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  • Writer's pictureCrag

Funding Higher Education: Public versus Private universities

The Prevailing View

People like “free” stuff, as if there were ever such a thing. UK citizens, and Millennials especially, like it when the government pays for their education, and they want tuition fees scrapped[1][2][3]. The Labour Party is seen as the vehicle for this, despite being the party which introduced tuition fees in 1997[4] after promising not to. Labour continued to promise not to raise them, and did, but they were not alone. The Liberal Democrats (responsible for perhaps the most infamous episode on this topic, under Nick Clegg) and Conservative Party committed the same treachery at later times.

Ancient history to the Millennial, perhaps. When tuition fees’ origin are acknowledged, the blame is laid at the feet of “red Tory, Tony Blair”. Ironically named because, at the time, perhaps unsurprisingly for a typically adversarial British opposition party but true nonetheless, the Conservatives opposed tuition fees. Despite enormous popularity at the time, Blair no longer counts as a real lefty because, among other missteps, he dared to take the modest step toward students paying a low, government price-set fee, to attend publicly funded universities, with money borrowed from the government. Hardly a revolutionary privatisation.

In all iterations of government, of all parties, public funding and control have been the staple features of higher education in the country. It is important to note, therefore, that this is never really a party political issue. While trends develop in one party to be for or against tuition fees at a given time, that trend can completely reverse given some years. The actual trend of opinion of a party may also be different to its public face - a party virtually never advocates for tuition fees, right up until they move to implement them. The true trend is toward preserving and expanding government control.

Education is viewed as a right by many people, and for some reason there is an assumption that since it is deemed a right it should be provided by the state. Apparently, it seems so intuitively true that no-one need explain why education is a "right", nor why goods and services we have a "right" to should be dispensed by the government. We would all agree that one should have the right to access food, but we do not expect the government to prescribe and dispense it for us (bar a few extra-nutty Marxists). We would not even entertain the idea that the government could match private enterprise in its ability to provide food. Everyone should have a right to obtain education and food in the sense that everyone should be free to obtain them - free to participate in obtaining them in the marketplace - but that doesn’t mean people should be coerced into providing them for other people.

When the state collects taxes to provide a good or service, the taxpayer is coerced into providing that good or service to another person. This has unsatisfactory outcomes, in terms of the quantity and quality of the good or service in question, and in terms of the infringement upon individual freedoms. Tuition fees set by the UK government have been implemented for some time, and opposition to them has softened. The student loan feels inconsequential to the student, and one can hardly blame them for feeling that way: 77.4% of student loans will never be fully paid back, according to the Institute for Fiscal Studies’ projection of the 2017 student loan system[5]. The taxpayer will meet the cost instead. The evolution of the situation has left us with the same sentiment, lingering: that state involvement, now by way of price-fixing and loan-providing, is somehow good for our education system. Ultimately, "the government" - or, more accurately, the taxpayer - still mostly pays for all of our education. The feeling is, as it was prior to 1998, that it is thanks to the government that we can go to university. The argument to publicly fund education has as much weight behind it as ever. results date article published

Dispelling Myth

Education is not free – it is always paid for. The question is: how to pay for it? If the government subsidises or wholly pays for higher education, it is funded by taxation (which is taken from all citizens above a set, low threshold of income in the UK – you start paying tax when you earn an amount equal to approximately 43% of the average UK salary[6]). The purpose of university is to provide the individual attending with a level of knowledge and qualification which will enable them to access highly skilled jobs and increase their earnings later in life. If the latter is not true for an individual, then economic justifications around creating skilled workers, encouraging increased productivity, and positively affecting society evaporate – the government would be sinking money into a recreational outlet which serves no purpose other than the student’s indulgence. It would seem this is indeed the case for most people, as the IFS’ projection that the majority of students will have their debt written off suggests. Whether this is the majority case or not, people should pay for their own indulgences.

Who Goes To University

University students mostly come from higher income households[7] and by obtaining entry are necessarily among the higher IQ members of society. In professions like medicine, the affluence of the average student is higher still[8]. UCAS analysis and research consistently shows that disadvantaged people are less likely to go to university, and that white working-class boys are the least likely sub-group to enter higher education[9]. It is unsurprising that the most fortunate children – in their genetics, household income, the state of their family (children raised by two biological parents are more likely to go to university[10]), support for homework, resourceful and motivated parents - would do better in school, on average.

