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

A PICTURE FOR THE FUTURE?

The funding of higher education in the UK The demand for higher education Innovation and evolution in higher education

THIS SLIDE ILLUSTRATES COMPONENTS OF THE DAY

NOW

Current situation       

2/3-5 years

‘Lock ins’       

Long-term drivers

        Outcome 1 Outcome 2 What is hoped for in the 30-year vision?

Outcome 3 Institutional level    Sector level    Short-term choices 2010 Key indicators 1. 2. 3.       Long-term choices 2015 2040 ‘Segment stories’ A.

B. C.

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

9,000 8,500 8,000 7,500 7,000 6,500 6,000 5,500 5,000 4,500 4,000 And this has been the story of funding for the past twenty years

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

New entrants? • Lots of small niche suppliers & some big value entrants Innovation? • In what is offered in terms of services, pricing, support, etc Continued market domination for a time?

Failures, mergers and take overs?

• Biggest and most financially sound of the ‘incumbents’ • Amongst both original players and new entrants New regulation?

• Ex ante to protect consumer interests and ex post competition law New sources of funding?

• An influx of foreign investment at some point

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?

2 500 2 000 1 500 1 000

Higher education institutional income from non-EU domiciled students 1994/95 - 2008/09 (and non-EU domicile student numbers; excluding students from EEA countries) 173 985

*

199 225 214 690 219 175 239 210 229 645 247 995 *

300 000 250 000 200 000

97 997 111 480109 940 116 840117 290122 150 136 295 152 620

150 000 100 000 500 50 000 0 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

Academic years

Source: Higher Education Statistics Agency (HESA): Resources of higher education institutions, Students in higher education institutions, various years * From 2007/08 writing up and sabbatical students are no longer included in standard counts of students 0

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)

And the route out is long and complex

Sovereign debt crisis Recession and unemploy - ment Economic outlook Banking debt crisis Credit and lending crisis

Will this lock in the shift to tuition based funding?

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

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2010-11 2011-12 2012-13 2013-14 2014-15 Loan outlay to HEIs HEFCE grant

What other questions will need to be resolved?

Immediate questions • Impact of government student number de regulation and incentives (AAB and £75000) • The new regulatory framework – extent of any de regulation or liberalisation Short/ Medium 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 450000

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

400000 350000 300000 250000 200000 150000 100000 50000 0 2009/10 HEI in the UK Non-EU Other EU 2009/10 HEI overseas

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 in UK higher 1998/99 2009/10 Number of students education institutions from the top 20 countries of domicile for non-EU students, 2009/10

Producing new concentrations of demand

UK providers with courses in Hong Kong 1.

2.

3.

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5.

6.

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8.

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14.

15.

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Birmingham City University Coventry University 19.

20.

De Montfort University Edinburgh Napier University 21.

22.

Glyndwr University Herriot-Watt University 23.

Kingston University 24.

Lancaster University 25.

Leeds Metropolitan University 26.

Manchester Metropolitan University 27.

Middlesex University 28.

Nottingham Trent University Staffordshire University 29.

Oxford Brookes University Sheffield Hallam University 30.

Queen Mary, University of London 31.

32.

33.

Swansea Metropolitan University 34.

35.

The Royal Veterinary College, University of London 36.

The University of Bolton The University of Hull The University of Nottingham The University of Salford University College Birmingham 37.

38.

39.

40.

41.

42.

University of Bath University of Bedford University of Birmingham University of Bradford 43.

44.

45.

University of Central Lancashire 46.

47.

University of Derby 48.

University of Durham 49.

University of Glamorgan University of Gloucestershire University of Greenwich University of Hertfordshire University of Huddersfield 50.

51.

52.

53.

University of Leicester University of London University of Manchester University of Northampton University of Northumbria University of Plymouth University of Portsmouth University of Reading University of Strathclyde University of Sunderland University of Surrey University of Ulster University of Wales University of Wales, Newport University of Warwick University of Wolverhampton University of the West of England, Bristol York St John University

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

Complex ethical and political landscape Diverse student and staffing needs New competitors – US and Chinese universities New organisational challenges – HR, finance Overseas academic and industry partners for research Brand Positioning Investment 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?

5 000 000 4 000 000 3 000 000 2 000 000 1 000 000 -

Science budget allocation

1000 900 800 700 600 500 400 300 200 100 0

HEBCI survey

Collaborative research Contract research 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

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?

You may be interested in US revenue models

You may be interested in US expenditure models

How might the presence of new entrants affect you?

Online provision, with local learning bases: locations within 10 miles of 87 million Americans No tenured professors – recruited by The University of Phoenix 455,600 enrolled students in 2010 (25,000 in 1995) the class Large marketing budget –20% of Apollo Group’s $1.3 billion net revenue on selling and promotional expenses Aggressive recruitment of those with access to federal aid and veterans – nearly 90% of revenue

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?