How the Humanities -- a talk given a Birkbeck, November 2011

I feel that in addressing this meeting I am preaching to the converted. I doubt there are many people here who do not believe already that the arts and humanities are worthwhile, and that they deserve their place in British Higher Education. Many other people here have spoken and given their reasons. I would like in my alloted time to speak from the standpoint of someone who spent many years analysing corporations, and a fair amount of time in the last few months looking at universities and their often strange ways. Then I wish to put all of that into the context of what is going on all around at government level. Not Why the humanities then, but how the humanities.

The first point to bear in mind is that there is a certain futility in talking about education when discussing Higher Education policy, as that has long been of only minor importance. Politics and power have, for the last 30 years, been of much greater significance. It was not out of a desire to improve universities but to discipline them that the Conservatives under Margaret Thatcher in the 1980’s chipped away at tenure and university autonomy. John Major’s decision to double the number of students without funding them in the early 1990’s had more to do with massaging down youth unemployment figures than producing an educated population. The abolition of the binary divide was more concerned with driving down costs and exploiting the opportunity to corporatise the polytechnics than to give university degrees to all. The Lambert report under Labour was primarily occupied with making universities more useful to business. And the creation of the likes of hefce had as much to do with strengthening central control as it had with ensuring that the best research was funded well.

Now universities are to be hit by another tsunami of reform, and all the signs are that it is a worthy successor to past initiatives in the sense that it is ill-conceived, will be badly executed, and has little to do with the question of educating the population. This is perhaps inevitable for a review conceived by Labour as a means of securing more funding for universities without paying for it, modified by the Conservatives to be a means of facilitating cuts, and modified again by the Liberal Democrats to appease their backbenchers. In such a scramble, educational priorities slipped down the rankings, and the question of precisely how English universities are to maintain their remarkably high level of achievement has been largely forgotten. The result seems to be an actual cut in universities’ income instead of an increase, delivered in a complex and inefficient fashion, and laden down with so many conditions that any benefits will be more than offset by new burdens and obligations. One thing seems clear, and that is that although the government might not be willing to pay for the humanities, it will not, as a result, be surrendering any of the power it has over them.

The general incoherence is, this time, on an epic scale. For the last few years, we have been told that our great problem is that we have individually taken on too much debt, so the government is adopting a policy which will make a larger proportion of the population take on higher debts than ever before; this is known as choice. We are told the country’s future depends on a well-educated workforce, and then the government takes measures to reduce the appeal of that education by tripling its cost.

And above all, we are told that market disciplines will be introduced, but the result is to be a system of such tangled complexity that market forces are the very last thing which will apply.

In the grand scheme of things, a overall cut of 10 per cent or so to the total budget might not be so bad. Most companies, after a decade or so of interrupted growth could deal with such a thing relatively easily. Costs invariably can be reduced; it is in the nature of organisations to become a little flabby over time. It is where those cuts fall which is crucial. A well-run company will go after unnecessary overheads first of all. Management structures are simplified, expenses squeezed, all to protect the core activities which are the essential engines of growth and profit when the economy turns.

With the universities, much could be done here. Vince Cable could do more than issue limp begging letters asking vice-chancellors’ nicely if they wouldn’t mind being a little bit more restrained on the pay they give themselves. His department could ban daft schemes which divert funds into Ozymandias-like ventures into the sands of Araby. It could insist that all peripheral activities, like sponsoring rugby teams, building sports centres, acquiring palaces, stop immediately. Universities could do away not only with the fatuous mission statements and glossy strategy documents, but also with the people who write them. They could accept that employing about a thousand people in public relations departments might be a misuse of funds. The government could demand that the central administration budget be cut down drastically and immediately. It has instead been notably silent on the issue.

Not to be too polemical, King’s College London this week launched an appeal for £500 million. If treated as endowment at the usual yields, this would produce about 16 million a year, not even enough to cover the increase in central administration costs since 2002. Whether prospective donors will be told what they will be in effect paying for remains to be seen.

At the same time as revenue will drop, even with the rise of student fees, costs will also be driven up inexorably. Universities are charities, and do not pay tax, but they do pay VAT, and this is going up to 20 per cent next year, enough on its own to blow a hole in the budget. There is talk of a compulsary employers’ levy to make up a deficit in the pension fund, which will also be expensive, and possibly very expensive. Many universities are going to be forced into spending more on fund-raising, but with no change to the tax regime for donations, they will all be competing for the same pot of money, spending more in an expensive beggar-thy-neighbour policy. Nor is sending alumni out into the world laden with debt going to increase their generosity in later years. Equally, costs will be driven up by the business of administering a complex fee structure, and complying with whatever directives come from the new super-quango the government sets up. Best of all, perhaps, it seems as though the government is going to cut the teaching grant before the increased revenue from fees starts flowing, risking a quite unnecessary short term funding crisis that could well doom many courses, and even institutions, that might otherwise be viable.

Welcome to the weird and wonderful world of British Higher Education policy.

