Last month I discussed the background to some research on the condition of British higher education that ISRF are funding. Now James Brackley and two co-authors have published an excellent overview of a first phase of that research in The Conversation.

Called “University finances are in a perilous state,” the title won’t shock academics. Even university managers are admitting the general crisis, and are now trying to convince the new Labour government of its structural nature. By structural, they mean the crisis can’t be traced to specific unforced errors or to rational market forces punishing inferior courses and universities. The structural problem is that the sector’s “business model” was flawed from the start and is now damaging good and bad actors alike.

What was the flaw? Brackley, plus his co-author, former ISRF Fellow Adam Leaver, along with fellow accounting academic David Yates, say it was marketisation itself. The piece has a great thumbnail sketch of the introduction of markets in British higher ed over the past 15 years. If marketisation is the problem, then further market adjustments are not the solution: the only solution is removing the market from control over higher education. Of course that is the one thing we assume cannot be done.

Why is the market not the solution—as the Conservatives have claimed—but the problem itself? After all, Brackley et al. note, “the [market] decade from 2012 to 2022 was a boom period for UK higher education.”

Well, the boom rested on several sources of extra revenue: tripled fees paid by growing numbers of home students, double those tripled fees paid by growing numbers of international students, institutional borrowing at near-zero interest rates, and, also noted by Brackey et al., “severe workload increases,” which added to net revenues by lowering costs.

Advocates always claim that markets bring new efficiencies to all organizations, mainly by inducing competition. But competition does not generate an efficiency learning curve in services as it often does in manufacturing (see this good standard account of photovoltaic manufacturing in The Economist). In education, efficiencies generally take the form of “severe workload increases.” These cut staff and programmes, reducing the educational capacity of the sector as a whole.

Market partisans generally ignore the institutional and social effects of market forces, including those that rendered higher ed’s new revenue sources temporary. Sure enough, each of these sources is now in trouble.

Inflation has eliminated a third of the real value of home student fees, so universities now lose £2500 per student. Anti-immigration policies—as well as global trends—have reduced international student enrolments. Interest rates and cost inflation have shot up since the pandemic. Home students now graduate with £45,000 in debt, forcing them to start their working lives in a financial hole and changing their incentives to learn. In addition, the easy gains from workload increases are likely in the past; the current versions, focused on mass layoffs and programme closures, destroy the human capital they claim to liberate and actually lower efficiency (on top of their cruelty and injustice).

These trends remain mere anomalies in the standard paradigm or storyline unless they can shatter the story itself. The (neoliberal) storyline accepts that problems arise in educational markets, but claims the solution to be more markets. In this story, which the new Labour government seems prepared to defend, the market will be self-correcting.

Responding to market pressures, universities are already cutting back on facilities growth and borrowing. The new government will be less hostile to overseas student immigration, so international student numbers will recover, perhaps not fully but enough to re-float the stronger universities. The new government will eventually allow partial inflation coverage with graduated home fee increases. Interest rates and inflation are already coming down, easing those pressures too.

In addition, the standard story goes, the 67 (and counting) universities with redundancy plans are “right-sizing” the sector by eliminating weaker programs (with less student interest), units, and perhaps, at some point, entire weaker institutions. Sackings at universities like Goldsmiths are unfortunate, this story continues, but part of what should be seen as a normal process of institutional culling and renewal. The uptick in financial risk identified by Brackley et al. is thereby already being addressed. Apart from isolated emergencies that may require government intervention, the sector is in decent shape—at least good enough to be expected to take responsibility for accepting the Tory funding model and fend for itself.

The default response to problems appearing within a market model is to continue the same market model. The challenge is to convince autopilot thinkers to accept the opposite: that the solution to market problems is a “radical rethink” like the one Brackley et al. call for in their piece. How could we launch this rethinking?

Emergent theories rarely get heard unless they can show that the dominant theory has not only failed in the past but will by its nature fail in the future. Can we say this of the UK funding model? Can we say that the Labour version of marketisation will fail as badly as has that of the Conservatives?

The preliminary answer is yes, on simple financial grounds. Near-zero interest rates will not come back, thus limiting institutional borrowing. “Normal” inflation will remain 2-4% per year, eroding university purchasing power. Geopolitical factors and British politics suggest international student numbers will not soon recover, if ever. Because of current levels of student debt, fees cannot now be meaningfully hiked. Without another bailout of extra money from somewhere, the Brackley et al. downward trend line will carry on.

A first claim of our emergent theory is that markets support public goods like education only under special circumstances. Public goods are those that must be allocated even to those who cannot pay their cost, and at a reasonably equal level of quality, which means that revenues must be widely shared. In response, special circumstances at first toss in extra revenues, like tripled home fees. The extra money was (predictably) temporary, as inflation would erode fee value and debt-funding would raise its cost, but as is typical it lasted long enough to get the consent of university managers to the new system.

The new higher ed theory will develop the public-good status of education, and do this sustainably over time. We’ll start the ISRF version with a critique of the current system through expanded research from Brackley et al. and other partners. We’ll include the effects of the half-privatised market model on working-class students and students from racialised communities, on per-student resources uni by uni, and on working conditions for academic staff. We’ll estimate damage to learning quality for students who are working more than ever during university time while studying with staff who are likewise stretched increasingly thin.

But that is only half the job. In a later round, our research will need to outline society’s educational needs which then in turn determine budgets, reversing the standard practice of squeezing education into the budgets that are handed down.

This will involve deeper thinking about what universities are really for. We’re facing a future in which, because of the climate crisis, our lives will focus increasingly on activities other than work and consumption. What kind of universities of the future can help with that?