Consider the outcome of this situation. We have a significant number of taxpayers who do not go to university, who are disadvantaged compared to university goers, who are paying for people who are better off in all of those regards to go to university, making the beneficiaries better off still. Do not misunderstand my point about genetics and intelligence: it is of course true that many a person from a poor background, who doesn’t go to university, is very intelligent - but it is little solace that a proportion of their already limited income will go to fund the education of a less intelligent, wealthier person. I am only making the observation that, usually, the more intelligent members of society have a superior capacity to attend university. The point is: all these characteristics diminishing one’s socioeconomic position are more likely to be held by the non-graduate. The less intelligent person will be more likely not to choose to go to university, and if they do they are more likely to drop out – but they must pay taxes for their more intelligent peer from the same neighbourhood to go to university. The better equipped member of the poor neighbourhood was always more likely to have a greater income than the less equipped member of the same neighbourhood, so why should we increase that disparity?

The bottom line is: people who go to university, who are already better off than those who don’t, and who have every expectation of earning more than those who don’t, make poorer people subsidise their education via the ballot box. I struggle to think of any more unjust and regressive a form of taxation than this. It is outrageous that people on low pay in menial jobs should pay for the education of a professional on a six-figure salary. The professional can and should pay for their own education with the rewards they have reaped by virtue of receiving it.

The individual who does not attend university gets an especially raw deal, because he or she who leaves school and starts work at 16 or 18 pays taxes for between 3 and 10 years longer (and sometimes even longer than that) than the university graduate will. It is of course the wealthiest among us who can afford to delay entering the real world for the longest, therefore benefitting from the subsidy of taxpayers for the longest; and, who after all their years of study, can expect to receive among the highest incomes.

The argument most often received to counter my own, is that since society benefits from a doctor, we should all pay for their training. Aside from the humorous and telling omission of lawyers and accountants whenever this argument is made, there are several obvious problems with this argument. Firstly, that every job is a benefit to society for as long as it exists – if a person’s work activities did not benefit other individuals, their position would not exist because no-one would pay them. Secondly, that the salary of a doctor serves not just as a justification not to give them a poorer person’s money, but also as an enormous incentive to become a doctor. If £100,000 or £200,000 a year, or a desire to help people, or to challenge one’s intellect, or an interest in the human body, or as is undoubtedly the case some combination of all four, is not enough incentive enough already then perhaps the individual in question shouldn’t become a doctor. “If only someone else had been willing to invest in my future on behalf, perhaps then I would have become a doctor” has a uniquely strange ring of entitlement to it. Thirdly, most people who go to university do not become doctors. So, even if this argument were valid for the only profession people seem to feel is safe to deify, it still would not apply to the majority of professions and therefore doesn’t justify the blanket policy decision.

Costs, Incentives, and Robbing the Poor

The level of public expenditure on higher education varies greatly between countries. As far as the UK goes, Scotland remains a “cheap” for the individual (up to £1820 per year) and therefore expensive to the public purse, while England, Northern Ireland and Wales have implemented tuition fees of £9000 (the latter) and £9250 (the former two). I cannot be accused of perpetuating the inequalities caused by the public funding of universities, as I did not go to university. I know of fewer than half a dozen individuals around my age whom did not, and I remember the shock of my friends and teachers when I left Sixth Form College after the first year to do an apprenticeship in gas engineering. As a musician, the improbability of me getting a good return on the £9,000 per year tuition fees for a music degree turned me toward different opportunities, and I consider that a good thing. Had there been no tuition fees, I might have gone to university, but imposing a direct cost creates a sense of personal responsibility and an incentive to make better choices according to your situation and personal skills. I now earn more than my graduate peers, I have funded my passion for music, and I have a good career plan in place.

While I support the imposition of direct costs on beneficiaries of higher education, rather than hidden costs being imposed on everyone, I do not support the way it has been done in the UK. The way the government imposes the cost rather than universities, and how the government issues loans rather than banks, and the way those loans are managed, means the cost to the taxpayer is still huge[11], and therefore its regressive nature as a form of taxation persists. It also means the cost of university education is more expensive than it ought to be.

