Higher education ‘market’ has failure points, says national audit office

Janet Downs's picture

Attending university is one of life’s biggest financial decisions.   But young people aren’t able to assess the value of their investment, the National Audit Office (NAO) points out.  

It isn’t their fault, the NAO says.  Young people have ‘insufficient help and advice’.  At the same time higher education (HE) institutions are under ‘little competitive pressure to provide best value’.

Delivering public services via ‘markets’ is supposedly aimed to increase ‘competition’ and ‘drive effective and efficient service delivery, better quality, and greater innovation’.  This relies on consumers having ‘knowledge of the options and their benefits’.

The Government hopes to ‘achieve social and equality objectives in public service markets’.  A typical private market, the NAO writes, ‘would often struggle, or fail’ to ensure all groups have equal outcomes.  In HE, the Department for Education (DfE) attempts to reduce this risk by requiring universities charging maximum fees to have ‘fair access agreements’ intended to increase participation from under-represented groups.

But ‘public service market aims’ aren’t always met, the NAO says.  There are many reasons behind ‘market failure’.  All relate to HE:

  • The ‘product’ is complex and ‘personalised’
  • It’s likely to be a once-in-a-lifetime purchase
  • It’s difficult to make ‘well-informed choices’
  • It’s only possible to rate the service ‘during, or after, “consumption”’
  • Students are ‘locked in’ – changing provider isn’t ‘realistic or desirable’
  • Students have ‘an important role in co-producing the value’ of their university experience
  • Disadvantaged groups find it difficult to access HE or ‘have worse outcomes’
  • Providers find it difficult to enter or leave ‘the market’

Careers advice, the NAO writes, is ‘poorly targeted’ and ‘doesn’t always reach’ disadvantaged young people who need it most.  The poor quality of careers education and guidance is a recurring theme on this site. 

‘Point of sale’ protection is weak, the NAO concludes.  HE is a complex product and isn’t regulated to ensure customers ‘understand risks and uncertainties’.  The Office for Students ‘may make some improvements’ but its remit doesn’t include the kind of consumer protection found elsewhere, the NAO warns.  

There are also problems with the ‘supply side’ including:

  • Lack of incentives for HE providers to offer courses in expensive subjects such as science
  • Competition focuses on marketing rather than ‘teaching quality’
  • It’s unclear how students would be protected if their HE supplier fails despite the DfE’s new regulatory framework
  • It’s unclear whether the new framework will ‘drive HE quality improvements’.

The NAO lists two further concerns:

  • Participation in HE by disadvantaged students is already ‘weighted towards lower-ranked providers’.  This risks a ‘two-tier system’ in which some providers ‘find it easy to attract high-achieving candidates’ while others ‘struggle to compete at all’
  • Competition won’t result in HE institutions charging different fees

The DfE is ‘taking action on a number of issues…But the HE market has substantial challenges that DfE and the new regulator, the Office for Students, will need to understand and grapple with in taking forward their reforms,’ concludes the NAO.

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Roger Titcombe's picture
Wed, 24/01/2018 - 12:38

The NAO appears to have some catching up to do. According to a November 2017 ‘YouGov’ poll, there is considerable dissatisfaction on the part of recent graduates.

“new YouGov Omnibus research among more than 500 current students and recent graduates shows their views on whether university is worth it. It finds that more than a third (35%) of those with a student loan who graduated between 2010 and 2017 disagreed that the “costs of going to university were worth it for the career prospects/learning I gained”.

A lot of the gripes are unsurprisingly related to money, tuition fees and student loans, which helped bring out the youth vote for Labour in the June 2017 General Election.

“When it comes to the costs of a degree, YouGov’s research also finds that there is significant pessimism among both recent graduates and current students with loans about whether they will ever be free of the burden of repayments during their working life. When asked how long they expected it would take to pay off their student loan, 41% of both recent graduates and current students say they don’t think they ever will.”

The government’s Teaching excellence framework (TEF) results 2017, also caused a stir revealing widely disparate teaching standards, including a surprising number of long established, prestigious institutions in the lowest (bronze) category along with perhaps the more expected former non-university Colleges, raised to university status by the Blair higher education reforms and his ambition for half the population to become university graduates.

The truth is that marketisation doesn't work for the provision of any essential public service of which education is just a particularly glaring example. I write about this here.


Janet is right to point out that the National Audit Office appears to have recognised this truth.

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