Who should pay for higher education?

6.19 The National Committee has identified the groups which benefit from higher education and which therefore might be called upon to make a greater contribution to its funding in order to meet the gap which has been identified. These are: the Government on behalf of the taxpayer; students and their families; graduates; institutions; those who employ graduates; and employers in general. A new compact is needed between these various groups, each with a role to play in ensuring the success of higher education in the future. Table 6.2 below details the benefits and responsibilities incurred by each stakeholding group.

We agree with the National Committee that Government will, and should, continue to be the main funder of higher education and should, over the longer term, increase public spending on higher education having regard to growth in the Gross Domestic Product (GDP). Institutions must ensure that they provide value-for-money through identifying costs and benchmarking, as we have suggested, to world class standards. Implementation of the Inquiry's recommendations will also be a component of the institutional part of this compact. Employers will continue to support higher education through general taxation but we have also suggested other ways in which they could assist, particularly in encouraging and supporting their employees in lifelong learning, investing in, or donating resources to, research activities and providing equipment and technology.

6.21 We have recognised, with reluctance, the need for a contribution from graduates in work to the costs of higher education and agree that there is compelling economic evidence that supports this approach. Chapter 6 of the National Committee's report details a number of studies which provide evidence that there is a strong link between individual participation in higher education and the relative subsequent prosperity of that individual. The National Committee found that these benefits present themselves in two key ways: a graduate is more likely to be in work than a non-graduate; and is likely to earn more than a non-graduate. Both these trends become more apparent later in a graduate's career.

6.22 A report for the Scottish Graduate Careers Partnership, 'The Class of 92', based on a longitudinal study of 3,000 graduating Scottish students in 1992, followed up in 1996, broadly supports these findings for Scottish graduates.111 The study showed that in 1992, nine per cent of new graduates were unemployed compared with 10 per cent of the Scottish workforce. Only four years after graduating, in 1996, two per cent of the graduates were unemployed, compared with nine per cent of the Scottish workforce. In terms of earnings, the average salary for the graduates increased from 12,500 to nearly 20,000; national average UK earnings in 1996 were around 17,000.112

6.23 We have also heard arguments that graduates are sometimes under-employed, rather than unemployed. 'The Class of 92' shows that, whilst this may be true for new graduates, it is much less the case several years after graduation: for those graduates who were employed in 1992, there was in increase in the numbers employed in 'graduate' jobs from 86 per cent in 1992 to 93 per cent in 1996. We therefore agree with the authors of the report that it presents 'a powerful argument in favour of the higher education route into the labour market'.113

Rest of Chapter