Student fees and the law of unintended consequence

We were talking the other day - a small group of procurement folk - about contract incentives and the law of unintended consequnces.

We covered some examples we've seen, where incentivisation clauses actually drove the wrong (and unintended) behaviour.  Paying the IT provider based on help desk call volume for instance - which might actually encouarge the firm to install PCs badly so they get lots of calls.  That sort of thing.

Which made me consider the student funding question.  Are we getting into similar sitiuations with the coalition's attempts to appease those not in favour?  For instance, if children from the poorest families don't have to pay the fees - is that not another reason for those families to stay poor (and not look for work) so their kids benefit?  And if I have to start paying back my loan once I earn £21K, is that an incentive to spend even longer bumming around the world rather than getting a proper job?  Which seems to be pretty common now anyway...

And, although we don't usually do politics here, I'll break the habit to say that it does annoy me to hear people saying "there is no choice - we have to charge students somehow".  Of course there is a choice, and I do think politicians need to acknolweldge this and make the case rather than pretending it doesn't even require debate.

We could take a few billion out of the health budget (increasing by £2 billion this year).  We could cut foreign aid (£10B a year)  / EU payments (£6B pa)  / Trident (£15-20B just for upfront costs) / free bus passes and winter fuel for old folks (>£3B pa).

We are choosing not to do these things and get more revenue from students (or future ex-students) instead.  So this is a choice about inter-generational wealth transfer (as David Willetts understands very well).  And we're choosing that my (and my parents') generation would like to have more money, and not have our pensions / free bus passes / health services hit, while the generation my daughter and nephews represent will have less.  So anyone who is surprised that they're just a little bit annoyed is very naive.

That's not to excuse in any way the stupid behaviour we saw last week, which is without a doubt harming the students' case hugely.  And I never liked Pink Floyd... idiot boy.

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Voices (8)

  1. John Latchford:

    Remember that no-one forced the Polytechnics & specialist colleges to convert to become Universities – the academics decided they wanted to – and it seems to me that in doing so they massively widened their range of courses, increased their fixed costs, and increased the salaries of Vice Chancellors – the average VC salary in the Russell Group of Universities is now over £270,000 – I am sure some must be worth this much – but are they all?

  2. bitter and twisted:

    But is it the learning from the degree that makes the graduate productive – or is it that both the degree and productivity are an effect of intelligence and stability?

  3. Kevin Potts:

    Peter – it seems more important than ever in the 21st century knowledge economy to have a college degree. I heard yesterday that unemployment among college educated in the U.S. is only 4% while the overall unemployment rate hovers close to 10%. I did not corroborate this fact. But if true, the college educated are working (not taking unemployment payments) and they are paying taxes. Helping students get a college education is much more of an investment than a cost in my opinion.

    Kevin Potts
    VP Product Management and Marketing
    Emptoris, Inc.

  4. Christine Morton:

    Personally I want to see any bank bailouts in the UK or elsewhere (Ireland please take note) stopped so that FAILURE is rewarded with FAILURE. When speaking about incentives we are now incentivising banks to take more risk than is appropriate because we the people will be there to see that they won’t fail.

    I support the education system far, far more in this country than I do the bank bailouts.

    Thank you. I’ll take my soapbox with me…

  5. Philip Orumwense:


    Just to deviate from this discussion thread and to focus on your introductory sentence which you aptly described as ” … where incentivisation clauses actually drove the wrong (and unintended) behaviour. Paying the IT provider based on help desk call volume for instance – which might actually encouarge the firm to install PCs badly so they get lots of calls”.

    This has for a number of months been nagging at me and I thought I could use this opprtunity to explore a new and emerging thinking which in my opinion is seriously gaining some currency amongst various supplier groups and Policy Makers. In IT this is presented as pay per click where buying organisations are expected to pay for services in line with the number of customer (both internal and external) interactions with the application, software, services and other forms of procured or outsourced service requirements.

    Whilst this is fine as an incentivised contracting methodology but it is largely in favour of the service providers. I can’t help but think that buying organisations may well be left with paying for bespoke services several times over in situations where there are multiple deployments of a number of applications from an identical install base which requires the same base software/applications and as you rightly pointed out – this will most likely lead to very perverse behaviours and increased service acquisition costs.

    That said, on the issue of tuition fees – the increase in these fees may well manifest itself in a number of ways:

    i) A significant reduction in the number of arts, humanities, social and management sciences, single subject courses and generalist courses within our tertiary and higher institutions as most parents and their wards will as a matter of course weigh up the return on the investments for such courses and programmes that do not necessairily have any forms of professionalism attached to them.
    ii) As with item i) above – we could begin to see a rise in vocational and technical training and one that is akin to the old C&G type professional qualifications e.g. Plumbing, Electricals & Electronics, Mechanics, Masonry, Apprenticeships, etc. A return to real craftsmanship which is not a bad thing!
    iii) We could also see a real exodus of home grown, capable, intelligent and competent students migrating into other countries where the costs of higher eduction is affordable when compared to what we have to pay here in England – this could mean taking up domicile in Scotland, sending our wards to the US, Canada and such other countries that can offer similar levels of training at affordable costs – the net effect of this is that our future brains could become permanently lost to these host countries.
    iv) The numbers of foreign students in our Further Education (FE) institutions will most likely see an upsurge as the fees paid will become much more comparable, similarly, the FEs will have to supplement the reduced number of home students taking up places with an increased number of foreign students intake – again another blow to our future heritage.
    v) Finally – as a tax payer and a civil servant, it is rather difficult not to think of the significant impact this is likely to have on both my disposable income and the debt to which my wards are going to become exposed to unless of course I elect to pick up the costs. This is at a time when the future outcome of our children and their peers have never been so bleak, not with fewer jobs, higher mortgage deposits, rising unemployment and so on.

  6. Peter Smith:

    That is a great point – and raises another question, which is whether the coalition shouldn’t at least have taken a little longer to think about other options such as the one you raise. (It worries me that the Health reforms have been similarly rushed). And I totally agree with your last sentence – not only a debt issue, but I fear we will also have a generation with unduly optimistic expectations of their future jobs and wealth!
    And here’s a quote I’ve just seen from Fraser Nelson, editor of the thoroughly right of centre Spectator magazine
    “Yes, there’s a budget deficit to fix – but did the universities budget really have to take such a knock? The Lib Dem error, in my view, is accepting the Tory pledge not to cut the wasteful NHS budget. Had its budget been shaved by the same amount as other government departments, there would be no need to cut the uni budget. The axe could have been wielded more evenly. The lesson from Canada’s cuts was that there should be no protected departments: if you protect a budget as massive as that of the NHS (which accounts for a quarter of departmental spending), then you concentrate pain elsewhere. Someone – in Britain’s case, undergraduates – gets it in the neck. ”
    Here’s his full piece.

  7. Kevin:

    Hi Pete,

    Interesting point. I was at Birmingham Uni on Wednesday taking my eldest to look around one of his choices. The department head returned from a town centre rally to chat to parents. He offered the following observation

    50% plus people now go to University. Is this too many, about right or not enough? The government could reduce the tertiary education budget in several ways. One way that hasn’t been widely discussed would be to close 50 of the current 150 UK universities and spend the budget on the remaining 100. That way 35% ish of the population would still attend Uni but at no increase in tuition fees.

    For my part, I feel that successive governments have used university funding and student number growth as a way to defer youth unemployment. As a nation we’re not able to create graduate level jobs for 50% of the population.

    Far too many graduates end up in low paid jobs that they could have attained with less qualifications yet will have significant student debt. A double whammy.



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