The question currently under discussion is whether the government should allow universities to increase their tuition fees above the current cap and if so what the new maximum should be. However, this question is based on the assumption that the government should be free to dictate how much a university should be able to charge its students for its services.
If universities were state owned institutions, then this would be expected. However, in the UK every university is recognised by law as a private, independent and autonomous institution. As noted by the Committee of University Chairmen in 2004, while universities may be different in origin and size, they all share the characteristic of being legally independent corporate institutions which are “accountable through a governing body which carries ultimate responsibility for all aspects of the institution.”
This begs the question, if the governing body of each institution is ultimately responsible for all aspects of the institution, then why are politicians now allowed to undermine this independence by dictating to private universities how much they can charge students for their services?
Unfortunately, the cap on tuition fees was sanctioned in Section 24 of the 2004 Higher Education Act, which imposed a condition on the governing body of each institution to ensure that its tuition fees did not exceed the specified £3,000 limit. Any institution which fails to meet this condition is threatened with financial penalties and as the government continues to provide approximately 60% of university funding, the fear of losing this income is sufficient to force universities to do whatever the government dictates. However, as this condition clearly undermines the independence of universities and their freedom to set their own fees, it raises the question of whether there are now any restrictions or limits left relating to the nature and extent of government interference with private institutions operating in this sector of the economy.
There is clearly increasing uncertainty and confusion surrounding the rule of law in higher education, with the government no longer bound by rules which are fixed and announced beforehand. As a result, it is now difficult for universities to predict with any degree of certainty how or what the government is going to do next, making it difficult for them to plan for the future.
As noted by F. A. Hayek in The Road to Serfdom (1944), the discretion left to the government should be reduced as much as possible in order to prevent it from “stultifying individual efforts by ad hoc action.” Within the known rules of the game, universities must be free to pursue their own individual missions, knowing that any future government will not deliberately intervene to frustrate their efforts.
Section 24 of the 2004 Higher Education Act should therefore be repealed and all future legislation on higher education should include a clause stating that any government intervention in the higher education sector must not in any way interfere or undermine the freedom and right of private institutions to set their own tuition fees.
This blog originally appeared on the IEA website on 28 August 2009.