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Hackney Metro University

Working Group on Future Funding and Recruitment Priorities, Working paper for discussion, June 2011

Preamble

The Working Group on Future Funding and Recruitment Priorities (FFRP from here) was convened a year ago in May 2010. It was established as a pre-emptive initiative to anticipate the redefining of priorities that would inevitably arise as a result of the change in government in the UK. Though we have yet to see the consequences in the area of policy directed towards higher education by the new government, at least the likely quality of those changes seem to us to be predictable.

The new government will be likely to continue the existing direction of policy that seeks to promote the operation of a market in all areas of education and widen the scope of entrepreneurial activity in the sector. This is not a major change, since this philosophy has been dominant, perhaps even hegemonic in the world of education at all levels above elementary for some decades, at least since the policy’s inception via World Bank reforms associated with the structural adjustment that was associated with the 1980s debt crisis. The basis of the reform was founded on research into the ‘returns to education’. Put simply this is a measure of the material and monetary advantage experienced by the educated by virtue of their pursuing educational qualifications over and above what they could have achieved without those qualifications. This rate of return is usually expressed as a percentage, a value that represents the equivalent of an interest rate paid on bank deposits, except in the area of education it applies to the increased earnings received by an educated individual over and above what would be received without possession of the qualification. If we say, for instance, that the rate of return for degrees in engineering is ten per cent, then students graduating with university engineering degree can be considered to earn ten per cent more per annum than students without the degree. It is worth bearing in mind that over a forty-year working life, a ten per cent return per annum would result in the individual’s total earnings being forty times what they would have been without the qualification. It must also be born in mind by staff members who are not mathematicians or accountants, that the rates of return to education are often much higher than ten per cent, a figure that is considerably higher than that for other forms of capital investment. This finding instigated the era when contribution to funding by individual students became the principal way that the ‘finance gap’ in education might be addressed, the finance gap being the shortfall between what education costs to deliver compared to the level of funding that states can offer via taxation. It took countries such as the United Kingdom, where pre-existing systems were established and entrenched, a decade or more to implement the approach in full.

Initially, this kind of analysis was applied to education systems in the Third World, a process that identified the highest returns to primary education. This was a biproduct of the fact that in many poorer societies, secondary education let alone higher education was unavailable to the majority of the population. Further work in societies where there exist no employment opportunities for graduates of education with only elementary qualifications, the rates of return to education were identified as acquired cumulatively throughout the process, with the highest rates achieved by students who completed higher education.

Now student demand for higher education is often misinterpreted by people who do not understand these rates of return. They question whether, for many students, there might exist a better, more lucrative path into a skilled trade via what is usually labelled ‘vocational training’. It is no surprise that the word ‘vocational’ is usually associated with the word ‘training’, whereas ‘academic’ is always associated with ‘degree’. Students are not stupid, however. They know that university qualifications are always associated with higher rates of return than other routes. ‘Vocational’ always means second best, unless, of course, it is associated with law, medicine, accountancy or any other ‘professional’ qualification, no matter how vocational the training on offer might be. Demand for higher education will therefore only increase in the future, because those involved in the system are aware that it is always potentially the most lucrative route.

Until recently, higher education has not really addressed its offer in relation to anticipated demand, especially demand led by student-anticipated rates of return. We have not been what might be described as ‘market or demand led’. We have tended to notice the demand and then respond, rather than plan pre-emptively to attract and manage that demand. Certainly, we have never tried to market ourselves in a manner that would try to anticipate future demand, but we have always approached the task in a highly ad hoc manner, without applying consumer analytics to the process, as would be attempted by commercial ventures. This working group feels that this approach has to change and that the strategy we will have to follow in the future must involve a greater acknowledgement of the need to market specific kinds of educational experience, because we anticipate it will align with student demand.

What is the market?

We offer apologies for couching the debate in these terms. But the fact remains that successful institutions in the future will need to attract students and those students will not materialize unless they feel the investment will provide returns for them. In the past we have tended, though not exclusively, to allow the dictates of academic history and respectability to determine our offer. This will need to change in the future if the institution is to survive, let alone prosper. It should be noted at this juncture that the stance of this paper is not ideological, merely pragmatic. None of the participants in the group is ideologically neo-liberal economically nor neo-conservative politically. We do, however, recognise that the political and economic environment in which our sector operates has changed and is still changing, the direction of travel currently emphasised being that of economic liberalism and the creation of a market in educational offer, within an essentially libertarian environment.

So, having located ourselves as mere observers of a process, which will certainly happen, whether we like it or not, we state as guiding principles that the future lies in attracting foreign students, that the foreign students most likely to attend are those from the fast-growing Asian economies and that the greatest demand will arise in subject areas with the greatest generality of offer, thus facilitating the greatest transferability of the skills gained, in technical terms, those areas with the greatest elasticity of substitution. In simple terms, this means we must recruit Chinese, Indonesian, Malaysian, Indian and Vietnamese students onto business, management, marketing and media courses. These subject areas do not generally require expensive technological resources that need constant updating, they do not require the construction of specialist facilities and neither do they require the recruitment of the kinds of professional teaching staff who are currently in short supply. Such types of study also provide the institution with greater possibilities for profit.