Why is this happening? One reason is that, if you commission a report, the answer you get depends on the question asked, and the person you ask. The question was limited to that of student fees, and so the answer did not touch on the greater structure of university funding, much of which comes from research monies. The remit of the committee was carefully designed so that it did not look at why it was reasonable to stop subsiding students, while continuing with much larger subsidies to businesses by allowing them to get a great deal of research on the cheap. It did not ask whether, if it is fair for students who benefit to pay for their education, it might not be reasonable to ask companies, who benefit from an educated workforce, to pay more as well. It did not deal with the question of why, if bankers can threaten to leave when their finances are threatened, the best and brightest students might not adopt the same reasoning, and go abroad if their education can be had under better circumstances elsewhere. Nor did it deal with the consequences for the much-vaunted “knowledge economy” if these students don’t come back again.

And the question was asked of Lord Browne, whose successor carried the can for the Gulf of Mexico disaster while trying at the same time to strip out “the unacceptably high overhead costs” “arteriosclerosis and bureaucracy” which weighed BP down during the period Browne was in charge of it. Lord Browne was a highly successful businessman, but he came to the task of reviewing fees with predictable ideas, attitudes and responses. Putting a question to a man wedded to “flash and fluff,” as the Economist phrased it, guaranteed that the one thing that would not be part of the answer would be a critique of the hugely expensive bureaucratic structure that has grown up over the past few decades. Indeed, he ended up recommending a system which will require much higher administrative costs.

All this will happen under a programme billed as introducing market forces into higher education. It would have been preferable if it had done so. I am, in general, quite keen on market forces in their proper context, and have a high regard for well-managed companies. But I do not believe that market forces have much of a role in situations where the market has to be artificially created, and is then interfered with before it even starts operating. With markets, it is all or nothing, and in the case of universities under the current arrangements, it is not going to be all, so would be better if it were nothing.

In a completely free market, the humanities would clean up. Faced with a choice between an arts degree costing £8,000 a year, and one in science costing upwards of £30,000 a year, then history and philosophy would suddenly become very popular for everyone except those determined to work as scientists. But it is not to be. The natural cost advantages that the humanities enjoy will be erased by continued subsidy to the sciences, while the natural disavantages of the humanities – their lack of access to research money – will continue unchanged.

Charging for what used to be free is not going to be balanced by an ability to become more flexible. Universities will be exposed to some of the pressures of a market system, but their responses will be limited by government directives. To put it simply, many departments may well close not because there is no demand for places, and not because students would not pay higher fees, but because the government will not let supply and demand meet up in a market driven fashion. This would be fine if it was prepared to pay to make up the difference, but it won’t do that either. It is after all possible that greater access and stability could be achieved by increasing fees still further. Personally I would disapprove strongly, but if a university could charge £15000, and divert a large portion of this into a needs-blind admissions policy in the Harvard manner, this might work for some institutions. But we will never know. Rather, universities are to be forced into an ill-fitting straitjacket designed purely to triangulate the political needs of the governing parties.

The market to be introduced is so rigged that, were it to be implemented in the City, the fraud office would soon enough be fingering the collars of the perpetrators. Every reference to market forces is disingenuous in the extreme. Universities will not compete against each other, but will rather operate as a cartel, or a series of cartels targetting different market segments. The normal market disciplines on managements will not apply, as there is no means left of effectively challenging or criticising their decisions. The choice available to students will be converted solely into what level of debt to incur. Internal costing of departments will remain opaque, random and arbitrary.

One thing that those in the arts must beware of is being bamboozled by arguments that their subjects are non economic, loss-making, sub-critical or whatever term may be in fashion. People in the humanities are not generally very good at reading balance sheets and financial statements, but they really should get into practice. As pieces of creative writing, the average university accounts are marvels. For exercises in the analysis of texts, they offer perfect study material. What they say, what they do not say, what they emphasise, what they hide away in dank little corners on page 23 are wonders of obscurantism. They should be read carefully, not least because of the pleasure that can be derived from sending in Freedom of Information requests to get the information left out.

The most important thing to remember is that however many numbers and statistics are deployed to give an impression of precision and rigour, these are all fiction at departmental level. A decent accountant could make any faculty show a profit or a loss simply by juggling the figures to get the result desired. All the highly complex and sophisticated accounting techniques brought in over the past decade or so are essentially fraudulent, because they are based on entirely subjective assumptions. To take an example, the philosophy department at Middlesex was closed because it made a loss, and this fact was dutifully reported in the newspapers. But it only made a loss because the university creamed off more than 50 percent of its revenue in central charges, and those charges were not only set more or less at random, they were beyond the control of the department to influence. An entirely independent faculty, which could negotiate a fair price for use of rooms and libraries, and which had some control over other outgoings – like a say in the vice-chancellor’s magnificent salary – could easily have managed to show a profit. The sin of Middlesex philosophy was a failure to meet an arbitrary internal benchmark determined by the needs of the administration for funds, not being a financial basket case.

