stop subsidising the interest rate on loans to students. Yesterday I listened to yet another case, not at my own university, of a middle-class student who has opened an ISA account into which she is putting her student loan – thereby pocketing the difference between the market rate of interest and the subsidised rate. My hunch is that tens of thousands of students do this every year. You do not have to have an MBA to realise that that is a sign of a muddled world.

Parents may not realise that universities in this country need to raise far more money. The recent debate on the funding of UK universities has been hampered by emotion and lack of data.

The facts, from the impartial statisticians of the United States Department of Education, are these.

First, across the advanced world, higher education spending per capita is greatest in Switzerland at $24,000 per student. Then, in turn, come the USA ($21,000), Sweden ($16,000), and Denmark ($15,000). The UK is tenth in this league table at $12,000 per student, of which students themselves contribute less than half.

Second, whether we view this UK figure as high or low depends on what we expect to achieve. If we wish our top institutions to compete with the elite American universities, the task is currently hopeless. US Ivy League universities charge students approximately eight times what we do ($40,000 a year in 2010). Plus the rich American universities top this up with endowment income. Hence it is inevitable that the UK, where fees are little more than £3,000, will offer students worse student-staff ratios and an undergraduate education of lower quality than the best US universities.

Third, these funding differences explain why in the most reliable world ranking of universities – the so-called Shanghai ranking, produced with objective data ( – shows that out of the top 20 universities only two are British, one is Japanese, and 17 are American. It is also why the UK now produces a minute proportion of the world's Nobel Prizes.

Fourth, unless we could command the public support that Swiss universities achieve – which, in my view, is unlikely – the consequence is either to accept that we will perform at a fundamentally second-rate level or allow UK universities to charge higher fees. Surely we do not want to be second-rate?

Fifth, UK parents would be advised to understand that in the future the particularly hard-up UK universities will rationally favour overseas students rather than their own loss-making offspring. If we stick with the current system, UK parents and students will be the losers.

Our nation will have to live increasingly by its brainpower. Higher tuition fees are needed.

The writer is pro-dean for research, Warwick Business School

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Education

Belong: Volunteer Mentor for Offenders

This is a volunteer role with paid expenses : Belong: Seeking volunteers who c...

Recruitment Genius: Experienced Health & Safety Support Tutor

£19000 - £25000 per annum: Recruitment Genius: This is a fantastic opportunity...

Reach Volunteering: Trustees with Finance, Fundraising and IT skills

Voluntary and unpaid, reasonable expenses reimbursable: Reach Volunteering: St...

Recruitment Genius: Telesales Executive - OTE £45,000

£18000 - £45000 per annum: Recruitment Genius: This market leader in the devel...

Day In a Page

Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
Transfer window: Ten things we learnt

Ten things we learnt from the transfer window

Record-breaking spending shows FFP restraint no longer applies
Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent
Markus Persson: If being that rich is so bad, why not just give it all away?

That's a bit rich

The billionaire inventor of computer game Minecraft says he is bored, lonely and isolated by his vast wealth. If it’s that bad, says Simon Kelner, why not just give it all away?
Euro 2016: Chris Coleman on course to end half a century of hurt for Wales

Coleman on course to end half a century of hurt for Wales

Wales last qualified for major tournament in 1958 but after several near misses the current crop can book place at Euro 2016 and end all the indifference