A d v ic e Pa p er (11-03)

Februa ry 2 0 1 1

The Future of Higher Education in Scotland:

a response to the Scottish Governments Green Paper

Summary

There is great pressure for universities to focus on the immediate demands of the economy and the capacity
of its graduates to fit seamlessly, through vocational training, into specified economic roles. But whilst this aspect of their work is important, the capacity, to prepare students with the breadth of understanding, the skills of logical analysis and the boldness to respond creatively to an unpredictable future is one of the most important roles of universities.

It is important not to underestimate the diversity of practical benefits that universities confer. Institutional
diversity is an important attribute of an effective higher education system. It is important that Scotlands universities are regarded as parts of a system whose cumulative capacity responds to a variety of the needs of society and not merely as a collection of individual institutions.This raises the question of whether we have the university system that we need.

The international perception of university excellence and its trajectory of improvement or decline is
of great importance.The message went abroad that Scotland was serious about investing in research excellence. It is important that such a message is maintained.

The Green Paper identifies a number of possible sources of additional funding that we regard as
inadequate to make up the postulated short to medium term deficit: Significant increased support from business is highly unlikely, and indeed has nowhere been found to be sufficient as a major contributor to the core funding of universities; enhanced philanthropic giving of the scale required might be a long term prospect, but even the most successful fundraising enterprises in universities outwith the USA have failed to raise funds of the magnitude required; increased efficiency at the level of individual institutions also seems inadequate to the task; and there can be no confidence that increased cross border flows could significantly increase income.

We conclude that in view of the international context, and assuming that there is a major funding gap,
there is no alternative to a radical approach.The first order options, either separately or in combination, for addressing the funding issue and their consequences are: flat funding for higher education spending; virement from other parts of the Scottish Government budget; structural change in the Scottish university system; and student contributions.

It would be a serious error to detach questions of funding from questions of purpose. Funding mechanisms
inevitably predicate behaviour and function. It is vital that a long term funding strategy for universities in Scotland is discussed in the context of the functions that we wish our universities to fulfil.
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A d v ic e Pa p er (11- 03)
Introduction
1 The Royal Society of Edinburgh (RSE), Scotlands National Academy, welcomes the opportunity to respond to the Scottish Governments Green Paper on the Future of Higher Education in Scotland. With input from the Fellowship this response has been produced by the RSEs Education Committee convened by Lord Sutherland of Houndwood. The Education Committee is well placed to respond as it is concerned with all aspects of education in Scotland, and at all stages. It is proactive in identifying and promoting priorities for education in Scotland. Whilst we appreciate that there are many detailed issues subsumed in the options set out in the Green Paper, the options themselves need to be related to high level issues that provide the context for the work of Scotlands universities. Our response is therefore based upon this necessary prior consideration in order to help define what is required of our universities. We would be pleased to discuss further any of the issues raised. The international higher education landscape is changing rapidly. Major investments are being made in Asia, with sustained, state initiatives in China, buoyed up by the historical readiness of even poor families to pay high tuition fees. Germany continues with its Excellence Initiative in funding a hoped-for renaissance of universities through support of a revitalised, research-based elite.The President of the USA has moved to reinvigorate his race to the top initiative, in which,to win the future requires winning the global competition to educate our people. Its universities have been one of Scotlands few success stories. Several rank very high in the international league tables that purport to measure excellence, and Scotlands research, most of which is undertaken in its universities, is ranked first in the world in terms of research impact per unit of GDP1.All this has been achieved at low cost.As the Green Paper states, Scotlands universities are funded at a level of about 1% of GDP, compared with 1.3% in England, 1.4% in Sweden, >2% in India & China, 2.9% in the USA and 5.8% in Australia. Taking the 2010/11 budget settlement as a baseline, Universities Scotland2 estimates that our universities face an imminent shortfall in funds as a consequence of the funding cuts for 2011/2012 of 130 million per annum, and that the Scottish Governments projection of flat funding in cash terms till 2014/2015, at a time of relatively high inflation, will create a cumulative
1 2 3

