Thank you, Mr President
Urban myths are a fascinating subject. They are modern folklore, they are believed implicitly by the listener often because they contain “a grain of truth” and they are always fiction or simply incorrect. For example, I hate to have to tell you that there are no alligators roaming the New York sewers or subway system and that the Great Wall of China is no more likely to be visible from space than any other man-made object. How does an urban myth gain acceptance? They are often told as if from a “friend of a friend”, they are full of dire implications and they play to the prejudices and interests of particular parts of society. For example, it’s bound to be irresponsible, proletarian New Yorkers who flush alligators down the toilet – what more could you expect?
Well, there certainly is one great urban myth current in Britain and that is that our universities are shackled by the state both ideologically and financially. The story goes as follows: the acceptance of state support has weakened universities and to some observers they have become merely arms of the state policy machine. If such support was rejected and universities became private, with one leap Jack would be free and we would move into the sunlit uplands of real university freedom. This myth has great currency in the disillusioned common rooms of some institutions, amongst many alumni and donors and in great swathes of our right-wing media. Like all modern urban myths, it is completely untrue. I shall discuss the financial aspects later, but I want to state categorically that at no time has any Minister of the Crown or civil servant ever, ever tried to interfere with the ambitions, governance or operations of the University of Bristol. We are an autonomous, self-governing institution – we are already private – and my every experience is that the Crown respects that.
Furthermore, I have never tried to moderate academic opinion or freedom of expression and neither has our governing body, Council. In fact I was open in my web newsletter to the staff that we would not allow any sense of a surveillance society on campus as the Minister was requesting last year. Our website was recently blocked from China because we had a paper on it from one of our academics mentioning Falun Gong. In spite of all the inconvenience that the blockage caused, we made no approach to the academic to ask him to remove it. Council is completely committed to freedom of expression and actually becomes most angry if it believes we are being even remotely swayed by tides of public or government opinion. Freedom of expression and academic freedom are as wide as possible in the UK in 2007 and government funding has never and never will, under our current system, compromise that.
So privatising British universities will not increase academic freedom. I want to place before you two other main arguments which should make you vote to defeat the motion. The first is that private universities, as exemplified by those in the United States, are neither independent of state funding nor a universal good. The second is that British universities are incapable financially of becoming private.
We should start by defining what we mean by private. As I have already said, British universities are already private – they are self-governing and independent. I am assuming that the private in the motion essentially means like an Ivy League university in the USA. It is here that other urban myths come into play. For some reason, we think these Ivy League universities do not receive state support for their students. I remember going to visit the state University of Maryland where they complained that the private university of Johns Hopkins in Baltimore received more money from the State of Maryland than they did. It’s really not possible to decide whether this is true, but the State of Maryland certainly gives $80 million of support annually to 40,000 Maryland residents to attend higher education, be it at state or private institutions. One Ivy League university with nearly 10,000 undergraduates receives $75 million of state and federal support for its students – that’s $7,500 per student per year. It is sophistry to say that as that money goes to the student rather than the institution, it does not count – it is funding that the university would otherwise have to find and therefore it is a subsidy.
Let me talk a little bit about charitable status and what that means for state support. One Ivy League received $600m of gifts last year. As someone well versed in seeking philanthropic gifts, I know that around $200m of that is money which would otherwise have been paid in tax. Even more impressively, the university pays no tax on its investment income - just imagine your own fund manager telling you that you enjoyed such government largesse! The same Ivy League university generated $1.2 billion from its endowment last year - and about $400m of that is money which any non-charitable institution would have had to pay in tax. This partly explains the US Ivy League’s huge growth in endowments - a tax-free 12% annualised return grows much faster than a post-tax 8% annualised return. The very fact of its charitable status means that this one university has over $600m of income from government, in a single year, which at any non-charitable institution would have been snapped up by the taxman. Add to that over $150m of additional federal research income, over and above project costs, in order to sustain the research environment and you get a total of well over $750m of government funding for a single private university. Not a bad chunk of that single institution's $3 billion annual income stream!