Another thing to note is the extraordinary nature of the loans system being proposed, which is that students will be charged at 3 per cent plus inflation for a very long period of time once they hit a certain level of income. This is sheer profiteering disguised as fairness. Essentially, the government will be requiring individuals to issue 30-year index-linked bonds on their own balance sheets, rather than do it itself. A few sums shows what this might mean. For the government will raise the money to advance the loans on a flat rate basis. It will, in other words, borrow the money at about 2.5 per cent, and lend it out at 6.1 per cent, more if inflation increases. While it will enjoy the benefit of seeing its real debt eroded by inflation, the student will not be permitted the same escape route. If only half the total number of students take out a loan of £7000 every year, then that would amount to a transfer from the state’s balance sheet to those of individuals which stabilises over 30 years at about £110 billion. The government would pay a peak £2.75 billion a year in interest for this, and receive peak income of £6.75 billion back, as wage inflation will ensure within 12 years that most graduates earn over the £41,000 benchmark which triggers the maximum levy, and there seems to be no provision for this to be index-linked.

Even Barclaycard would applaud such audacity, not least because there are measures to guarantee this income stream by imposing financial penalties on anyone who wishes to pay off their debts early – a unique and almost feudal arrangement, where individuals are going to be forced to remain in debt, effectively to provide the government with cash flow, for most of their working lives. I know of no other case of a government requiring its citizens to be in permanent debt. The argument that this is just like a mortgage is specious, as mortgages are not index-linked, there are a wide variety of different time periods available, individuals have a choice of which ones to take, and they are secured on hard assets which have traditionally risen in value over time. None of these conditions apply to student loans.

It should be noted that this does nothing for total debt levels; it merely shuffles them around, massaging down the government portion by increasing the private portion. It is financial jiggery-pokery similar to that of the Private Finance Initiative. And already there have been suggestions that this be taken one stage further, that the government might try to raise money by selling off the student loan book -- George Osborne mentioned this as a long-term aim in his last budget (Guardian 22 June 2010).

If such a thing happens, then we will at least be able to console ourselves with having witnessed a stupendous feat of financial wizardry. Having transferred liabilities from banks’ balance sheets onto the public accounts because of the financial crisis, student loans will progressively transfer public debt onto individuals. If the loan book is then sold to financial institutions, the banks will have successfully transmuted their liabilities into assets in a way which makes turning dross into gold seem almost commonplace.

For all that, the changes that are coming need not be bad for the arts and humanities, although the dangers are so clear and considerable that they need little elaboration from me. All crises present opportunities, but the ultimate outcome depends on who siezes those opportunities. The rise in student fees is a devious manoeuvre which is fundamentally unfair and profoundly inefficient. But it will inevitably switch more attention back to teaching and away from research, which will play to the humanities’ strengths. For the past 30 years, the desire to squeeze the arts into a scientific research-heavy model of funding has forced them to compete on a field where they cannot win. There is no way that they can raise the sorts of money in research grants that the sciences can collar, no way that they can justify themselves in terms of direct and measurable contribution to economic growth. Nonetheless they have been required to try, and have been all too easily depicted as a redundant indulgence as a result.

Training the minds of the young effectively and efficiently is another matter, and the area where the humanities excel. With luck, the whole system may begin to be rebalanced, and teaching may come back to enjoy equal status once more. In this, the students are natural allies, quite likely to join any protest against the idea of their fees being diverted to other things. They may be willing to stump up for their own education, they may not be quite so keen to fund a vice-chancellor’s pay rises. They may want to know where their money is going, and how it is spent. As most humanities departments operate on a shoestring, this natural curiosity in the young is a characteristic which should be encouraged.

Many years ago, the historian Alfred Cobban gave an interview in which he talked about getting his Professorship at UCL. He was taken aside by the head of the college and told that, while UCL would be quite happy if he wanted to do any research, he must realise it would be in his own time. He was being paid to teach, and nothing else, and would he please remember that. This did not prevent him from producing a large number of high quality books and articles, and indeed his entire generation produced vast amounts of research without having to be bullied or bribed into doing so. Very few people now can even imagine how such a system could work, so used have we become to managerial insistence that without incentives and penalties, league tables and assessments, nothing would ever get done. But it did, and I suspect it would work just as well now. When academics have something to say, they rarely have to be forced or cajoled to say it.

But they can only do so if they have time, and in the humanities time is often more precious than money. Many research grants in fact are used up literally to buy time. A proper response to the changes coming down the line would be to begin the process of stripping out the vast amounts of busy work that have accumulated over the past few decades. It would abolish the RAE for the humanities, dispose of the constant internal assessments, cancel huge numbers of committees, get rid of professional heads of departments and return them to the ranks where they could pull their weight as teachers – in short, dispose of everything which was not immediately and directly related to teaching, leaving more space for doing research at other times. Linked to an administration that was genuinely committed to stripping out other unnecessary expenses, then the humanities could live under the new regime and even prosper in a world that was simpler and less subject to random manipulation. It will never be easy to deliver a high quality education on a quarter of the income per head that a major American university gets, or a third of the amount that Eton charges, but it would then be do-able, just about. At least there would be the possibility of surviving until some future government comes along and launches yet another review to unravel the mess made by the last one, as will inevitably happen. But my concern is that unless a very real amount of genuine soul-searching is undertaken by everyone from government down – a reexamination far more substantial that the superficial tampering of the Browne report – then by that stage irreparable damage may have been done.

-- Iain Pears