Archive for May, 2011

In my last post, I offered four possible future funding scenarios for higher education in the UK. In the period since this post (which, admittedly, has been longer than I would have liked) we have seen the publication of the Browne Report on higher education and the subsequent choice of a new university funding system by the coalition government.

I suggested, back in 2010, that the most likely course of action to plug the impending university funding gap would be to transfer the burden from the taxpayer to the graduate. With the withdrawal of HEFCE funding for band C and D subjects (the arts and humanities, primarily, drawing calls of philistinism from many quarters), and the increase in the tuition fees cap to £9,000, this  is exactly what the current administration has done.

What is not so clear, however, is the effect that these changes will have on the HE marketplace. They certainly haven’t created much in the way of price-led competition; the average fee level being perilously close to the £9,000 maximum, and nowhere near the naive £7,500 suggested by the Government.

In fact, contrary to my prediction in the previous post on this subject, there appears to be little to differentiate Russell Group and post-92 institutions from a cost perspective; all are proposing fee levels at either £9,000 or very close. to that figure.

The question, perhaps, is whether these prices are sustainable. A degree as a product is effectively a Veblen good (that is, one in which price has an inverse effect on demand compared to normal expectations of the relationship), and, like the famous Veblen good – champagne – it can be tainted by perceptions of poor quality when the price is too low. However, this doesn’t mean that a Veblen good can ignore the normal price/demand relationship; Moet et Chandon would have a hard job selling their bog standard NV bubbly for the same price as Krug.

One wonders how many of the post 92s will continue to be able to flog their own equivalent of £25 wine for the same price as Oxbridge’s Krug. This is something that I will be investigating in forthcoming posts.

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