Now, there's an important catch to charitable status. Private schools in the UK are discovering that they need to defend their offering of a "public good" robustly, sometimes by changing their admission policies, and I do wonder whether the Ivy League universities' provision of a public good should be scrutinised more closely for the same reason. Again there is a myth that Ivy Leagues use their massive wealth to ensure a diverse undergraduate student body. In fact, as Malcolm Gladwell showed in his article “Getting In” in the New Yorker in 2005, there have been debates about the demography of Ivy League schools for over 100 years, particularly over the percentage of Jews, Blacks and now Asians getting in. The schools have constantly had to defend the retrenching that takes place if particular minorities become over-represented. In fact, such diversity is an anti-thesis to their management of their “luxury brand”. Gladwell says in the New Yorker article, and I quote, “If Harvard had too many Asians it wouldn’t be Harvard.” These are schools that openly practise “legacy admissions”, i.e. you get additional points in your assessment if one or both your parents went to the same university. This must be the only admissions system in the world where you get additional points because you are more advantaged.
Finally, we have the recent announcement by at least two Ivy Leagues that that they will charge no more than 10% of the total family income for anyone whose family income is $180,000 or below per year. Some facts: the median family income in the US is $68,000. $180,000 puts you in the top 3% of all income earners in the States. We now have the unedifying spectacle of a wealthy institution subsidising wealthy individuals to perpetuate a constrained access to elite education - hardly a public good.
So, I would argue that the private universities are not independent of state support, nor are they behaving as a public good – not my idea of a healthy position for a first-world economy in 2007. Is society getting the just return it deserves from giving these schools approximately 25% subsidy?
Let me turn to my second argument, the straightforward reality that British universities simply cannot afford to go private. The University of Bristol has an annual income of £340 million, of which £110 million is a core grant from the Higher Education Funding Council – the government body which distributes the money in higher education. Additional funding to support government and charity research grants adds a further £10 million. We have 11,500 undergraduates, which essentially means that to replace that grant would require an additional £10,000 in fees per year per student. However, that is not the end of it. It has been calculated that to sustain the estate of the university requires a surplus of about 8% of turnover, which is about £20 million this year. Because we can be so sure of government income streams, we will actually post a surplus of only £2 million this year – so we would need to charge an additional £2,000 per year to cover this. We also get about £20 million per year in capital grants, so we would need to charge an additional £2,000 per year to cover these.
Therefore we would need to charge an additional £14,000 in fees overall and you need to add the current £3,000 per year so that the final total is in the order of £17,000 per year. Our endowment is £48 million, so we have no sensible means of moderating that cost – remember two-thirds of those attending Ivy Leagues get financial support from the institution. I calculate that we would need about £50 million per year to ensure adequate bursaries so that students from all backgrounds could access the university - i.e., an additional £5,000 to the headline fee figure, which is now £22,000 per year. I just don’t see that students and families will tolerate such fees or are in a position to afford such fees in a country where 90% of households have a post-tax annual income of less than £40,000. £22,000 is not an inflated figure – fees at Ivy Leagues are in the order of $35,000 per year. When you consider the relevant purchasing power of the $ and the £, that is roughly equivalent.
Finally, I am a taxpayer. Higher Education is vital to this country’s future and I want the democratically mandated government to have policy in this area. There can be no doubt that this government has focused our universities’ attention on widening participation and fair access to an extent which I don’t believe we would have done alone and I don’t think that is a bad thing. University income from government is £7 billion per year on core grant alone – that is the equivalent of universities having an endowment of £140 billion. We have recently negotiated a significant loan facility with a large bank and they made it plain that they would not have given us access to such an amount for such a period of time at such a rate of interest if they did not have the security of our government income. It is that security of funding which allows the sector to be so excellent and competitive, and we would turn it down at our peril. I propose you vote to reject the motion.