In a private, free market system, individuals would be free to pay an amount for their tuition according to what level of quality they wanted, could afford, and/or could achieve. Universities which do not provide the best education and charge high fees for it would not survive in a free market – they would have to be cheaper, and they would have an incentive to raise their game. On the other hand, expensive and under-performing education establishments survive on the public purse for decades.

Countries in which the direct costs to study imposed on students are little or nothing have almost no universities which feature in the top 50 worldwide[12], bar a couple of relatively inexpensive Chinese universities, two Swiss universities and one French university. Whether those particular examples are unusually excellent, prestige-filled national bastions, or a result of preferential public funding (incidentally usually true in cases where direct fees are low or zero, and always true for national treasures) or private donation would require detailed investigation, but the anomalies are so few in number that they don’t matter much to the point I am making here. Switzerland is a particularly special case, with many aspects of the country’s governance being out of the ordinary, hosting a small and wealthy population.

The two most expensive countries to study in internationally (the UK and the USA) exclusively dominate the top 10 universities list. Most of the rest of the top 50 is made up of other expensive universities from the most education-costly countries: Hong Kong, Singapore, Japan, South Korea, Canada, and Australia. It goes back to that old adage: you get what you pay for – but while this holds true on a national basis, it is only true for the individual citizen in a free market system.

The UK is one of the most expensive countries in the world to study in, and for its expense has produced some of the best universities in the world; but tuition fees are set by the government and are pretty much the same across all universities. UK/EU students pay £9,250 (~$11,598) per year, and international students pay between approximately £10,000 (~$12,539) and £40,000 (~$50,158). The cost of lower quality universities is artificially high while the cost of world-class universities relatively low for international students and extremely low for UK/EU students. It is again the less privileged and less advantaged students who are getting ripped off, while the crème de la crème enjoys great value at the top universities. Why should it be that Ravensbourne University London, ranked 131st in the UK[13], costs the same £9,250 per year (2020)[14] as the top university in the country: University of Cambridge?

The inequity caused by price-setting of fees is made more grotesque by the disparate allocation of public money to different universities by the government. The salaries for staff at the best universities are many times higher than for those at less prestigious institutions. The most lucrative remuneration package for the year 2013-2014 went to an individual employee at the University of Oxford who received £690,199 (~$865,475)[15]. The cost of appointing at least 7,554 university employees at £100,000 (~$125,395) for the year, with eight of those being remunerated more than £500,000 (~$626,975) per year, is one borne by all taxpayers which benefits only the elite. It is a delicious irony that such is the outcome of a system where cost uniformity is implemented in the name of equality and fairness. Price-fixing here, as in innumerable other examples, harms the poorly off worst. It would not surprise me if UK politicians, a disproportionate number of whom are Oxbridge graduates (not a criticism in itself), have favourable dealings with the universities they graduated from.

Students at Oxford, Cambridge, University College London, and Imperial College London (all in the top 10 UK universities) can of course expect a greater income than the majority at the expense of less successful British students, but they also pay a very low cost by world standards for the level of education they receive. The number one and number two ranked universities in the world: Massachusetts Institute of Technology and Stanford University’s tuition costs almost £42,000 (~$52,000) per year. The fees for those two universities are a true investment for the paying student, who will reap the dividends later. The salaries for MIT graduates average £88,321 (~$110,762), with an average mid-career salary (10+ years’ experience) of £123,795 (~$155,200), according to PayScale[16]. Similar figures can be found for varying years on MIT’s survey report[17]. These figures seem astronomical to a Briton, but, firstly: be under no illusion that Oxford and Cambridge cost a similar amount if not more per student per year (prepare to have your mind blown by those costs, soon), the only difference is American taxpayers are not expected to subsidise their most privileged members of society to the same scale that the UK does (some state and federal grants exist and can be applied for). Secondly, consider the result of allowing a marketplace of universities to exist in the USA on the cost of tuition in public universities, versus the cost of tuition in price-fixed public institutions of the UK (bar the five private universities in the UK): the average cost for tuition fees and required services* in the USA, according to Statista, is £5,782 (~$7,250) for state residents at public colleges[18], whereas every UK university charges £9,250. A more transparent American source, College Board, shows the average yearly tuition fee for 2019-2020 in a public institution on a 4-year bachelor’s degree course is £6,963 (~$8,730)[19]. There are clearly plenty of affordable universities in the USA bringing their average down from the dizzy sums paid to their many world leading universities. “But Britain wasn’t an expensive place to study before 1998!” the current student might proclaim. On the contrary, it was, but it was all paid for out of general taxation rather than directly by the individual. Now, it is mostly paid for out of general taxation. The cost was, and still is, borne by many people who should not bear it.

