Financing Higher Education: Answers from the UK

Higher education matters. No longer the exclusive province of a small intellectual elite, it is a key element in national economic performance. A modern economy needs a high-quality university system, and needs to make it accessible to everyone who can benefit. But mass higher education is expensive, and competes for public funds with pensions and health care, to say nothing of nursery education and schools. How to pay for higher education has thus become a central issue. This book tells the story of the UK debate, illustrating a head-on collision between the economic imperatives of student loans and regulated market forces and the political imperative of "free" higher education. It also tells the story of the partnership of an economist and a political professional. The first part of the book contains selected writing from the late 1980s about two key elements in the puzzle: the proper design of student loans (writing which was picked up and promptly implemented in other countries), and the role ofregulated market forces, an area which remains a political minefield in most countries. The book traces those twin elements through the 1990s and into the 2000s, culminating in important - and perhaps path-breaking - legislation in 2004. Both sets of policies are rooted in the economics of information, and thus have technical roots not ideological ones. The only ideological element (a major preoccupation of both authors) is to widen access to higher education. The book offers lessons both about policy design and about the politics of reform of particular relevance to countries which have not yet addressed the issue, including many OECD countries, the more advanced post-communist reforming countries and, increasingly to middle-income developing countries. More generally, the policies are suitable for any country which has the administrative capacity to collect income tax.

Iain Crawford was Head of Public Relations at the London School of Economics. Nicholas Barr is Professor of Public Economics at the London School of Economics.