The second anniversary of the Browne report is fast approaching. Lord Browne promised a "paradigm shift" – towards the market, of course. What other Brave New World was/is available in these dog days of neoliberal triumph?
But it's not working. Higher education has lost almost 10% of its "market" (student applications) – due partly to higher fees, partly to the diminishing prospects for graduates in a needlessly depressed economy. No real "price" competition has developed because all universities have decided to charge the maximum fee, or as close as makes no difference. Far from backing out of higher education, the state has piled in, micro-managing the controls on student numbers.
What has gone wrong? One problem is the reluctance of politicians – whatever their ideological stripe – to roll back the state. Why should they be the exception to the rule that turkeys don't vote for Christmas? Another is that standards of policymaking and policy implementation, as opposed to think-tankery and spin, are now so low that all "reforms" are inevitably botched. A third is the internal contradiction between (high fee) Tories and (no fee) Liberal Democrats.
But a more basic contradiction tends to get ignored – between the neoliberal worship of money as the only moral currency and the "free" market's debasement of old-fashioned sound money. There are examples everywhere.
The best – and worst – is the billions, perhaps trillions, of dodgy derivatives that have come close to destroying the world's banks. Not content with speculating with real money, today's "wealth creators" invented phoney money – the only purpose of which was to act as global casino chips. Risk magically disappeared, except it didn't.
The habit spread. Governments told voters they could have nearly all the public services they still wanted, but no longer had to pay for them through taxes, an easy (if cowardly) electoral sell. Individuals saw that saving, and investing in the future, were mug's games. Spend what you want – and borrow the difference.
A second example is the private finance initiative (PFI) – and other cloned private-public "partnerships", which might more accurately be described as "rip-offs". The looming funding crisis in the NHS owes at least as much to these artificial and self-destructive schemes as to real-world causes such as more expensive drugs or an ageing population.
The only reason PFI ever "worked" was the arbitrary rules about what counts as public expenditure. PFI schemes cost more to produce less – but they were off balance sheet in national accounts. These rules had been set by governments, central banks and other "experts" who were totally suffused by the neoliberal orthodoxies established in the 1980s and 1990s.
A third example, sadly, is the government's higher education reform. The only reason it "works" is that the loans provided by the Student Loans Company do not count as public expenditure, while institutional grants from the Higher Education Funding Council for England (Hefce) do. So would funding recouped through a graduate tax – which is why this was never a starter.
Of course, in the real world, the old-fashioned world of sound money, there is no difference. Whether student loans or Hefce grants, the necessary resources have to be generated, through taxes or borrowing – and, having been spent on higher education, cannot be spent on anything else. But that reality has got lost in the smoke-and-mirrors world of 21st-century finance.
So more is less. Real public funding on higher education will increase under the government's proposals, especially as up to 40% of graduates will never pay back their loans in full, at the time when "headline" public funding is cut dramatically. The only way out is to sell on the student loans book to the private sector – perhaps as opaquely packaged "derivatives" with a zero-risk state guarantee?
Good news for universities perhaps: their fundamental problem is under-funding, regardless of source, compared with other countries. But a high cost will be paid – in terms of administrative disruption, betrayal of core values (treating a university education as a tradable commodity) and denial of social justice.
There is another misconception, that the government's reforms will shift the burden of higher education from taxpayers to users (students and graduates). This is true only in the narrowest sense. Almost certainly successful graduates of the 1960s or 1970s have made a greater personal contribution to the cost of their higher education through the progressive tax system that once prevailed than graduates of this decade will ever contribute by (part) paying back their student loans.
A paradigm shift, as Lord Browne claimed? Yes, in that the government's reform will disrupt, demoralise and politicise English higher education. No, in the sense that the "market" that has been created has more in common with dodgy derivatives and PFI schemes than a real-world sound-money market.