Tuition Fee Increase

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University strategy in an age of uncertainty: the effect of higher education funding on old and new universities

Heather Rolfe Discussion Paper No. 191

December 2001

Abstract

This paper explores the effects of changes in funding arrangements, particularly fees, on universities, and their strategic responses to these changes1. Using data from interviews with senior managers in four universities, it finds the most prestigious, pre-1992, university largely unaffected by tuition fees and others responding to changes in application patterns and intake. However, the effects of tuition fees on university strategy are not easily separated from other changes in the funding of Higher Education, and universities’ strategies were strongly influenced by the need to reduce costs and to generate income in a number of areas. A second major concern of all four universities was quality both of inputs such as students and staff and outputs, in degree results and ratings in employability, research, teaching and other activities. Marketing was assuming a position of increasing importance, with universities striving to develop a ‘brand’ to attract students, staff and funding.

The research was funded by the Leverhulme Trust and was led by Martin Weale and Hilary Metcalf at NIESR. Their advice on this paper is acknowledged with thanks. The author was responsible for the stages of the study involving qualitative investigation.

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1. Introduction The system for funding higher education has undergone a series gradual but significant changes in recent years, which have encompassed both the system of central funding for universities and financial support for individual students. Changes in funding have been introduced alongside a number of structural changes which have influenced university operations. As Stiles (2000) describes, these include the removal of the ‘binary line’ between universities and the former polytechnics, the introduction of regular external assessments of research and teaching quality by institution and the establishment of Higher Education Funding Councils. New external systems of assessment have been introduced, and are well established: the funding councils Research and Assessment Exercise (RAE), the Higher Education Quality Councils academic audit of institutional systems for quality assessment and the Higher Education Funding Council for England’s teaching quality assessments (see Henkel, 1997). At the same time, the number of students participating in higher education has dramatically increased. It has been noted that the combined effect of the ending of the ‘binary line’ and the creation of a larger higher education sector, through expansion of student numbers and university places, has led to increased competition between higher education providers (See Thorne and Cuthbert, 1996; Johnes, 1999:520). This paper explores the effects of changes in funding arrangements and at how universities have responded to these changes at strategic level, on such issues as the student intake, course provision, research and other key activities. The emphasis of the paper is on the particular effects of the introduction of tuition fees because the research was carried out as part of a larger study on the effects of tuition fees on universities. Two aspects of university strategy are identified in the paper: the first is the need to reduce costs through greater efficiency and to generate income, partly in response to a steady reduction in Government funding. The second aspect concerns ‘quality’ and ‘identity’ as ways in which universities seek to maintain or improve their position in the higher education market. The paper will explain the importance of these two issues with reference to specific strategic areas. The research findings are based on data from interviews conducted in 2000 with 33 senior managers about the effects of fees on university strategy, policy, financial management and provision. These included...
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