* What these services are is not clear and is hidden behind a paywall. It is safe to assume they represent some extra value which is not included in the British tuition-fee-only sum.

MIT Campus - Creator: Jorge Salcedo | Credit: Getty Images/iStockphoto

There is an irony in considering the case of international students: we in the UK expect individuals from a world-wide population, the vast majority of which is poorer than even the poorest Briton, to pay up to £58,038 (~$73,000) per year for tuition at Cambridge[20] (eye-watering, as promised). It is not clear if this is the market rate, or an inflated rate to account for profit lost in preferential policies for EU students. I will anticipate the argument that only the richest foreigners come to the UK to study by breaking down where they actually come from. If we take the top-ten non-EU countries sending students to the UK for 2017-2018 - China, India, USA, Hong Kong, Malaysia, Nigeria, Saudi Arabia, Singapore, Thailand, Canada - a total of 214, 445 students came to the UK to study[21]. 178, 840 of them, 83.4%, are from Asia. Asia is not the wealthiest of regions, but it is well attested that Asian cultures value education highly and that parents, especially from east and south east Asian countries, will accept great personal sacrifice to send their children to good universities around the world. While these people may to some proportion represent wealthier classes than the average in their respective countries, it is not fair to presume them to be wealthy in general. The savings rate in China, for example, is high[22], but their GDP per capita (per head of population) is very low[23]. A person considered "rich" in a poor country will find their spending power does not go nearly as far in a rich country. Low and middle income people are saving large amounts of money to spend on their children's education. Even the wealthiest citizens in a country are often poorer than the poorest of UK citizens. 73.7% of the students (sent to the UK by the aforementioned ten non-EU countries) are from countries with a GDP per capita of less than half that of the UK. That is, about three quarters of international students to the UK come from countries less than half as well-off as the UK. Again, an attempt to escape this reality is to paint the foreign student as part of such an elite class that their origin is not relevant - that every country has its ultra-rich population, and all ultra-rich people are practically equal. This obviously does not hold up, considering the numbers and the proportionality of foreign students from these countries; but, to dispel the notion entirely, observe the infographics below which highlight "low" and "high" income countries[24]:


The starkness of this representation of those living on between $2.01 and $10 per day, and those living on more than $50 per day, serves as an easily digestible antidote to the temptation to brush off international students as privileged. A further 15% of the world's population fall into the "poor" category, living on less than $2 per day. These people are mostly from west and south east Africa, India, China, and south east Asia - the parts of the world sending the majority of non-EU students to the UK to study.

A Political Football

Now, let's take a look at the whole picture through a political lens to appreciate the irony I referred to. The person who identifies with the left purports themselves to be a champion of the poor, the little-people, the plebeians, the downtrodden, the proletariat - take your pick. The same person advocates for a publicly funded education system which makes poor people under the system's jurisdiction poorer still, and benefits the rich. That irony we addressed in the first part of the article - and we find yet more. That same left-leaning person advocates for protecting or increasing foreign aid, naturally, because we ought to help the poorest people in the world. Yet, that same person apparently has no qualms about charging the poorest people in the world the highest tuition fees in the world.

