FUTURES FOR HIGHER EDUCATION

Trends presentation

2011

The workshop addresses two main aims

Analysing trends into the future and

what is taking us there

Exploring what we want for the future and how we could

get there

This presentation focuses on three main trends

The funding of higher education in the UK

The demand for higher education

Innovation and evolution in higher education

A PICTUREFORTHE FUTURE?

NOWCurrent situation

2/3-5 years‘Lock ins’

Long-term drivers

Outcome 1

Outcome 2

Outcome 3

What is hoped for in the 30-year vision?

Short-term choices

Long-term choices

‘Segment stories’

A.

B.

C.

Institutional level

Sector level

Key indicators 2010 2015 2040

1.

2.

3.

THIS SLIDE ILLUSTRATES COMPONENTS OF THE DAY

And these are points for the group to consider

Headline questions

• What are the key decisions that face your institution?

• How might these shape higher education in the UK and around the world?

• How do you see the future of HE in the long term?

Things to think about

• What sectors have changed beyond recognition?

• What sectors are starting rapid change now?

• What about ‘Black Swans’?

DEVELOPING A PICTURE OF THE FUTURE

These are some caricatures of the last decade

• Demand continuing to outstrip heavily regulated supply

• Persistence of a dominant 3 year residential degree model – prestige of traditional models

• Private providers and FE marginal or subordinate to universities

And this has been the story of funding for the past twenty years

4,000

4,500

5,000

5,500

6,000

6,500

7,000

7,500

8,000

8,500

9,000

£ p

er

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E s

tud

en

t

Government publicly planned unit of funding (real terms 2009-10=100)

grant

grant + public fee

grant + public fee + private regulated fee

grant + public fee + private regulated fee + capital

We are now set for a liberalisation of the market

• Supply side liberalisation

• Tuition fee replacing grant – with more scope for differentiation in cost (Or not...)

• Stronger demand led focus on ‘quality’

• Introduction of amendable mechanisms to restrain taxpayer liability

Others sectors have been through liberalisation

•Lots of small niche suppliers & some big value entrants

New entrants? •In

what is offered in terms of services, pricing, support, etc

Innovation?

•Biggest and most financially sound of the ‘incumbents’

Continued market domination for a time?

•Amongst both original players and new entrants

Failures, mergers and take-overs?

•Ex ante to protect consumer interests and ex post competition law

New regulation?

•An influx of foreign investment at some point

New sources of funding?

A big assumption that needs to be assessed

Post industrial economic development

Developing middle classes in emerging economies

Data rich and knowledge driven world –learning throughout career

Ongoing and growing demand for higher education and research

Could this be a picture of a deregulated high demand future?

1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/25 2005/06 2006/07 2007/08 2008/09

0

500

1,000

1,500

2,000

2,500

0

50,000

100,000

150,000

200,000

250,000

300,000

97,997

111,480 109,940116,840 117,290122,150

136,295

152,620

173,985

199,225214,690

219,175239,210

229,645

247,995

Higher education institutional income from non-EU domiciled students 1994/95 - 2008/09(and non-EU domicile student numbers; excluding students from EEA countries)

Academic years

£ m

illi

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, ca

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erm

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Stu

den

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Source: Higher Education Statistics Agency (HESA): Resources of higher education institutions, Students in higher education institutions, various years

£1

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£1

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* From 2007/08 writing up and sabbatical students are no longer included in standard counts of students

*

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£1

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m

£2

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m

However - the worst financial and economic crisis since 1929 started in 2007

Our GDP growth forecast is slow relative to previous recoveries. This reflects the effects of the fiscal consolidation, the relatively slow easing of tight credit conditions and ongoing private sector deleveraging.(Office for budget responsibility: March 2011)

Given rising pressure on governments’ balance sheets and limitations on public funding growth, Moody’s anticipates that the university sector will, over the long term, seek more independent sources of funding to finance growth and expansion. We anticipate that endowment fund building through philanthropy, enrolments of international students and borrowing will rise in some countries.(Moody’s International Public Finance: Higher Education, June 2009)

2007 2008 2009 2010 2011 2012 2013

Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

GDP growth

World growth will be sustained by the non-OECD countriesContribution to annualised quarterly world real GDP growth, percentage points

Source

Non-OECD

OECD

And the route out is long and complex

Economic outlook

Sovereign debt crisis

Banking debt crisis

Credit and lending crisis

Recession and unemploy-

ment

Will this lock in the shift to tuition based funding?