shortfall by then of 640 million.The coincidence of strong underfunding with higher or increasing levels of funding elsewhere indicates relative financial decline in Scotlands higher education sector over the next half decade. 6 These comparisons pose several questions. Does it matter that funding for higher education falls further behind that of other countries? Would it merely create a short-term problem with the prospect of longer-term recovery, or could it lead to irrecoverable long term decline? And finally, what do we want of our universities? The economic case for universities has been made many times, most recently in the submission of Universities Scotland to the Green Paper consultation and in the report by Biggar Economics3, which estimates a 6.2 billion contribution to GrossValue Added (GVA). But arguably the greatest impact of universities lies in the annual wave of graduates that pass into society, carrying with them new ideas and new understanding kindled in an environment of inquiry and scepticism that are stimulated by a university enterprise that seeks to expand the boundaries of knowledge. There is, understandably at the present time, great pressure for universities to focus on the immediate demands of the economy and the capacity of its graduates to fit seamlessly, through vocational training, into specified economic roles. But whilst this aspect of their work is important, a university system that moulds itself and its graduates only to present demands is one that is not listening to its historians. Even in the domain of technology, future developments only a few years away have been shrouded from contemporary eyes, whilst the profound political, economic and social revolutions of the last twenty years were quite unanticipated even immediately before they occurred. The capacity, generation by generation, to prepare students with the breadth of understanding, the skills of logical analysis and the boldness to respond creatively to an unpredictable future is one of the most important roles of universities. Human society cannot be decomposed in ways that governments often seek to do for the purpose of discrete policy actions. It is a complex interacting whole that needs to be understood as a whole. Universities enable this understanding by bringing together the totality of ourselves and our world, and by forging the diversity of skills, perceptions and inspirations that every society needs.

Why do universities matter?

7

The present dilemma

3

International comparative performance of Scotlands research base;The Scottish Government; Office of the Chief Scientific Adviser; November 2009 Building a smarter future: summary response to the Scottish Governments Green Paper; Universities Scotland; February 2011. The Contribution of Scottish Universities & Scenario Analysis. Biggar Economics, 2010.

A d v ic e Pa p er (11- 03)
10 It is important not to underestimate the diversity of practical benefits that universities confer. They provide trained personnel and credible credentials, and create useful knowledge.The technical excellence represented in the universities is a major attractor of research intensive inward investment, and of talented individuals, thereby becoming nuclei for creative economic clusters.They engage with local business and society in a great variety of ways, both as corporate bodies and through the autonomous actions of their staff, many of whom play the role of public intellectuals or as stimulators of social action. They promote social mobility, social justice and cultural engagement. Such is their diversity of function and focus, and of the diversity of opportunity that they offer to potential students, that no one institution can efficiently fulfil all the demands made on it. Institutional diversity is an important attribute of an effective higher education system. Notwithstanding their individual autonomy therefore, it is important that Scotlands universities are regarded as parts of a system whose cumulative capacity responds to a variety of the needs of society and not merely as a collection of individual institutions. It raises the question of whether we have the university system that we need. them. Declining scores in rankings will almost inevitably reduce the high international regard in which Scottish universities are currently held and undermine some of the benefits referred to in paragraph 11.

Funding options
14 If we accept the analysis of Universities Scotland about the funding gap, and in the context of the investments being made in international competitor systems, what options are there for future funding of the Scottish university system and what would their consequences be? 15 The Green Paper identifies a number of possible sources of additional funding that we regard as inadequate, either individually or collectively, to make up the postulated short to medium term deficit: Significant increased support from business is highly unlikely under present economic circumstances, and indeed has nowhere been found to be sufficient as a major contributor to the core funding of universities. Enhanced philanthropic giving of the scale required might be a long term prospect, but even the most successful fundraising enterprises in universities outwith the USA have failed to raise funds of the magnitude required. Increased efficiency at the level of individual institutions also seems inadequate to the task. The Green Paper makes clear that Scotlands universities already have a strong record of securing the efficient use of resources. Equally there can be no confidence that increased cross border flows could significantly increase income. Neither can there be confidence in the potential to achieve a major increase in recruitment of full-fee non-EU students.The international market is highly competitive; new UK border regulations are a deterrent to such recruitment; and awareness of the diminishing resources available to Scottish universities, with the implication of decline, would not help recruitment. 16 The important statement in the Green Paper, which we welcome, is that Scotland remains strongly in favour of ensuring that the prime responsibility for funding education at all levels remains with the state. With this in mind, we summarise in the following the first order options, either separately or in combination, for addressing the funding issue and their consequences.We conclude that in view of the international context, and assuming that there is a major funding gap, there is no alternative to a radical approach. Mere fudging at the margins would be an inadequate response.

Does the international context matter?

