Contemporary Issues in Economics

Tutorial 1 - Higher Education

1. One reason for removing the cap on student numbers is to attract

more private providers, who will charge lower fees. With an
uncapped number of students there is an incentive to enter the
higher education market and make profits. An uncapped number of
students means that they can now compete on quality with
established universities. They also couldnt compete on price as
without the removal of the cap as there would be few of them in a
market dominated by public institutions.
A second reason for removing the cap is it will allow more people to
attain higher-level skills, which can then raise economic
performance if they have a higher paying job. As well as this, higher
education has the ability to improve social mobility and decrease
inequality, as those from poorer backgrounds can still gain higher-
level education and in turn have a higher paying job.
Thirdly, education at that time was likely to feature in the general
election, and given the benefits of higher education to individuals,
can be sold as an aspirational policy in the run-up to the 2015
general election. Thus giving the conservative party more votes,
and allowing them to stay in parliament for another term.
The reason for raising tuition fees would put universities finance on
a sustainable footing with extra freedoms and less bureaucracy. It
would also allow for greater choice for students with a stronger
focus on high quality teaching. It should allow universities to replace
a large part of the lost state funding for teaching by way of graduate
contributions. Teaching grant cuts of 6% for 2011-12 were
announced, meaning that universities needed to raise tuition fees to
simply replace theses major cuts. Also, the government hoped that
by setting a high cap of 9,000 per year that price completion would
drive university quality.

2. One of the consequences of further privatisation of higher education

may be reduced tuition fees, as with more private firms providing
education, there will be increased competition in the market, and
hence tuition fees will fall as different firms compete. This should
allow more students to be able to afford to go to university and gain
a degree, meaning there will be reduced inequality as more people
can have higher paying jobs thanks to their degree.
Privatised educational establishments may only be interested in
making profits, and have no interest in other major aspects like
content of the degree or student welfare, meaning student
satisfaction may be lower and success rate for passing may also fall.
 Also, further privatisation may lead to more people taking out
private loans from the bank, which may not be as accommodating
as the normal method of attaining finance, and as a result could
lead to more student debt if it cant be paid off and students
struggling financially during and after their degree.
Alternatively more privatised higher education could lead to higher
quality teaching, if competition is fierce, universities will have to
provide an excellent level of teaching in order to attract the most
students. Therefore students may have far higher satisfaction levels,
and will be successful at university.
3. Twenty years ago the state typically paid about two-thirds of the
cost of undergraduate, in-state, education, assigning the remaining
cost to students and their families as tuition. However recently more
states are crossing the 50-50 line.
I believe it is a joint responsibility between the government and the
student themselves to pay for higher education. The government is
there to support the student through their degree, providing them
with grants, bursaries, maintenance loan and paying the tuition
fees, but it is then the students responsibility to then repay the
government over the course of their lifetime.
Having only the government pay for tuition fees would be
detrimental to the governments budget, and cause huge amounts
of debt. If higher education was free, the demand for it would be
huge, and cost the government millions to pay for it. This would lead
to spending cuts in other areas of the UK, like healthcare, meaning
other people would suffer and lose their jobs. However it is evident
that a lot of students never fully repay their loan anyway, in 2014
there was 55 billion in outstanding student loans at the end of the
financial year.
On the other hand, students cant be expected to pay for the
entirety of university, as this would mean only the wealthiest
students could go to university, and cause huge levels of inequality,
because those who cant afford it have to stay in lower paying jobs,
whilst the rich get richer. This scenario would also lead to a huge
skills shortage in the UK, as fewer people can afford to go university,
meaning the UK would be in shortage of essential skills like doctors
and nurses.
Having both students and the government pay for education creates
a healthy balance in my opinion. It lessens the strain on government
funding, but does not completely diminish the chance of lower
income students from going to university, meaning the UK can have
a diverse set of skills at its disposal, as well as higher tax returns
from better paying graduate jobs, and a more cultured society.