CEO blog: Universities a cartel? Not by any definition

13 Jan 2017

With 516 amendments tabled, the House of Lords lost little time in making clear its discontent with the HE and Research Bill. As Big Ben struck 5:30pm on 9 January, the government was defeated by 248 votes to 221 at first sitting of the Lords’ Committee stage on what many might regard as a point that the government should have found easy to answer – namely just what is the vision of a university which the Bill is seeking to promote. Peers are not the first to pose the question. Vice-Chancellors and others have raised it with Jo Johnson, Universities and Science Minister, with whom responsibility to deliver the Bill into legislation lies.

Some would argue that Johnson has been vague in his responses. In fact, the opposite is true. It has become increasingly clear that he thinks that established universities are a cartel and that even posing the question is indicative of the need to break the cartel at any cost even if this means casting aside definitions of a university which have been long-standing and which still pertain in Scotland. North of the border and in much of Europe the idea that universities should be institutions of teaching and research which are awarded the right to award honours and research degrees and other higher education qualifications based on agreed and carefully controlled criteria, is commonplace. It is seen as crucial to the reputation of a country's universities as well as a matter of public interest in view of the taxpayer funding invested in university teaching and research, either directly or, as is the case now in England, indirectly for teaching through the student fees and loan regime.

Perhaps unsurprisingly, given the fact that the Bill has been sold to Conservative backbench MPs as one that will expand young people’s access to university, Johnson reacted with some irritation to the Lords' vote. In an article in the Telegraph, he again described universities as ‘cartels’ and ‘closed shops’. With four more days currently scheduled for Committee stage in the House of Lords (and possibly more to come), a key question is whether Johnson’s charges stand-up.

The OECD describes a cartel as "explicit" forms of collusion, formed for the mutual benefit of member firms. According to the OECD, ‘cartels or cartel behaviour attempts to emulate that of monopoly by restricting industry output, raising or fixing prices in order to earn higher profits and may agree on such matters as prices, total industry output, market shares, allocation of customers, allocation of territories, bid-rigging, establishment of common sales agencies, and the division of profits or combination of these’.

Anyone familiar with the often cut-throat behaviour of UK universities in the recruitment of students and the award of research funding would discount at first instance the notion that established universities can, or have ever, operated as a cartel in any proper sense of the word. Moreover since 2010 policies of, first the Coalition, and then the 2015 Conservative government have explicitly sought to promote further competition rather than collaboration in spite of the evidence that there was a lot of competition in the system prior to this. These policies have included promoting competition (rather than partnerships) with FE Colleges and private providers and the deregulation of student numbers.  In contrast, somewhat ironically and surprisingly given their commitment to free markets, it is Johnson’s own government which has hampered the ability of UK universities to trade internationally through a series of changes to visa regulations, the introduction of so-called credibility interviews and the less than sympathetic interpretation of visa rules and guidance by UKVI, the visa and immigration service, which is now part of the Home Office.

It is also difficult to see how the other charge laid by the Minister at the door of universities, namely that they are a closed shop, stands up. The term was applied to factories and businesses where employees were required to join a particular trade union in order to work there. In fact, closed shops could never be imposed by a union but arose as a result of an agreement between the union and the employer for whom having all the workforce in one union was often convenient for pay and other negotiations. No such agreements ever existed in universities so why the reference to closed shops and cartels?

It appears that the real bone of contention is that the HE and Research Bill seeks to deliver a framework in which the criteria for an organisation to be awarded university title and degree-awarding powers will be considerably weakened. The White Paper and documents which underpin the Bill make it clear that Ministers envisage that organisations offering single degree courses and with less than three years of operating accounts (in other words, not even one cohort of students complete their studies) could be given the right to award degrees, including on a provisional basis.

In a tacit acknowledgement that this will create greater risks, the Bill requires institutions, including long-established universities, to establish student protection plans and shifts responsibility for regulation from the Higher Funding Council for Education to a new Office for Students (OfS). As it stands, the OfS will have no responsibility to act in the public interest. Controversially, universities that do have to act in the public interest will be required to fund the new regulator. Bearing in mind that teaching in universities is now primarily funded by student fees, the net effect is to shift the costs of regulating a riskier sector to students and graduates who will ultimately have to pick up the tab through their student loans.

In another nod to the private providers whom the government wants to enter the sector in greater numbers, Clause 47 of the Bill proposes that the OfS as the regulator should also be the validator of last resort in the event that an established university is unwilling to validate a private provider’s course. This is an obvious contradiction of functions but it is indicative of the lengths to which the government appears to be willing to go to incentivise private providers rather than support established universities. There are over 100 institutions in England which can offer validation. If a private provider cannot persuade one of them to validate their course, then the real question is surely quality of provision rather than the far-fetched notion that universities throughout the country have colluded to create the conditions of a cartel or closed shop.

As recent surveys of staff and Vice-Chancellors have illustrated there are widespread concerns about the Bill and the introduction of a Teaching Excellence Framework with a rating system which relies on proxy measures of teaching quality. Home Office proposals to apply differentiated conditions to the recruitment of international students and the failure to offer any clear direction on Brexit negotiating priorities for universities, students, staff and research have added to the unease.