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010-11 2011-12 2012-13 2013-14 2014-15

Indicative breakdown of funding between loans for the graduate contribution and HEFCE teaching grant between 2010-11 and 2014-15

Loan outlay to HEIs

HEFCE grant

What other questions will need to be resolved?

Immediate questi

ons

•Impact of government student number de regulation and incentives (AAB and £75000)

•The new regulatory framework – extent of any de regulation or liberalisation

Short/ Mediu

m term

questions

•Ending ‘moral hazard’ produced by government-backed loan – some risk transfer onto institutions

•Reducing government exposure to cost of loan book through RAB charge adjustments

•Setting student numbers free – ending student number controls

•Use of competition regulation

Ongoing

variable

themes

•Public value agendas of mobility, equality and access

•Research concentration v. diversification

How will these changes affect pressures around...

• ‘Customer’ satisfaction – quality of teaching and facilities?

• Staff and professional satisfaction – the volume and quality of research?

• Prestige and the push for ‘world class’ status – continued cost inflation?

We are already seeing the globalisation of higher education

2009/10HEI in the UK

2009/10HEI overseas

0

50000

100000

150000

200000

250000

300000

350000

400000

450000

Other EU

Non-EU

Overseas students on UK HE provision and location of study, 2009/10

Location of study

This is being driven by global economic development

China seeks to be the Asian country with the greatest number of international students and a major destination in the world for international students, according to goals outlined in its National Plan for Medium and Long-Term Education Reform and Development (2010–2020). With an annual international student growth rate of 7%, international student numbers will reach at least 500,000 by 2020, making it the biggest hosting country in Asia.

(China on the Cusp: Becoming the biggest international student destination in Asia: The Observatory on Borderless Higher Education)

China

India

Nigeria

United States

Malaysia

Hong Kong

Pakistan

Saudi Arabia

Canada

Thailand

Taiwan

Korea (South)

Bangladesh

Sri Lanka

Singapore

Japan

Norway

Russia

Iran

Turkey

0 20,000 40,000 60,000

2009/10

1998/99

Number of students in UK higher education institutions from the top 20 countries of domicile for non-EU students, 2009/10

Producing new concentrations of demand

1. Birmingham City University

2. Coventry University

3. De Montfort University

4. Edinburgh Napier University

5. Glyndwr University

6. Herriot-Watt University

7. Kingston University

8. Lancaster University

9. Leeds Metropolitan University

10. Manchester Metropolitan University

11. Middlesex University

12. Nottingham Trent University

13. Oxford Brookes University

14. Queen Mary, University of London

15. Sheffield Hallam University

16. Staffordshire University

17. Swansea Metropolitan University

18. The Royal Veterinary College, University of London

19. The University of Bolton

20. The University of Hull

21. The University of Nottingham

22. The University of Salford

23. University College Birmingham

24. University of Bath

25. University of Bedford

26. University of Birmingham

27. University of Bradford

28. University of Central Lancashire

29. University of Derby

30. University of Durham

31. University of Glamorgan

32. University of Gloucestershire

33. University of Greenwich

34. University of Hertfordshire

35. University of Huddersfield

36. University of Leicester

37. University of London

38. University of Manchester

39. University of Northampton

40. University of Northumbria

41. University of Plymouth

42. University of Portsmouth

43. University of Reading

44. University of Strathclyde

45. University of Sunderland

46. University of Surrey

47. University of Ulster

48. University of Wales

49. University of Wales, Newport

50. University of Warwick

51. University of Wolverhampton

52. University of the West of England, Bristol

53. York St John University

UK providers with courses in Hong Kong

And increasingly global research networks

The continued strength of the traditional centres of scientific excellence and the emergence of new players and leaders point towards an increasingly multipolar scientific world, in which the distribution of scientific activity is concentrated in a number of widely dispersed hubs.Royal society 2011

But addressing these trends is not simple

Brand Positioning Investment

Overseas academic and

industry partners for research

New competitors – US and Chinese

universities

Complex ethical and political landscape

Diverse student and staffing needs

New organisational

challenges – HR, finance

Wider range of degree models

(1+2 etc)

Research concentration may affect your institution’s positioning domestically and globally

Or will a drift toward contract based funding present challenges or opportunities?

