Higher education white paper could open the doors to private sector and shared services

Will the long-awaited white paper give private colleges the boost they are looking for?

• guardian.co.uk, Monday 20 June 2011 19.31 BST

Postgraduate students at BPP University College, the first private institution to be granted university college status in over 30 years. Photograph: Susan Swindells for the Guardian

As the dust settles on the launch of AC Grayling's New College of the Humanities (and rarely can so much spin and marketing have generated so many column inches), attention turns to the more serious business of the higher education white paper, expected soon.

The two are linked since this much-delayed policy paper should determine how far the government intends to push its mission to boost the private higher education market. The direction of travel was set soon after the general election, when ministers granted university college status to the BPP University College of Professional Studies.
BPP is owned by the for-profit US education corporation, Apollo Group, which runs the fast-growing Phoenix University, where student enrolment has mushroomed from about 20,000 to almost half a million over 15 years. Does the future lie with multinational, for-profit, education companies? Compared with the booming echo of the expansion plans of this commercial giant, the New College of the Humanities is muted sherry party chatter.
There is potential for the private market to expand in Britain. Globally, private institutions deliver about 30% of higher education, yet in the UK it is much less. Exactly how much less is hard to say as, according to a recent report from the Higher Education Funding Council for England (Hefce), private providers are not required to report student enrolment numbers.
BPP is currently one of only four private providers with their own UK degree-awarding powers. And, although the private sector already operates in higher education in other ways, it remains niche, providing mainly professional, graduate-level qualifications in business, management, law and finance.
So looking to the market to expand mainstream undergraduate teaching requires a leap of faith. But as well as its ideological commitment to the market, the government (or at least the Conservative bit of it) desperately wants to find ways of boosting the supply of undergraduate places at little or no cost to the taxpayer. It also hopes that competition from private providers will reduce unit costs among traditional universities.
The for-profit sector certainly sees opportunities in the UK once the cap on tuition fees rises to £9,000. The principal of BPP, Carl Lygo, told a parliamentary committee last month he has "aspirations to make a wider subject offering" than the current focus on business, law and health. He noted that Apollo already runs universities in arts, communications and wider health subjects, and that "is certainly the aspiration for BPP".
So what does the white paper need to do to boost the private sector? A big risk for private universities is that their degree-awarding powers are only granted for a six-year period. If they lose those powers, their entire business case collapses. Extending that period, or making it permanent, would encourage market entrants.
The other big issue is public subsidy. In the US, for-profit private universities rely almost entirely on student fees since they lack endowments or direct public funding. However, as a recent University and College Union study of the US model showed, there is an indirect public subsidy behind their fee income since students at private universities in the US are eligible for federal student aid. Indeed, it has been claimed that without this indirect subsidy the model would barely be profitable.
At present, in the UK most students at private institutions do not receive state financial support, although they are eligible under certain circumstances. As Lygo told MPs last month, this area is "opaque and obscure, so it is not surprising that the whole of the private sector does not know about that particular source of potential funding". Any white paper measures clarifying this could be a shot in the arm for the private sector.
But what are the risks of opening the taps to greater private provision? The universities minister, David Willetts, should know since his department received a private warning from Hefce last July and that advice has subsequently been published.
In it, Hefce highlighted the risk that private providers could cherry-pick profitable courses, ignoring the high-cost science and technology subjects the country needs. This brings the further risk of destabilising existing universities that, more altruistically, attempt to offer the full range of courses.
Hefce concluded that, taken together, the dangers of greater private sector involvement "may amount to a reputational risk for UK higher education". So, if the white paper does herald a rush to the market, ministers cannot say they were not warned.

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