The future of Oxbridge

posted in: University of Cambridge | 10

Despite the mostly friendly rivalry and healthy competitiveness between them, the universities of Cambridge and Oxford are far more alike than different. A neutral visitor to both would be struck by their similarities, the differences largely consisting in geography (Oxford city is larger, denser and surrounded by more attractive countryside than Cambridge, which has a more central river and less manufacturing industry). Having done degrees at both I am, I hope, a disinterested observer. On purely sentimental grounds I might be slightly more inclined to Oxford, since we are all to some extent prisoners of our past.

On a visit to Oxford this week I twice fell into conversations about the future of the university, on themes that are equally relevant to Cambridge. The locations of my talks were two college mealtimes – lunch at Keble and dinner at Christ Church. I might have had similar conversations in Cambridge colleges. The key question is financial: what is the future funding arrangement for these old, complex and by British standards, very costly universities?

Towards privatisation

We are now more than half way through a transition from a high reliance on state funding to a de facto privatisation. The Vice Chancellor of Cambridge said in a speech a while back that direct UK government funding to Cambridge now makes up less than 10% of the total (that excludes indirect funding won competitively from state backed research funding councils). And for that, he argued, you don’t get a seat on the board, let alone the right to dictate policy.

But in the minds of many Oxbridge alumni, at least those who were undergraduates (and so mainly British), these universities remain identified with the public sector. They are in fact charities which were originally independent of the state, even when kings and queens were their benefactors. In the early 21st century they are funded through a mix of student fees, research awards, charitable donations and income from endowments. In structure, though not alas in scale, this funding resembles the major US universities which are Oxbridge’s current competitors.

At the postgraduate level, which has expanded enormously in the last decade or so, the university does what it wants, though it has to make sure its policies are consistent with the funding councils that support many European students on PhDs and masters courses. For example, these councils have recently made clear they will no longer pay the college fees that students pay on top of the university fees, which is leading to some changes in arrangements to make sure that students aren’t disadvantaged.

Postgrad Oxbridge is overwhelming international and relatively disconnected from UK government policy. That’s partly because having two relentlessly meritocratic universities of world class standing, among several others in the UK, is entirely consistent with UK government science and economic goals. While we would welcome more state spending on science in particular, the universities are relatively free to decide their priorities and arrangements.

Undergraduate fees: the only way is up

But at the undergraduate level, things are different. From a pure research point of view the undergrad population is a bit of a nuisance. They consume a lot of resources because the funds from fees plus the residual state support fall short of the high costs of small group teaching that are a hallmark of Oxbridge education. But the longstanding mission of the colleges (not that they would have expressed it that way) has been to educate the brightest students from the UK, and more recently the EU, at undergraduate level. A tiny fraction of these go on to do postgrad study but the undergrad teaching is certainly hard to justify as a feeder to the research activities of the university.

Cambridge and Oxford both charge the maximum £9,000 a year allowed under UK government policy. The government provides a loan for this amount, with interest rates set at below market levels and repayments contingent on the amount that graduates earn, so there should be no disincentive either to go to university or to take lower paid jobs in future. But £9,000 still falls short of the cost of educating an undergraduate and is far less than the market would bear, judged by the fees charged in the US, where they can reach two or three times this amount (Harvard charges $40,000, which is about £26,000 at current exchange rates).

The current British government seems to believe that universities should stand on their own feet but still caps the fees they can charge, which is contradictory. Either we have a free market or we don’t. The problem for the government is that Oxbridge is still seen, at the undergraduate level, as a mainly British affair. A large rise in fees would attract criticism from many British families who hope their children will go there. The hike in fees to £9,000 was far from popular among the upper-middle class from which the majority of Oxbridge undergrads originate. Many of these parents, bafflingly, seem to think they should pay for their offspring’s education. Quite why their kids shouldn’t take out the loan I don’t know.

The Duke of Gloucester at Eton College, 1913.
It’s going to cost you more in future.

The future prospect is of the government withdrawing all financial support from British universities, or at least those more able to survive independently. This would be politically popular since most British people don’t go to university. At that point Oxbridge will face the question of whether to follow Harvard et al and charge a far higher fee but use some of the proceeds to fund much larger scholarships, adopting the “needs blind” approach that is common, at least in theory, in the US.

At present the system is already needs blind, so long as a prospective student is willing to take on a loan. There are already scholarships provided by Oxbridge, greatly augmented in the case of Oxford by the recent very generous £75 million donation by Michael Moritz and his wife. The main obstacle to lower income applicants at Oxbridge is their highly unequal access to education resources earlier in their life. This sharply reduces their chances of getting the high A-level (or IB) grades necessary to get a place. A well qualified candidate from a low income background has as good a chance as one from a private school. Quite why such a candidate should be discouraged by the need to take out a loan is not clear to me and, so far as I know, the data from the UK and other countries that introduced fees such as Australia, don’t show any such discouragement, which is essentially irrational. But it may nonetheless exist, which is why Oxbridge provides the scholarships.

Oxbridge: British or merely in Britain?

A needs blind system with much higher fees and far higher financial aid would, in theory, leave applications unchanged but generate more funds for the universities. But there is a second important question. Should Oxbridge then limit applications, or at least charge lower fees, to EU students? So long as the UK is in the EU, no longer to be taken for granted of course, legally there can be no discrimination in favour of UK students. But what about the rest of the world?

If undergrad Oxbridge follows the logic of postgrad Oxbridge, it will seek the best applicants from all over the world. Already non-EU students make up about 10% of Cambridge undergrads (data available here). Colleges have a financial incentive to take the overseas students, who pay up to £33,000 annual fees (it varies by country). And quite often in the subject I know best, economics, there are outstanding overseas students who merit a place.

