Delivering value for money in the age of the student

The Universities Minister calls for a better deal for students at the HEPI annual conference:

Thank you Nick.

It is a pleasure to be here today at HEPI’s annual conference. HEPI has proved itself an important voice in the field of higher education policy. And the impressive expertise assembled here today is testament to HEPI’s convening power.

One of the great privileges of being universities minister is that I am constantly reminded what a great higher education system we have in the UK. Scarcely a week passes when I don’t meet a foreign politician or ambassador who makes a point of saying how much they respect the UK’s universities. Last week I was in Israel, talking to some of the world’s leading tech investors and entrepreneurs – and without exception they remarked that our universities were a unique national treasure.

But what has made even more of an impression than the views of foreign grandees is the remarkable impact I see when I go to our universities in person. In my ‘Sam on Campus’ tours, I’ve been to universities across the country since the beginning of the year, and met and done events with over fifteen hundred students.

And the overwhelming impression I have is how their university experience has enriched their lives and broadened their horizons. If you want an advert for our HE sector, you need only spend time with these students. I’ve been especially moved to meet so many students who are the first in their family to go to university, and to see the great expansion of opportunity that has taken place under this government. It is something we should all be proud of.

Nearly one in two of 18 to 30 year olds in this country will now go to university. The system of fees and loans that has allowed us to remove student number controls and create this greater opportunity has also empowered students, and raised their expectations. We are now living in a different age: the Age of the Student. This means that universities and the value that you provide to your students and to society at large, is coming under greater scrutiny than ever before.

Many parents and credible commentators are now questioning the principle of mass participation in higher education. The challenge takes two forms: questioning the value for money that students get during their course; and the benefit they derive from a university education post-graduation.

I want to be clear that I do not see the value of a university education solely hanging on its contribution to one’s lifetime earnings. University should be an exciting, enriching stage in a young person’s life. For many, HE is a rite of passage to adulthood. And that is a good thing.

So yes, we do not want to narrow the debate when we consider the value of Higher Education. But that does not absolve us from the need to tackle ‘head-on’ the legitimate questions posed to the sector.

So what do we know about the current picture?

On the experience of today’s students, HEPI’s Student Academic Experience Survey is a good place to start. I was glad to see that the survey shows a modest increase in the number of students who think they are getting good value for money from their courses. But we should not overlook the serious implications of the fact that 32% of students report poor value for money.

Of course, no survey is perfect and students’ views of course quality may change over time and even after graduation. But no-one running any institution, whether a university or a business or a government department, can afford to be complacent faced with the knowledge that nearly a third of the people they serve think they are getting a bad deal.

One implication of this is that universities need to think very carefully about actions they are taking that look like a relaxation of standards. The sharp rise in unconditional offers on the part of universities gives me cause for concern: can universities put their hand on their heart and swear that they are not compromising on standards?

The same applies to grade inflation. Issues like these are problems in their own right but they are all the more important at a time when universities reputations, one of the most precious resources, are being questioned.

But it also means that we really need to understand what is lying behind concerns about value for money, with a view to tackling them.

But what about the longer term value people derive from a university degree?

Today we have a better picture than we have ever had before, with the launch of the first major analysis of the Longitudinal Education Outcomes – or LEO – data for people five years after graduation. This data set tells us in unprecedented detail how much graduates from different courses and institutions earn after leaving university. I’m pleased to share with you analysis of this data published today by the independent and world-renowned Institute for Fiscal Studies.

Before I talk about the findings, let me stress one thing. There is more to a university degree than lifetime earnings. Higher education is first and foremost education, and not all the benefits of education can or should be captured in future salary. Some graduates’ passion or talents might lie in a subject area that is not highly paid, but is personally rewarding and of benefit to society. Some graduates choose not to go into paid work at all. Some leave paid work to raise families or care for relatives. Some take valuable and important jobs with low salaries. Salary levels are not the be-all-and-end-all.

But salary levels are still informative and important, especially in an environment where students are investing a considerable amount of their time and money in gaining a university education. With appropriate weighting and analysis, they can help us understand the differences between different courses and institutions, and see where value-for-money problems might arise.

The research looks at nearly 1,400 courses offered across UK universities, and draws on the LEO dataset to take into account background characteristics including class, ethnicity and GCSE results, to estimate the relative earnings return from different university courses.

The LEO dataset reveals that, from a salary perspective, while many institutions and courses are delivering big benefits to students, there are a clutch of courses that seem not to be.

It is clear from the IFS analysis published today that this is not all explained by prior attainment. What potentially matters most is a student’s choice. After controlling for prior attainment and background, the researchers found significant differences between the earnings of graduates across different subjects and providers.