11 Universities increasingly operate in an international market.The international perception of university excellence and its trajectory of improvement or decline is a key determinant of the calibre of staff it is able to appoint, the international research funding it is able to win, the international research groups it is able to engage with, its capacity to attract the interests of internationally mobile businesses, the number of premium-fee-pay international students it is able to attract, the international opportunities it is able to create for its students and the quality and the extent that it can open its students eyes to a wider world. 12 It is striking for example how the pooling process of the last few years, designed to maximize the impact of the best researchers from across the Scottish universities, has proved to be a powerful attractor for international academic talent to Scotland. The message went abroad that Scotland was serious about investing in research excellence. It is important that such a message is maintained. 13 By the same token, the international ranking tables of universities that have been developed in recent years are demonstrably influential in guiding students, academics, universities, governments and businesses in their choices of study, employment and engagement4. Though we have grave reservations about the meaning of such rankings, they exist, will continue to do so, and are likely increasingly to influence behaviour. Scottish universities currently perform extraordinary well in
4

Hazelkorn, E. 2007. The Impact of Global Rankings on Higher Education Research and the Production of Knowledge. Higher Education Management and Policy, 19(2).

A d v ic e Pa p er (11- 03)
Option 1 flat funding
17 The Universities Scotland paper illustrates the consequences of the anticipated funding gap on student intake, indicating, in the absence of funds from other sources, that the student intake for 2012/2013 would need to be significantly reduced if the quality of the educational experience is to be maintained.At a time of financial difficulty and high youth unemployment, such an outcome would represent a major political decision. It is of course possible that Government, through its control of University core funding, could require universities to retain current levels of student intake. The consequence of this would be a significant further reduction in funding for teaching or, if this were protected by universities, a serious impact on research and other capacities.

Option 4 student contributions

20 This option has been well rehearsed and could take a variety of forms.We would not wish to express a view about a preferred model if fees in some form were to be introduced. It is a trend that is increasing in university systems across the world. It would send a powerful message if Scotland could retain fee-free access, provided that the current excellence of the system could be retained and enhanced. To do so would however require a bold political decision to implement options 2 or 3.Without such a decision, the choice would be between implementing student fees in some form or risking serious deterioration of the quality of higher education and research in Scotland.

Funding and purpose

21 Although the present debate and the Green Paper focus almost entirely on sustainable funding mechanisms, it would be a serious error to detach questions of funding from questions of purpose.As night follows day, funding mechanisms inevitably predicate behaviour and function. For example, some have commented that the rewards for strong performances in the Research Assessment Exercises of the last 30 years have been such, and research has consequently been so prioritized by universities, that the quality of education has suffered. Research may have become the enemy of education rather than providing an enriching context.There is a lesson for Scotland in the current confusion about university funding policy in England, where the UK Governments attempts to reverse engineer its policy as the perverse and unintended consequences of funding proposals for the structure and purpose of university education become apparent. 22 It is vital therefore that a long term funding strategy for universities in Scotland is discussed in the context of the functions that we wish our universities to fulfil. Whereas it is important that financial arrangements are urgently put in place to provide a secure basis for the recruitment process for the academic year 2012/13, it is vital that a longer term funding strategy is based on a very clear analysis of its consequences and that there is agreement that they are consequences that we would wish for.

Option 2 virement from other parts of the Scottish Government budget

18 The Scottish Government has the power to resolve any financial shortfall by virement from other parts of its budget.The arguments presented in paragraphs 7 to 10 would provide justification for this. We of course recognize the difficulties of doing so in view of other major demands on funding during a period of budgetary stringency. Moreover to adopt this approach would only be a stop-gap unless calculations of the longer term impact suggested that this could be a sustainable route.

Option 3 structural change in the Scottish university system

19 Scotlands 20 universities are free to determine their own individual missions.Arguably, one consequence of this has been to increase the focus on research, partly because of the high status that has been given to research and partly because success in the 4-5 yearly research assessment exercises has been one of the few means whereby a university could increase its core funding. Equally arguably, the extent to which Scottish universities have adapted to the diversity of needs referred to in paragraph 10 has been an outcome of competition in HE market.An alternative route in the provision of diversity that could also be a means to further increase system efficiency would be to follow the route pioneered by the University of California system. In this, different institutions play different roles. Some major in research and postgraduate training, some in first degree education and some are highly vocational.Well-trodden pathways between institutions that are able to articulate their programmes ensures that universities are parts of a well integrated and flexible system. The experience of pooling could be useful in facilitating such a radical re-structuring.

Additional Information and References

Any enquiries about this Advice Paper should be addressed to the RSEs Consultations Officer, Mr William Hardie (Email: evidenceadvice@royalsoced.org.uk) Responses are published on the RSE website (www.royalsoced.org.uk).
Advice Paper (Royal Society of Edinburgh) ISSN 2040-2694

The Royal Society of Edinburgh (RSE) is Scotlands National Academy. It is an independent body with a multidisciplinary fellowship of men and women of international standing which makes it uniquely placed to offer informed, independent comment on matters of national interest. The Royal Society of Edinburgh, Scotland's National Academy, is Scottish Charity No. SC000470