HEBCI survey

2003-04 2004-05 2005-06 2006-07 2007-08 2008-090

100

200

300

400

500

600

700

800

900

1000

Collaborative research

Contract research

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

2013-14

2014-15

- 500,000

1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 4,500,000 5,000,000

Science budget allocation

How will financial models evolve?

• Efficiencies: streamlining and new accounting practices?

• Costs: hollowing out of functions as part of efficiency and modernisation strategies – narrower focus?

• Funding: new models of private revenue?

• New ways of monetising the asset base – investment driven organisations?

Stream

Instituional group

US for profit (4 year) US not for profit (4 year) US public (4 year)

-50% 0% 50%

% of Total per FTE

-50% 0% 50%

% of Total per FTE

-50% 0% 50%

% of Total per FTE

Auxillary enterprises

Educational activities

Federal appropriations, grants and contracts

Gifts

Government grants

Hospitals

Investment income

Investment return

Local appropriations

Other

Other non operating revenues

Other operating revenue

Other revenues

Private gifts, grants and contracts

State and local governments

State governments

Tuition and fees

Revenue per FTE at US higher education insitutions by income stream 2008/09

You may be interested in US revenue models

Stream

Instituional group

US for profit (4 year) US not for profit (4 year) US public (4 year)

0% 20% 40% 60%

% of Total per FTE

0% 20% 40% 60%

% of Total per FTE

0% 20% 40% 60%

% of Total per FTE

Academic support

Auxillary enterprises

Depreciation

Hospitals

Independent operations

Instruction

Non operating

Operation and maintenance plant

Other

Other operating

Public service

Research

Research and public services

Scholarship/ fellowship

Student services academic and institutional support

Expenditure per FTE at US higher education insitutions by expenditure stream 2008/09

You may be interested in US expenditure models

How might the presence of new entrants affect you?

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Aggressive recruitment of those with access to federal aid and veterans – nearly 90% of revenue

The University of Phoenix455,600 enrolled students in 2010 (25,000 in 1995)

And what about online – are we leaving a decade of disappointment?

• Development in CPD & TNE:• Facilitated• Blended• Online

• Increasingly bottom up adoption and adaptation of technologies – e.g. Cloud computing

• Do technologies require review of methods?

• Navigating knowledge• Intercultural and online

learning• Research methods &

networks

And what about ‘unbundled’ models of delivery?

• The role of technology in enabling the disaggregation of delivery and compartmentalised ‘products’

– The delivery process:• Content – syllabus, research & scholarship• Classroom – teaching, lectures, supervision• Infrastructure – IT networks, libraries,

estates etc

– The ‘product’:• Pay as you go tuition, credit accumulation• Examination, accreditation and validation• Assessment• Library services• Accommodation• Student finance?

And through all of this generations will change – what will this mean?

Today •Cohort of fee paying students entering into academic workforce•Web 2.0 generation entering into higher education

2020 •Fee paying cohort entering and maturing into academic posts•Web 2.0 generation entering into the academic workforce

2030 •Fee paying cohort moving into leadership positions•Web 2.0 generation entering into mature academic posts

2040 •HEIs staffed and led by those who have paid for most or all of the cost of their tuition and been brought up on internet social networking

And social priorities will evolve – what will be the next one?

• The shift to a digital society: innovated and incubated by universities in the first place

• Will it all be about technological and social solutions for climate change, or something else?

Future of UK university research base, UUK 2010

Some initial questions for the group

• What is right, wrong or missing from this picture: or have you heard it too often to care?

• What is most significant for you and what are you less bothered about?

• What are the most significant uncertainties and how might these shape outcomes?

• What other ways are there or should there be of looking at all this?