The no-longer public university

The notion of public-private partnerships is becoming less easy to define in higher education. What people have long regarded as a public body – universities, for example – turns out to be anything but.

In England, the well-established higher education institutions are nearly all private or ‘quasi-private’ in their corporate forms, while the proliferating new private providers help underline an increasing lack of ‘publicness’ in the higher education sector. ‘Private-private’ partnerships would be a better description.

Nor is this an entirely recent phenomenon. In England, universities have long enjoyed freedoms from the state as institutions and this is captured in legal charters of incorporation. The pre-1992 universities have the legal status of a person: some are companies limited by guarantee, while Oxford and Cambridge essentially are self-governing members’ associations.

The post-1992 universities, however, were in public ownership until the 1988 Education Act, but now have quasi-public status. They do not currently have full rights of private ownership associated with independent companies and are unable, as exempt charities, to dissolve themselves. Nonetheless, they act as independent corporate bodies with self-responsibility for their respective futures.

A possible reform in future legislation in England would be to give higher education corporations the power to dissolve themselves or change to an alternative form (for example, a company limited by shares or a PLC), and to take the Privy Council out of the equation for chartered corporations – the older entities – who wish to alter their constitutions.

Such moves would not only extinguish most of the remaining differences in corporate form between the public and private sectors in higher education in England, but also allow, for example, takeovers or mergers between for-profit commercial companies and traditional universities.

Charitable status

The established universities and colleges (including not-for-profit private ones) generally enjoy charitable status and its concomitant tax advantages. However, it prevents the raising of equity investment by issuing shares. Consequently, some institutions may in future wish to drop charitable status (especially as some of the tax advantages over non-charitable entities are being eliminated by the Coalition government). Increasingly, universities continue to corporatise along the lines of those in the private sector.

As well as converging around similar organisational models, universities of all kinds are becoming subject to common funding and regulatory models. Current reforms in England are making access to student loans and the payment of tuition fees the prime source of public funding support for universities and colleges, although some operational grants remain.

Although regulation has yet to keep up to date, for the most part both traditional and so-called ‘alternative’ or new providers are being externally governed by common rules on degree-awarding powers, university title and quality assurance monitoring, and this commonality will certainly increase in coming years.

Accountability

The notion of public accountability, especially following the global triumph of transparency as a regulatory norm, appears to operate in similar ways in higher education, irrespective of whether an organisation is notionally public or private. That is, institutions are subject to legal, political and market notions of accountability, as are organisations in other sectors.

In addition to the rendering of account to elected governments, and being subject to the judgements of the courts, market-enhancing policy reformers also are inclined to view accountability as spontaneously generated through the disciplines arising from a multitude of well-informed individual consumer decisions found in competitive markets.

While commercial objectives of effectiveness, entrepreneurialism and efficiency are commonplace for universities, for some these mixed ‘accountability regimes’ should also allow public interest goals to be imposed (or contracted on) private actors.

So, for example, in return for their students gaining access to publicly-backed student finance, universities (as private entities) are required to promote social and ‘fair’ access in their student recruitment policies and to provide students with access to independent arbitration.

Risk tools and techniques

As part of the increased privatisation of higher education, we find the import of private sector models into governance and external quality assurance arrangements, too, especially the utilisation of risk tools and techniques.

Risk management and risk-based regulation for internal control systems, and for externally assuring quality and standards, is now a major characteristic of both so-called public and private entities in higher education. Risk tools and approaches have helped form regulatory regimes across a range of sectors for two and more decades (in the UK, it is a statutory obligation for regulators to adopt risk frameworks).

In recent years, however, governments in Australia and the UK have seen such frameworks as appropriate for higher education as well. By encouraging risk tolerance where appropriate, such models contain inherent tensions between lightening the regulatory load on ‘trusted’ organisations and providing incentives for more enterprise and innovation on the one hand, and yet wanting to ensure that taxpayers and students receive affirmation that the courses taken reach expected standards on the other.

The ‘risk university’

Universities and colleges, like many businesses in the modern world, operate with complex external environments and face numerous regulatory and risk challenges. ‘Private’ or ‘public’ they are all becoming ‘risk organisations’ – with risk seen both as a source of potential innovation and added value, while also potentially generating hazards and harms, not least to the reputation of the university or business.

The risk university and college appears more pressurised by external risks than ever before: legal, funding, ethical, security and media (including social media) – but particularly by extending processes of external evaluation.

This includes rankings, external quality assurance and professional accreditation. But internally, too, risks abound – from colleagues, professional groups, trade unions, local managers and so on. Many of these processes have the potential to have a huge impact on a university’s reputation if anything goes wrong.

Consequently, these growing external constraints (and potential risks) on all higher education entities – which, nonetheless, positively are aimed at improving university accountability, not least in the eyes of the public – have worried some governments.

In the UK, for example, there is growing governmental concern that the emerging ‘risk university’ is the ‘risk averse university’. Ministers fear that institutions will become increasingly reluctant to take any risks at all, even those carefully undertaken with managed entrepreneurialism in mind. Innovation and global competitiveness could suffer.

The aim of risk-based regulation in higher education in England is to allow regulation to be proportionate to the problem or perceived risk in hand and, if at all possible, it should reduce associated bureaucratic costs and ‘red tape' for both regulator and the regulated.

It does so by focusing regulatory attention predominantly on those parts of the sector that are perceived to be riskier than others. The aim is to control administrative power (particularly that of the external regulator and its propensity to pass unnecessary ‘red tape’ on to those being assured) and as a consequence to release entrepreneurial and creative talents in the institutions.

This implies heightened forms of managed risk-taking and being aware that occasionally ‘accidents’ in regulatory terms will happen. For both established and newer providers, regulators and external quality assurers begin by identifying the risks that they are seeking to manage, not the rules that they have to enforce.

This should help reduce the tendency for assurers to operate with traditional input-based models that seem ill-suited to be applied to the new private providers with their often more focused business models.

The scope for new and older higher education entities and private suppliers of services to them to collaborate is still large, however. Perhaps nowhere is this more important than in the new digital revolution in higher education. Effective and efficient learning technology platforms require the resources of both providers and commercial suppliers in the pursuit of cost-effectiveness, productivity and quality enhancement.

Nonetheless, and finally, we need to ensure that the ‘public good' benefits of the new digitalised HE generated by online learning systems become protected and are not simply accessed through the pay-walls of proprietorial company systems in pursuit only of commercially profitable applications.

Not-for-profit collaborative forms and entities will be needed to ensure that the massive amounts of data on how students learn that will become widely available in the new digital higher education economy, help create better adaptive-learning systems for the benefit of the higher education sector as a whole.

* Roger King is a visiting professor at the University of Bath, a research associate at the London School of Economics, and a member of the Higher Education Commission. He spoke on “Public Private Partnerships: Regulatory and policy issues” at the Observatory on Borderless Higher Education, or OBHE, Conference on Public-Private Partnerships held at Regent’s University London, last Wednesday and Thursday.