Monday, May 04, 2015

Private Higher Ed in UK - What to expect from General Election?

Private Higher Ed in the UK, as well as Higher Education in general, took a huge hit from the last General Elections. The Coalition government, over the last five years, effectively destroyed the business model of UK Higher Ed, and replaced it with a badly thought-through model that was stillborn. On the private Higher Education side, which was largely dependent on International students, the ever-changing regulations and poor implementation were catastrophic, allowing only the very crooked and completely dishonest to survive. In a way, the last election and its aftermath demonstrated fully how politicians can damage a whole sector. Hence, with another election due next week, it is worth thinking about what this might bring.

In this discussion, the policy towards International students must feature prominently. Several reasons for this. First, the Private Higher Ed in Britain was always dependent on International Students till the last government changed it and made it dependent on taxpayers money. Second, because the demographic trends point to a declining number of students going to the university every year till 2022, the shortfall in student numbers must be made up with the students coming from outside EU. Third, the global Higher Ed market is exploding, with the rising demand from global Middle Class, and British Private Higher Ed has been unnecessarily handicapped by Government policy. A British Higher Education is still respected and valued in international markets, and it should be given the room to play, so to speak, for its investors to earn rightful return.

In a way, there was not much discussion about International students during this election campaign, which is good. So, one may really expect some meaningful discussion, not constrained by the mindless commitment to a number as David Cameron had to do last time around (this time, he has tied his hands with a commitment on a referendum on EU membership). In fact, there are some promising signals, with Tories promising a review of the policy, Labour talking about taking the International Students off the migrant numbers and SNP and Greens, who may become more significant after this election, effectively calling for removal of the barriers on student numbers. Overall, the lack of noise about International students is good news, because this may allow everyone to return to their sense.

Everyone still talks about clamping down on abuse, which makes abundant sense. The problem of government policy in the last few years was that it did too much of policy tinkering and too little on implementation. As is the problem of conservative governance, the approach was driven by bombastic rhetoric, ivory tower policies and poor implementation. At a time when the government was claiming that UK borders were under siege, they were cutting manpower in UK Border Agency, which made absolutely no sense. The whole thing was driven by a distrust of the people coming from poorer nations, as if they were all habitual abusers, and clamp down on any private education entity owned by ethnic minority owners. However, this kind of policy that targets supply (of abuse) and leave demand intact (because of lax implementation) only ends up increasing the incentives for abuse, just as scarce supply and unchanged demand do in any economic transaction. That we are back to common sense talk, when we are talking about sensible policy and good implementation is really good news.

Does this mean we shall get back the Post-Study Work visas, which made Britain an attractive education destination? It is unlikely, as none of the main parties are really talking about this. Labour is talking about giving these visas if the student can find a job within six months after finishing their studies, which is a good half-way house. Their other proposal of allowing people with STEM degrees is rather more ridiculous, and based on the mistaken assumption that Britain needs less business or creative talent. We may indeed see something akin to the Knight Review that Australians did after their share of International student markets collapsed, and a form of Post-Study work right consistent with the requirements of the British industry.

The dependence of Private Higher Education on Student Loan funding, on the other hand, is starting to create a American-style bubble in the UK. While the fee cap avoided the college fees from rising infinitely (as in United States), this may not stay for too long if the sector is to remain competitive. On the other hand, opening up the loan access to Part Time students, an income-contingent repayment (unlike the US) and removal of student number restrictions have led to very poor recruitment by private sector institutions. This will also mean a surge in non-payment, as many pupils availing these loans in Private Sector colleges never actually intend to work. This is not an election issue, as politicians are more or less sleepwalking into this. However, this is going to come up on the legislative agenda fairly soon, as all parties intend to review the policy one way or other.

If one looks at the history of private sector Higher Ed in the UK, this has happened before. The sector changed as the government policy changed, rushing to take advantage of new markets. A policy change is on the cards, so it is logical to expect some action in the sector. The difference, perhaps, is that the sector has changed considerably over the last five years, partly because of the policy and partly because of globalisation, and the mom-and-pop colleges have now been, largely, replaced by a sector funded by professional investment. This is now going to accelerate. Whether this will make the sector more compliant is hard to say, but it is likely to become more strategic and more ambitious. One would hope that would bring greater diversity to Higher Education in Britain, and create some British brands in the International Education market.







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