Higher Education Viewpoint: We're a private company, not welfare provision

THE Higher Education Funding Council for England (HEFCE) meets this week to decide for the first time on the allocation of funding for the entire university system: former polytechnics as well as 'old' universities.

Their first priority must be to honour the commitment, given by the Government but supported by all parties, to double the participation of school leavers in higher education during this decade. Students have been shoehorned into existing institutions over the last few years - to the equivalent of several new universities every year. This policy has, however, not been backed up with the equivalent provision of financial resources. While there were 'efficiency gains' - the Government's euphemism for squeezing fat out of the system - to be made in the Sixties, we are now down to skin and bone. John Patten, the Secretary of State for Education, has recognised that this rate of increase in numbers will have to be slowed temporarily. The problem for the council is how. All its policies have been based on forcing expansion at the lowest possible cost.

The second priority for the council is to fund academic research more selectively. The recently completed research assessment exercise ranked British universities according to the excellence of their research. The London School of Economics and Political Science did well. My academic colleagues and I have been led to believe that those who did best will be funded accordingly. If the council does not redeem this pledge then it will demotivate and demoralise the best researchers in the country.

But now comes a new twist: the recently announced Treasury inquiry into the four major departments of state involved in spending large quantities of public money on the provision of social services - health, social security, education and the Home Office. The implication is clear: cuts are on the way again.

This grouping of departments and approach to public expenditure problems pinpoints something that has been worrying me for some time and which was highlighted by the Government's rejection of the LSE's bid for the former GLC's headquarters at County Hall. I was then, and remain now, convinced that our proposals were viable financially and would not have involved the Government in footing the bill. Our bid had the backing of a bank (Hambros) that endorsed our plans and was willing to lend us money.

Our proposals were rejected because the Government and the funding council would not allow an internationally recognised institution to take any kind of financial risk. The LSE was not treated as a private company - which it is - but as some part of the United Kingdom's welfare provision.

At the LSE almost half our students are from outside the UK. The demand for places from overseas far exceeds supply. In 1990 this was recognised when we won a Queen's Award for Export Achievement. Last year our foreign currency earnings were approximately pounds 12m. With additional space and capital investment, of the kind that County Hall could have provided, we could easily have doubled that.

Had we been a renowned maker of widgets rather than the nation's leading social science institution, our case would have gone to the Department of Trade and Industry, if to government at all. It would certainly not have concerned the Department for Education. The LSE would have been seen as part of an export-orientated, profitable British industrial sector and its enterprise encouraged and perhaps even assisted.

In higher education the UK has a world leader. The problem is that the Government neither sees it nor treats it as such. It is classified as a public service and is thereby seen and funded as a cost centre rather than a profit earner.

In the Eighties the Government's policy was to double the number of students at universities and to fund research more selectively. Now a new priority is overriding these earlier ones. This is to cut back the soaring costs incurred because universities responded so enthusiastically to the earlier policy. What a mess. The only way out is to abandon the welfare model of higher education and to see it for what it has become, one of Britain's most internationally competitive service industries, and to structure and finance it accordingly.

The writer is vice-chancellor of the LSE.

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