The benefits and costs of privatisation were discussed at a recent meeting of the LSE Council. The discussion formed part of a wider consideration on the financial strategy on the School’s future, which is taking place at present.
Comparisons have been made between the financial strategy of the LSE remaining as a charity in receipt of government funding, and its financial strategy were it to become a private university.
The details are not yet public, but if the School became a for-profit private university, it could charge unlimited tuition fees and decline to accept government quotas on accepting students from poorer backgrounds. Furthermore, those choosing to study at a private university are not automatically eligible for government loans or bursaries to help cover their fees.
At present, public status protects many of the School’s services, including several operating below market prices and sometimes even below cost: widening participation schemes, the provision of scholarships, residences, and the nursery are four such examples. Public events and the Library are highlighted as being costly services which the School is obliged to provide as part of its remit as a government-funded charity.
It is public information that in its current state none of the surpluses (profits) of the LSE are distributed; instead, they must be reinvested back into the School’s operations. As a private institution the LSE would have more freedom to use its profits as desired and would not be obliged to invest any surpluses back into teaching and other educational services. This would be particularly relevant to the LSE given that it has for many years been running surpluses unlike those of its competitors.
A privatised LSE could also lift current caps on student enrolment numbers and expand its campus at a much faster rate, the review suggests. Currently, the School is at the upper limit of its quota after many years of growth.
A newly privatised LSE would be able to expand its population and this could explain the recent purchases of new buildings around Lincoln’s Inn Fields by the School. The Review notes that the current nature of universities means that takeovers or mergers are difficult, and how in its current state there is not much benefit to growth. In previous years there has been discontent among students about the rapid expansion of the LSE, with some complaining that it has lowered teaching standards. At his appearance at UGM last Michaelmas Term, the Director, Sir Howard Davies, admitted that the School had now reached the limits of its possible expansion, and that this growth had come at the expense of optimum classroom environments.
The main drawback to privatisation would be the loss of direct government funding for UK and EU students, the document adds. Even with the proposals of the Browne Review, many elite UK universities fear that the rise in tuition fees proposed by Lord Browne would not be enough to compensate for the 40% cut in the university teaching budget announced in the coalition government’s Comprehensive Spending Review last Wednesday. As a private university these predicted losses could be averted at the expense of students with higher tuition fees and fewer bursaries.
At present, the University of Buckingham, which is one of the only privately funded universities in the UK, still participates in important ratings such as the QAA, NSS and HESA. Currently home undergraduate fees for the university are around £17,000 for the whole course. In addition, students are eligible for student loans and bursaries from the government.
An arrangement similar to that of the University of Buckingham would remove some of the School’s own fears around privatisation. David Willetts, the Universities Minister, has previously signalled his desire for more private universities in the UK with the recent granting of “University College” status to BPP business and law colleges.
LSE Director Howard Davies has sought to discount the possibility of privatisation, commenting: “I have so far seen no arguments which convince me that the School and its students would be better off as a result of ‘going private’.” The School has separately released a statement, which asserts: “It is sensible to survey the financial landscape in its entirety to understand the position of the sector as a whole. But it would be entirely wrong to isolate any part of that survey and portray what is background information as a preferred course of action”.
Attempts at privatisation have met with opposition from the University and College Union (UCU) which found that 96% of professors are against private universities and many believe that they are a threat to academic standards. The head of the UCU, Sally Hunt, said: “In a world where young people are being locked out of the higher education system by slashes to government funding, our legitimate concern is that UK students will fall prey to the kind of mis-selling and profiteering scandals currently rocking the for-profit university sector in the United States.”
The LSE is not the only university thought to be considering privatisation, with reports this month that the University of Cambridge may pursue this course of action. Remarks were made last year by the previous Rector of Imperial College London, Sir Roy Anderson, who advocated that five of the most elite UK universities (LSE, Oxford, Cambridge, Imperial and UCL) go private to compete with the US Ivy League universities. Sheerman’s remarks prompted a backlash against him from many Higher Education stakeholders.