Students who choose medicine or economics earned approximately 25% more after graduation than if they had studied biological sciences, history or English. This translates to over £6,500 per year.

But choosing a high-return subject is not enough to guarantee high earnings. The lowest earning business degrees have a return more than 10% below the average degree, whilst the highest have earning at least 80% above the average degree.

The top courses for women – economics at LSE, maths at Imperial and law at Oxford – have a return of at least 100%; approximately £26,000 per year higher than the average degree five years after graduation. Among the bottom courses for women, future incomes are much lower. Creative arts degrees at some universities leads to salaries at least 44% lower than the average graduate – approximately £11,000 per year. But this is not just a story about arts degrees. The variability among courses and institutions, even when subject and prior attainment are held constant, that should give us particular cause for concern.

The IfS analysis shows that women who study the bottom 100 courses have earnings up to 64% (approximately £17,000) less than the average degree after graduation. For men, it can be up to 67% (approximately £21,000) less.

These findings demonstrate that studying the same subject at a different institution can yield a very different earnings premium. The choices that students make about what and where to study does matter.

The urgency of addressing value for money

Today’s publication – the first in a series of such publications – has far reaching ramifications for the debate on value for money in Higher Education.

The clutch of underperforming degrees is a problem for students – it is likely they include many of the courses whose students feel they are not getting value for money.

They are also a problem for the taxpayer, since courses where students tend not to earn graduate salaries after graduation account for a disproportionate share of the costs to the public purse of the student loans system. And they are a problem for the reputation of the sector. They are the inconvenient kernel of truth underlying critiques of mass higher education.

Previously it has been all too easy to dismiss value for money concerns as informed by personal anecdote, not hard evidence. What the HEPI and IFS Research tell us is there is some truth to the concerns. And as one prescient Vice-Chancellor said, the sector needs to “stop complaining and move onto the front foot”.

Dealing with these issues is more urgent than ever. As well as their responsibility to their students, our universities also have a vital duty to the country as a whole. And this is a pivotal moment for the UK. As we prepare for Brexit, we need to ask ourselves how Britain will make its way in the world – and what sort of country we will be? I am convinced that we can only succeed through ingenuity and know-how, and with a spirit of openness and optimism. And what institutions represent these principles better than our universities?

The ideas, the skills and the understanding that our universities generate through their teaching, their research and their wider engagement are more important than ever.

I believe mass participation in higher education is here to stay and is key to our economic future. But for this vision to be realised in full, universities need to focus relentlessly on value for money.

This is why value for money is a matter of central importance for the Review of Post-18 Education the Government is currently conducting, with input from Phillip Auguar’s independent panel.

It is also important to recognise the huge positives in the IFS research.

The huge improvements at our universities today are not always obvious especially to those who have not set foot on campus for a very long time and write off vast swathes of the sector.

Here too the LEO data is helpful. It shows that across the HE sector, not just at our elite institutions, there are courses that are providing significant salary uplifts, as well as broadening minds and fostering learning.

We should view the LEO data as an opportunity to make our university sector even better. This must be a shared endeavour – between government, students and universities. Today I’d like to outline the contribution that each group can make.

Government’s role in promotion value and quality

We in government are taking a number of steps to increase value for money.

Firstly – and most importantly – we have established the OfS as an independent regulator with a specific and clear mandate on value for money within its general duties.

We are also pushing ahead with the Teaching Excellence and Student Outcomes Framework, which is becoming common currency within universities and beyond, giving students information about the characteristics they care about in a clear way. We will also continue to look at ways to improve further our LEO data over time to continue to help people make the right choices.

I was glad to see yesterday’s announcement from Nicola and the team at the OfS about the new institution-level awards, meaning that there are now close to 300 universities and providers that have a TEF rating. The fact that so many of these awards were given to FE colleges and other non-university providers speaks to the growing diversity of provision.

We will be developing this further with announcements about subject-level TEF to follow in the coming months.

Transparency and student choice

But improving value for money is not a task for government on its own. The combination of our student finance regime and the regulatory provisions of HERA puts unprecedented power in the hands of students. It is only right that we enable them to make choices that drive value for money.

Our university system gives students an unprecedented degree of choice. Any of you involved in admissions and marketing will know that this is already a powerful driver of value. But I believe we can do more. Tools like TEF and LEO put more information into the hands of prospective students to allow them to better understand what course is right for them, and what outcomes particular courses at particular institutions have delivered.