So will Oxbridge gradually become global undergraduate elite universities? And if so, what will that mean for their relationship with the UK? For a couple of centuries these old universities have dominated the education of the UK elite. But if British applicants are squeezed out by better qualified foreign students they might be rather unhappy about it. These most British of institutions might no longer be seen as British, merely based in Britain.

At a recent University of Cambridge alumni event in Singapore I encountered enormously warm goodwill by alumni towards their old university. But one person, quite prominent in the proceedings, combined a quite genuine love for Cambridge with the view that the UK is a “third rate declining country”. Quite apart from plain rudeness, he seemed to be annoyed that the value of his house in London had been diminished by the falling sterling exchange rate. (I suspect that in the long run he’ll need to worry about a lower Singapore dollar, but leave that aside.) But it did make me realise that the idea of Cambridge – and of Oxford – is something greater than the idea of a leading British university. That is a great strength in an interconnected and increasingly competitive world. But it makes me wonder whether Oxbridge faces a difficult transition in the coming decade.

10 Responses

  1. Wing Hung

    This is an interesting comment.

    Care to elaborate?

    And yes, Oxbridge is held in high esteem in Asia.

    Hope this won’t change in the near future.

    • Wing Hung

      I was referring to the remark:


      I suspect that in the long run he’ll need to worry about a lower Singapore dollar,

      • Simon Taylor

        Singapore has kept its currency pegged to a basket of currencies. It has run a current account surplus which has funded its sovereign wealth funds. This is suggestive of a somewhat undervalued currency. But in the long term, with one of the most sharp demographic adjustments of any country (an abrupt aging of the population), Singapore is likely to face a move to current account deficit, a lower saving rate and downward pressure on the exchange rate. The Singapore government is acutely aware of the demographic challenge – a shrinking workforce, a rise in age-related spending and lower growth. Its ability to manage this challenge should not be underestimated but this is not, on the face of it, a recipe for a strong currency. The UK has much more benign demographics, mainly owing to immigration, and if it can manage its structural economic challenges (quite a big if) then it should see a stronger currency in the longer term.

  2. Anthony Smith

    Inclined to Oxford ? Damnit, man, that would be treason in our house ! Dad and I still yell at the Boat Race… until Oxford win again. Lunch at Keble, dinner at Christ Church ? It’ll be a skinny latte for you next time in London.

  3. James Barton

    This may be relevant to choices about taking out student loans:

    http://www.guardian.co.uk/money/2013/jun/13/raise-interest-rate-student-loans-secret-report

    This isn’t normal counter-party risk – I’m not sure if it has a name? Anyway, if it looks like your counter-party looks might unilaterally re-write the terms of your debt agreement, you’d be nuts to enter into an agreement with them.

    They don’t have to actually re-write any of the rules to have a chilling effect on loan take-up – they only need to be seen to be considering it.

    “Quite why such a candidate [from a low income background ] should be discouraged by the need to take out a loan is not clear to me”

    – Is there any difference in earnings after after qualification for students from different income backgrounds? Is there any perception of difference?

    – I don’t know the terms of current student loans. But I assume that with a degree and a loan, you probably won’t have a higher income (versus just going straight into work) for several years. Ignoring what the rational discount rate would be, what discount rate do you think 17-year-olds use when weighing future costs and benefits?

    – Lastly, there’s a question of the overall value created by an individual getting an undergraduate degree. One report (http://www.millionplus.ac.uk/documents/reports/Value_of_a_UK_degree_Full_report.pdf) gives an average premium, at current costs, of £115k. A move to Harvard-like £26 kpa fees, for a three-year course, would reduce that by the NPV of a £51 k fee increase. Depending on what people choose to study, that may make the economic benefits rather marginal. Of course, the average Oxbridge premium is probably higher than the national average premium.

  4. Joelyne

    Ha…comparison to Australia? Australians, as a whole, absolutely believe in free education as a right. The only university fees I have ever paid were guild fees to the tune of $230 dollars. I went back a few years later and student protests had totally stripped away any fee I had previously paid. There are fees though, we just rarely if ever have to pay before the completion of our education. That is, they are completely deferred until we earn sufficient enough to pay it back in automatically taxed increments from our pay. So not a good comparison but nice try. Other than that, nice read.

    • Simon Taylor

      Fees were introduced in Australia in 1989. Previously university tuition was free. The fees are paid out of loans, payment of which is deferred and contingent on income. This is roughly the same system as the UK.

  5. Matthew Dancey

    Dear Mr Taylor.

    Just read your interesting report.
    What are your personal feelings on the number of Japanese students studying at both Oxford and Cambridge with average intelligence but, healthy bank balances to contribute to the ever needy colleges.
    When studying there some 16 years ago I was amazed at the number of non english speaking students that where literally way out of there depth. But the deep pockets of the parents seemed to resolve this issue.

    • Simon Taylor

      I have no experience of what you’re referring to. In my own experience of college admissions at the undergraduate level and at graduate admissions, which are done at the faculty level, there is a standard English requirement across the university, which is somewhat higher than the UK Border Agency’s own minimum. Anyone with poor English would have great difficulty passing the exams. It is undoubtedly true that there are more students from higher income backgrounds at prestigious universities across the world, whatever their nationalities, because access to good primary and secondary education is still correlated with income in most countries. That is certainly something I wish were not true. But it doesn’t mean those students, or their parents, somehow purchased their places, at least at UK universities. It may have happened in the past in rare cases but I’m confident it’s not normal practice now.

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