Current UK policy makes it self evident that the left has won the first and second arguments - to publicly fund education and spend vast sums on foreign aid - and it seems to me that they have, in a sense, won the third argument too: invoking "fairness", nationalism, and protectionism, to trump free competition or compassion for the world's poor. A truly level playing field would see UK students paying their own way and competing with worldwide talent. A terrifying prospect for UK voters. Indeed, the playing field is so tilted against the poorest inside the country, and the poorest in the rest of the world, in favour of the rich and especially the domestic rich, that one wonders how such policies still stand in a world of "social justice". Could it be that rich westerners vote to better their own position, at the expense of those less fortunate, under the guise of "fairness" and "equality"? Such is the result of policy driven by intentions rather than by observation of the results. Such is the result of policy decisions made by marrying the tyranny of the majority with emotional arguments. It is such an irony that it is realised on campus in the form this gag: “The voters like the idea that the state pays for student tuition, it is just that the state concerned is the People’s Republic of China, not Scotland.”[34]

A Generational Landscape: The Effect of Created Incentives

Despite the cries to abolish tuition fees, and the warning against betraying students again and again with broken political promises, it remains true is that an individual who has no concept of incurring a cost is not dissuaded enough by that cost to decline to participate. The cost of UK universities is mostly inconsequential to the psyche of the young person. Not only does the idea that “we all pay the same, which means none of us is any worse off than the other and the debt incurred is therefore meaningless” hold water for many people, but the reality of there being no requirement to pay the tuition fees until you earn £19,390 and £26,575 (plans 1 and 2 of the student loan)[35] makes the expense one that many students will never see the cost of. Considering the huge increase in the number of young people going to University, and staying for further study, and the similarly large increase in the number of people in the UK who stay living with their parents well into their 20s and beyond (27% of people aged 20-34 in 2019 live with their parents[25]), we have to recognise that a majority of Gen Z and perhaps close to a majority of Millennials live at their parents’ or the governments’ cost and not their own. It does not seem unreasonable to suggest that there is a serious risk of generations of people with warped financial sensibilities, given their perception of having a free-ride for perhaps a decade or more of their adult life.

The British example, despite being undesirable in its public funding and pricing mechanism, has proven not to dissuade applications to university as was often warned by those opposing tuition fees. Those who want tuition fees abolished still contend that they place too heavy a burden on the poorest in society and therefore reduce the number of university applications from the underprivileged. In reality, there was a 72% increase in the number of young people from poorer backgrounds applying to university between 2006 and 2015[26], and since then the surge has continued - a new record of four in ten young people applying for university was met in 2019[27]. Compare that to 1950, when the overall participation rate in higher education was 3.4%, or in 1970 when it was 8.4%[28]. Since the idea of "a positive role for the state" became popular in the UK, the British government heavily funded higher education with public money from about 1911 onward and made it entirely the taxpayer's burden in 1962. It is because of that policy you will hear people talk of university being "free" between 1962 and 1998.

It might be that the imposition of tuition fees has had no significant effect on a general trend toward a greater number of applications, or it might be that universities are generating more revenue under the new system and therefore have more places to offer. I would wager that both of those suggestions are true. Another contributory explanation, for the UK specifically, is that “good” degrees are easier to come by than they used to be – 28.4% of UK universities in the year 2018/2019 were awarded a first-class honours degree, compared to 12.6% of students in the year 2006/2007[29]. Imperial College London gave out the top marks to over half of its graduates[30]. The apparent drop in difficulty to attain good grades would surely go some way in raising the number of young people who want to go to university, that is until the grades become worthless due to their inflation - not dissimilar to the trend of a monetary inflation. Whatever the combination of reasons, it seems to me that the trend of UK universities is higher attendance, higher attainment on paper, and lower value results. In the USA, on the other hand, university enrolments have been in perpetual decline[31] and for all the right reasons, in my view.

University is not suitable for everyone. One of the best and most widely reported reasons for the decline is that trades, or “blue collar” jobs, are matching and surpassing the salaries of many graduate professions[32]. I have to say, this mirrors the experience I had in the UK. Wages for workers with a high school degree or less rose faster in 2016/2017 than any other band of workers grouped by educational attainment in the USA[33].


The imposition of tuition fees in the UK was a step in the right direction, as it introduces at least some vague idea of fiscal responsibility. However, its actual economic and societal results due to its socialised function in the UK is far from desirable. In the face of lower positions on international rankings, higher costs, grade inflation, and improper allocation of public money, the UK should abolish its stranglehold on education and allow private universities to flourish in a free market system. The US should not follow the path of the UK, and it should get back to its roots as soon as possible, if it is politically possible. The unleashing of a free market system on education would yield better results, at a lower cost, with a more equitable outcome, greater freedom of choice, fostering better financial sensibilities and greater personal responsibility. Universities would finally live and die by the quality and value of the education they provide.


