“Our universities have a paramount place in an economy driven by knowledge and ideas.”
These are the opening words of the 2016 white paper Success as a Knowledge Economy, which created the funding and regulatory architecture governing English higher education today. The arrangements are founded on a broad faith in the economic benefits of generating and communicating knowledge.
This vision assumes that an increasing supply of university graduates and research, coupled with open markets that reward enterprise, leads to endogenous economic growth. That can happen anywhere because ideas are boundless and non-rivalrous, but particularly in England because our universities are among the best in the knowledge business.
English higher education has grown by integrating the development of specific skills for the workplace alongside universally applicable knowledge. This is clear from the progress of most English universities from institutes established for professional and technical training towards university status, the absorption of training for an increasing range of professions within higher education, and the way in which universities can now articulate the workplace capabilities of all graduates, regardless of their discipline.
Notwithstanding this, the reforms proposed in 2016 emphasised knowledge more than skills. By that time, most of the cost of teaching in English universities had been transferred to student tuition fees backed by income-contingent loans. So, the reforms mostly focused on providing confidence for the investments made by students and the risks carried by the exchequer. This would be delivered through regulation focused on issues important to students and the government, whilst positioning students as the pivotal influence on provision through competition for their choices.
Universities would compete to increase and improve the supply of graduates. This would then enhance the capacity of businesses and public services to capitalise on innovation and new technologies, which would yield improved productivity and jobs requiring graduates. That is a crude characterisation, but it provides a starting point for understanding the new imperatives for higher education policy, which are influenced by challenges to this vision of nearly a decade ago.
From market theory to experience in practice
Despite an expansion of university graduates, the UK has had slow productivity growth since the recession of 2008–09. Rather than the economy growing alongside and absorbing a more highly educated workforce, there are declining returns for some courses compared with other options and concerns that AI technologies will replace roles previously reliant on graduates. Employers report sustained gaps and mismatches between the attributes they need and those embodied in the domestic workforce. Alongside this, ministers appear to be more concerned about people that do not go to university, who are shaping politics in the USA and Europe as well as the UK.
These are common challenges for countries experiencing increasing higher education participation. The shift from elite to mass higher education is often associated with a “breakdown of consensus” and “permanent state of tension” because established assumptions are challenged by the scale and range of people encountering universities. This is particularly the case when governments place reliance on market forces, which leads to misalignment between the private choices made by individuals and the public expectations for which ministers are held to account. Universities are expected to embody historically elite modes of higher education reflected in media narratives and rankings, whilst also catering for the more diverse circumstances and practical skills needed by a broader population.
In England, the government has told universities that it wants them to improve access, quality and efficiency, whilst also becoming more closely aligned with the needs of the economy and civil society in their local areas. These priorities may be associated with tensions that have arisen due to the drivers of university behaviour in a mass market.
In a system driven by demand from young people, there has been improved but unequal access reflecting attainment gaps in schools. This might not be such a problem if increasing participation had been accompanied by a growing economy that improves opportunities for everyone. But governments have relied on market signals, rather than sustained industrial strategies, to align an increasing supply of graduates with the capabilities necessary to capitalise on them in the workplace. This has yielded anaemic growth since the 2007 banking crash, together with suggestions that higher education expansion diminishes the prospects of people and places without universities.
In a competitive environment, universities may be perceived to focus on recruiting students, rather than providing them with adequate support, and to invest in non-academic services, rather than the quality of teaching. These conditions may also encourage universities to seek global measures of esteem recognised by league tables, rather than serving local people and communities through the civic mission for which most were established.
Market forces were expected to increase the diversity of provision as universities compete to serve the needs of an expanding student population. But higher education does not work like other markets, even when the price is not controlled as for undergraduates in England. Competition yields convergence around established courses and modes of learning that are understood by potential students, rather than those that may be more efficient or strategically important for the nation as a whole.
Navigating the new policy environment
After more than a decade of reforms encouraging competition and choice, there appears to be less faith in well-regulated market forces positioning knowledgeable graduates to drive growth. Universities are now expected to become embedded within local and national growth plans and industrial strategy sectors, which prioritise skills that can be deployed in specific settings ahead of broadly applicable knowledge. This asks universities to consider the particular needs of industry, public services and communities in their local areas, rather than demand from students alone.
Despite these different imperatives, English higher education will continue to be financed mostly by students’ tuition fees and governed by regulatory powers designed to provide confidence for their choices. We suggest four ingredients for navigating this, which are concerned with strategy, architecture, regulation and funding.
The government has promised a single strategy for post-16 education and a new body, Skills England, to oversee it. A more unified approach across the different parts of post-compulsory education should encourage pathways between different types of learning, and a more coherent offer for both learners and employers. But it also needs to align factors that influence the demand for graduates, such as research and innovation, with decisions that influence their supply. That requires a new mindset for education policy, which has tended to prioritise national rules ahead of local responsiveness, or indeed coherence with other sectors and parts of government.
Delivery of a unified strategy is hampered by the fragmented and complex architecture governing post-16 education. Skills England will provide underpinning evidence, both influencing and drawing on Local Skills Improvement Plans (LSIPs), but it remains uncertain how this will be translated into measures that influence provision, particularly in universities. A unified strategy demands structures for convening universities, colleges, employers and local authorities to deliver it in local areas across the country.
That could be addressed by extending the remit of LSIPs beyond a shopping list of skills requirements and enhancing the role of universities within them. Universities have the expertise to diagnose needs and broker responses, aligning innovation that shapes products and services with the skills needed to work with them. They will, though, only engage this full capability if local structures are accompanied by national regulatory and funding incentives, so there is a unified local body responsible for skills and innovation within a national framework.
Regulation remains essential for providing confidence to students and taxpayers, but there could be a re-balancing of regulatory duties, so they have regard to place and promote coherence, rather than competition for individual students alone. This could influence regulatory decisions affecting neighbouring universities and colleges, as well as the ways in which university performance is measured in relation to issues such as quality and access. A clear typology of civic impact, together with indicators for measuring it, could shift the incentives for universities, particularly if there is a joined-up approach across the funding and regulation of teaching, research and knowledge exchange.
Regulation creates the conditions for activity, but funding shapes it. Higher education tends to be a lower priority than schools within the Department for Education, and research will now be balanced alongside digital technologies within the Department for Science, Innovation and Technology. A new Lifelong Learning Entitlement and reformed Growth and Skills Levy may provide new opportunities for some universities, but any headroom for higher education spending is likely to be tied to specific goals. This will include place and industry-oriented research and innovation programmes and single-pot allocations for some MSAs, alongside the substantial public and private income universities will continue to generate in sectors such as health and defence. In this context, aligning universities with the post-16 education strategy relies on pooling different sources of finance around common goals.
Closer alignment of this kind should not undermine the importance of knowledge or indeed create divisions with skills that are inconsistent with the character and development of English higher education to date. The shift in emphasis from knowledge towards skills reframes how the contributions of universities are articulated and valued in policy and public debate, but it need not fundamentally change their responsibility for knowledge creation and intellectual development.
This appears to have been recognised by ministers, given the statements they have made about the positioning of foundational knowledge within strategies for schools, research and the economy. We have, though, entered a new era, which requires greater consideration of the demand for and take-up of graduates and ideas locally and nationally, and a different approach from universities in response to this.