Making this information more accessible to applicants will help this process. But government doesn’t always have the best ideas about how to do this: we should make the most of all the country’s tech talents. That’s why today I am announcing the UK’s first ever Higher Education Open Data Competition, which will be open for applications on June 25th.

We will be awarding up to five contracts of £25,000 each for the development of innovative and accessible digital tools to make use of public data on student outcomes. This will help put valuable data like LEO to use and allow software developers to come up with new, appealing ways of displaying and analysing the data, reflecting what applicants really care about.

Our goal here is simple: we want people to study what they are good at and to follow their passion, but do that in the knowledge of what that degree actually offers. We know from other fields, from housing to energy to childcare, that making better use of public data provides insights that government alone would have missed. This is a chance to do the same for HE outcomes and to help applicants make even better choices.

The role of universities

While government and students have important roles to play, there is a vital third leg to this stool: you, our universities. The Higher Education and Research Act enshrined university autonomy in statute, and it is something we hold sacred. The corollary of this is that we cannot achieve change without you. So today, I want to encourage you to listen, engage anew and lead the change to deliver for our students.

This is partly a question of the basics: appropriate contact hours; timely student feedback; highly motivated staff; and appropriate training and support to ensure teaching is of a high standard. In other words, making sure students get what they pay for.

It is also about building on success. One sometimes hears the critique that Britain focuses too much on university degrees and not enough on vocational learning. Vocational and technical skills are vital.

But I reject the false dichotomy between university and vocational education. In fact, much of Britain’s best vocational education goes on in degree courses in universities.

Take Bournemouth University’s computer animation and visual effects courses, whose graduates have gone on to work on some of the biggest movies of the past decade. Or the accounting and finance degree at Nottingham Trent, which has fantastic satisfaction and employment rates – an example of the difference that effective work-based placements can make to a learning experience.

In all these cases – and countless others – universities have engaged with the wider world and are delivering courses that combine first-rate education with excellent outcomes for students. Being more open to the idea of degree apprenticeships would also help.

This speech is also a call to arms for innovation. The best universities have a knack for anticipation and planning, which makes it look as if they knew exactly what was coming all along. Take the development of remote experiments, for example. The Open University is now home to laboratories that can be accessed online by its students, allowing them to control research-grade microscopes, robots and telescopes. And while I am on the Open University, let me be clear that I see it not just as a great national institution but as essential to our future higher education landscape.

We have now recast regulation in a way that is explicitly designed to facilitate innovation, avoiding overly-prescriptive, process-focussed approaches that might place limitations on creativity. I challenge all universities to make the most of it.

Finally, I would like to send a message to one group of universities that is almost certainly not in the room today: the universities of the future.

We set up our new HE regime to be more welcoming to you: to make it easier for you to get started; and to give you a level playing field with established institutions. There is a huge demand for accelerated degrees, for new ways of delivering university education, and for undergraduate and post graduate courses that focus on the higher technical skills that our innovation and technology driven economy needs.

So, we have provided a faster route for high quality new providers to gain degree-awarding powers. We know you can bring new thinking and new offerings for students; we’ve seen the impact that the Open University, Buckingham and BPP have provided for students. We’re seeing how NMITE in Hereford is changing how engineering students are selected, how they learn, and how they find employment.

I know there are more good ideas out there from providers we do not even know exist. And I wanted to make sure you make the most of your opportunities. That is why I can announce today that I am setting up a focused team, working alongside OfS, to help those who want to set up high-quality new universities understand the regulatory system and make the most of the opportunities. If you have a credible plan for the next Open University, the next BPP or the next Buckingham, I want to hear from you – we will help you make the most of your vision.

Conclusion

I made this speech today because I believe it’s important we focus on what is really important in the debate on universities.

It is often hard to see the wood for the trees. Take for example the recent debate over Oxford’s admissions that has dominated the media in recent weeks. This is an important story, given the important role Oxbridge plays – rightly or wrongly – in British society.

But it’s easy to slip into thinking that the value of the university sector is best expressed through a debate about who is admitted to two of our 150 plus higher education institutions.

But there is more to universities than admissions, and more to the sector than Oxbridge. What really matters is that we build a system where everyone with the ability to benefit from a university education has the opportunity to attend, the information they need to make the right decision, and that when they go to university, they receive a first-rate education that delivers real value for money.

The LEO analysis we are publishing today is part of a revolution in transparency that will help us understand the problems our universities face. It challenges received wisdom and snobbery about where excellence in the system lies, and it casts light on what is working and what is not. And I am convinced that it will help government, students and universities come together to change things for the better.

When our talented young people succeed, our country succeeds. I’d like to thank you for your help in making this vision a reality.

Sam Gyimah, Universities Minister