[1] Matthew Smith, Students split on how universities should be funded, YouGov, 9 October 2018, accessed 4th July 2020

[2] Paul Humphreys, Scrap Tuition Fees... Yes or no? Join the debate, 9 March 2016, accessed 4th July 2020

[3] Should the UK abolish university tuition fees? Poll, ISideWith, accessed 4th July 2020

[4] David Blunkett proposed the Teaching and Higher Education Act 1998, on 26th November 1997, accessed 10th July 2020

[5] Claire Crawford, Rowena Crawford, Wenchao Jin, Estimating the public cost of student loans, IFS Report R94, Institute for Fiscal Students, accessed 10th July 2020

[7] Jake Anders, The Link between Household Income, University Applications and University Attendance, The Journal of Applied Public Economics, The Institute for Fiscal Studies, June 2012, accessed 10th July 2020

[8] Kathryn Steven, Jon Dowell, Cathy Jackson, Bruce Guthrie, 13 January 2016, Fair access to medicine? Retrospective analysis of UK medical schools application data 2009-2012 using three measures of socioeconomic status, BMC Medical Education, accessed 10th July 2020

[9] UCAS End of Cycle Report 2019, Chapter 10 Equality in England, accessed 10th July 2020

[10] Dean Lillard and Jennifer Gerner, The Journal of Higher Education, Vol. 70, No. 6 (Nov. - Dec., 1999), pp. 706-730

[11] Gill Wyness, 15 October 2012, Tuition fees: have increases left the UK government and taxpayer better off?

[13] A compilation of The Times and Sunday Times Good University Guide, accessed 11th July 2020

[14] Ravensbourne, Undergraduate tuition fees, accessed 11th July 2020

[15] TaxPayer’s Alliance, Public Sector Rich List – Education, accessed 11th July 2020

[16] Salaries for Massachusetts Institute of Technology (MIT) Graduates, accessed 12th July 2020, accessed 11th July 2020

[17] Graduating Student Survey, MIT Global Education & Career Development, June 2017, accessed 11th July 2020

[18] Average annual charges per student for higher education in public and private institutions in the United States from 1970 to 2019, accessed 11th July 2020

[20] University of Cambridge, Undergraduate Study, International fees and costs, accessed 11th July 2020

[21] UK Council for International Student Affairs, International student statistics: UK higher education, accessed 11th July 2020

[22] OECD Economic Surveys, China, April 2019, accessed 12th July 2020

[23] Worldometer, GDP per Capita, accessed 12th July 2020

[24] Pew Research Center, World Population by Income, 8th July 2015, accessed 12th July 2020

[25] Office for National Statistics, UK, Young adults living with their parents, 2019, accessed 10th July 2020

[26] UCAS, UK application rates by country, region, constituency, sex, age and background, accessed 10th July 2020

[27] UCAS, Almost four in ten young people in England apply to university - a new record, 11th July 2019, accessed 11th July 2020

[28] National Committee of Inquiry into Higher Education (Dearing Report) - Report 6: Widening participation in higher education for students from lower socio-economic groups and students with disabilities - Table 1.1

[29] Higher Education Statistics Agency, progression rates & qualifications, accessed 4th July 2020

[30] Telegraph, Russell Group university awards first to more than half of degrees for first time amid grade inflation concerns, 5th February 2020, accessed 6th July 2020

[31] National Student Clearinghouse, Fall Enrollments Decline For 8th Consecutive Year, 16 December 2019, accessed 11th July 2020

[32] Michael Sasso, Bloomberg, Big Money, No Debt: The Blunt New Pitch for Blue-Collar Workers, 13 April 2019, accessed 4th July 2020

[33] Economic Policy Institute, Wages for workers with a high school degree or less rose the fastest over the last year, 2nd August 2017, accessed 5th July 2020

[34] David Leask, Scotland's ancient universities and their reliance on foreign students, Herald Scotland, accessed 4th July 2020

[35] GOV.UK Student Finance accessed 11th July 2020

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