To illustrate this scenario, we have provided detailed analysis in the annexe to the report. We have listed several types of degree course, including information systems, medicine, various forms of engineering, pure sciences, mathematics, humanities, business and social sciences. We have analysed each option as if it were a commercial proposition, with expected income from student fees compared to the costs associated with delivering and staffing the courses. It can be seen that the highest returns for our institution arise from those types of degree course which demand only general resources and where staffing can be flexible. An engineering laboratory that can accommodate only ten students to experience a particular experiment cannot be easily expanded, so student numbers on the course will forever be resource limited. A general course, however, that needs no specialist facilities can have its student numbers increased or decreased year by year as demand changes. With the technology that is emerging now, such as remote learning and local broadcasting, there arises the possibility of delivering the same teaching across several rooms, without the need for extra staff or extra specialist equipment, as long as the instruction required is non-technical. In purely economic terms, this means that the marginal cost of expanding student numbers approaches zero for these general courses, whereas the marginal cost of expanding specialist pursuits is very high and either constant or increasing.

In relation to the list of countries above, it must be noted that the potentially most lucrative source of recruits is China. The demand for higher education is high, the desire to study overseas is significant, though not as great as is generally perceived, and the commitment to education is strong. Unfortunately, we in Hackney Metro are not at the forefront of the minds of our potential students. We start from a weaker position than most other institutions in the sector simply because we have not had university status for as long and, of course, it takes time to build a reputation. Given this position, it is necessary for Hackney Metro to develop innovatory methods of quickly expanding our presence in the overseas student market.

Fortuitously, we do have an option to pursue. Quite by chance, following the recruitment of an individual Indonesian student some years ago, Hackney Metro has developed links with Uking Terbuka, the Indonesian conglomerate. The source of the link was entirely fortuitous, in that it stemmed from the personal relationship that developed between Professor Edward Pitcairn, Archaeology, and his doctoral student Dr. Sarnu Onggo, a relationship that has already generated a high-profile research project with the Indonesian Government as co-sponsor. Dr. Sarnu Onggo’s family happen to own a multinational conglomerate and, quite independently of the archaeological dig, representatives of the company approached the university to examine avenues of further cooperation. These links began in the area of business and management, but have since expanded to other areas, though all joint initiatives have thus far been small in scale. We thus make a highly pragmatic recommendation that Hackney Metro begins this new phase of development by seeking to expand these links.

Some months ago, the University Senate was approached by Uking Terbuka, who themselves expressed a desire to expand their partnership with our institution. This coincides with the company looking to expand its commercial operations in Europe. Uking Terbuka, incidentally, is one of the ten largest companies in Indonesia and now operates subsidiaries throughout South-East Asia and, crucially, in China. The original owners of Uking Terbuka, incidentally, were ethnically Chinese, though they now identify solidly with Indonesian Muslim culture. The company, however, also wants to expand in China and, given that the company has no language barriers to its participation and also given that the owners retain significant links with the coastal region of the mainland where the owning family originated, we expect the company will soon achieve its objective of establishing a significant presence in China.

Partnerships between higher education institutions and private corporations are not new. This particular partnership would, however, pose a few problems. This would be a partnership across two countries, where the prime interest of both parties lay in a third. For Uking Terbuka, the partnership would be primarily a commercial venture. But perhaps the most important consideration is that we have no information at present on what level of participation in the institutional management the company might desire. This is not a warning, merely a declaration of ignorance and a focus for further evaluation.

An option

Initial consultation with Uking Terbuka has identified a possible strategy for future cooperation. The company’s main future interest in this country is in property investment and in London we possess one of the most vibrant property markets in the world. Uking Terbuka has already expressed its desire to expand its presence in London but has thus far not identified specific sites of interest.

What is proposed, therefore, is an integrated joint project that would involve Hackney Metro concentrating its initial recruitment drive in China in the same region that Uking Terbuka is developing its own partnership. If this recruitment were to go well, the Uking company would build accommodation blocks that would charge commercial rents to their occupants but would provide initial discounts for those Chinese students who were also attending Hackney Metro. Detailed breakdowns of projected numbers of students, their costs and Uking’s interests are included in the annexe.

Of course, the company will be trying to operate commercially, trying to make a profit from their investment. This is not dissimilar to the current motives of Hackney Metro, with the crucial difference that we have neither owners nor shareholders, and, therefore, do not seek profit for commercial investors, merely income to secure our institutional survival. We have included the full text of the proposed memorandum of understanding between Hackney Metro and Uking Terbuka and we encourage staff to support the initiative.

Signed

Professor Jane Scrivener, education

Dr. Gemma Pitcairn, social sciences

Dr. Priantha Perswandar, public policy

Dr. Michael Adefolu, administration

Cc Daisy Johnson, member of London Assembly

15 June 2011