How do you price a university degree programme?

How do you price a degree programme? Well, ask most English universities and the answer is £9,000. Or rather, the answer may be ‘whatever the government-imposed upper limit for tuition fees is’. In fact, if the British government had followed Lord Browne’s recommendation that there should not be an upper limit, what would universities now be proposing to charge? £15,000? More? Or maybe less?

What is clear so far is that the British government’s strategy of suggesting a benchmark figure of £6,000, and then allowing up to £9,000 in exceptional circumstances, and establishing a whole new bureaucracy to deal with those exceptions (the Office of Fair Access) has not worked as intended at all. All universities to have declared their hand so far, except one, have gone for £9,000. The one exception to date is London Metropolitan University, which is actually going to charge less even than £6,000 for some programmes. Sheffield University, which has not yet made any specific announcement, may be going for less than £9,000, but we’ll have to wait and see.

The latest university to make its no-surprise £9,000 announcement is the University of Manchester, which has managed to declare its intentions in a sombre tone of regret, with its President saying that the decision had been taken ‘very reluctantly’ – which sounds odd, because either this is the right decision or it isn’t.

Some of the speculation doing the rounds is that universities now feel compelled to charge £9,000 as a quality statement: if we charge less, we are saying that our courses are less good. This suggests that pricing a university programme is now being seen as part of brand marketing, rather than determining a genuine cost structure.

Universities are not public service bureaucracies, but equally they are not for-profit commercial entities, and pricing their products on the basis of market expectations is not a good idea. But then again, it may be an inevitable consequence of the new English funding régime.

But it is equally wrong to see pricing primarily as a product of what the taxpayer can currently afford. The proportionate distribution of a sum of money fixed by government – as in Ireland and Scotland – does not reveal the true cost of a university degree. It may be that universities need to be both more forthright but also more transparent in explaining what costs must be met in order to offer programmes that are in line with mission and represent quality. Doing that properly will enhance the ability of the sector to be persuasive in coming to an appropriate funding mechanism. But right now it is hard to avoid the conclusion that both governments and universities are losing their way on this question.

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13 Comments on “How do you price a university degree programme?”

  1. Vincent Says:

    There was something of the child in the room with a bag of sweets and expecting it not to eat the lot about all this.
    Actually there was almost a awwwwwww moment at the innocence. But then I remembered the turn of the 90’s.

  2. Helen Says:

    Surely a pertinent question is ‘to whom’ the degree is worth £9,000? Currently, the UK government is claiming that the value accrues entirely to the graduate, and therefore is refusing to pay most of the cost of delivering a degree. This is clearly ridiculous, as the UK economy, like most other developed economies, depends on an increasing supply of graduates in order to grow. Graduates are not the only stakeholders in university education, and they should not bear the whole cost.


    • I’m not altogether sure that the British government’s approach is quite as straightforward as that. What it has put in place suggests a clear lack of any clear understanding of what it believes higher education is and does. It is a curious muddle, more curious when you consider that the universities minister (whatever about his politics) is a thoughtful and intelligent man.

      • anna notaro Says:

        indeed it is curious that most people, including some critics (even in the Humanities), acknowledge his thoughtfulness and intelligence, in any case he will be judged on what he delivers and not on his character, disappointing (but not entirely unusual)that his website http://www.davidwilletts.co.uk/
        has been updated last on January 2010!

    • Kevin Denny Says:

      Actually its not ridiculous (though it may not be entirely true). Say an individual’s income rises by £10k (p.a) by virtue of getting a degree and hence the economy grows by the same amount. In that case, its not at all clear why someone else should bear the cost: the individual has captured the full benefit of their effect on the economy.
      So the argument for subsidy typically relies on the idea that an individual’s education has some additional effect (called an “externality” or human capital spillover) that is not captured by the person’s earnings.
      Its not difficult to think of how this might arise (perhaps education makes people better citizens for example) but that doesn’t mean it is true. There is tons of evidence of the private benefits to education but it is much harder to find convincing evidence of these spillover effects -partly as they are intrinsically difficult to pin down.
      But if I had to make a guess, I would say the bulk of the benefits to education probably accrue to the individual.

      • anna notaro Says:

        As this paper by N.Barr (LSE) convincingly argues due to problems – both of concept and measurement ‘the benefits to education…
        cannot be quantified in any definitive way.(www.hm-treasury.gov.uk/d/252.pdf)
        As far as I am concerned higher education’s main positive effect is in the area of civil society. Robert Putnam, a noted researcher in the study of civil society, asserts that “dozens of studies [confirm] that education [is] by far the single best predictor of engagement in civil life.”(see
        http://en.wikipedia.org/wiki/Bowling_Alone)
        By civil society he means those facets of community involvement and organization that help strengthen social cohesion.


      • This is such a tired old argument, that I feel the need to respond with a tired old response (though this really did happen to me!): a few weeks I had an accident and spent three days in hospital, needing a serious operation. I’m very glad that the surgeon who operated on me and the doctors who cared for me were properly trained and knew what they were doing (and were presumably all educated in their chosen profession for ‘free’).

        Yes, I’m sure they all earn more than I do (just another humble lecturer), but their training benefits not just themselves, but society as a whole… to talk about them getting ‘the bulk of the benefits to [their] education’ is nothing short of nonsense.

        It may not be directly quantifiable, but then perhaps we need to recognise that not everything of value is quantifiable, and that society (presuming one believes there is such a thing!) can benefit in countless ways that don’t make it onto a balance sheet.

  3. Al Says:

    There is a further issue in that if there is a significant drop in demand, what will happen to the supply quantity.

  4. jfryar Says:

    If I was leaving college with a 36,000 pound debt, you can be absolutely sure I’d be asking the HR staff interviewing me for potential jobs what the salary was and whether they thought their renumeration package was realistic given the debt I had to accrue in order to meet the qualifications they’re looking for.

    I wonder what the impact of fees will be on salaries and whether businesses are prepared to partially pick up the tab. If not, I can see lots of people emigrating. If so, I can see a loss in competitiveness.

  5. morungos Says:

    I’m amazed at the naive “a degree is worth X” view, especially from the government but also from universities and other commentators. No. Degrees vary hugely. *Some* degrees will gain great salary benefits, others far less of one. This misuse of statistics, for this is what it is, is immensely damaging.

    In most other countries, and even in the UK for overseas students, fees vary by course and area. Why is this not yet happening in the UK? It is obvious that not all degrees cost the same to deliver (and that the HEFCE bands are a simplification, so the difference is not all down to government standard contributions). Competition between courses will be a very significant factor.

  6. Mary Says:

    Nearly all the universities that have declared their hand so far are the “elite” universities – Oxbridge and Russell Group – who dominate the HE debate in the UK. I work at a non-Russell Group university with a huge commitment to community engagement and widening participation, and the only figures I’ve heard discussed in-house are substantially below £6k. I hope very much that we do go for lower fees, and show the Russell Group institutions that we are not scared that our students will desert us because we haven’t set them higher.


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