Thursday, May 26, 2011

LSE in the news again: what message does £500 off send?

The London School of Economics is now the first "Russell Group" British university to set fees from 2012 at less than the permissible maximum, £9000. LSE has opted for fees at £8,500 -- of course, this is but £500 under the permissible maximum and a near trebling of the approximately £3,200 fees set at present.

The BBC reports that the LSE has said that it wanted to send "a clear message that LSE welcomes students from all backgrounds". Virtually all other UK universities opted for fees of £500 more.

The LSE is correct to say that it is sending a clear message, but there is reason to doubt its stated reason. It may be doubtful that saving a mere £500 per year will genuinely make much of a difference. Students need not pay fees upfront anyway and only pay upon earning £21,000 after graduating.

I think there is a different message being sent and perhaps not entirely unrelated to some unfavourable press coverage in recent weeks. The idea might be that charging a bit less would grab the university some favourable headlines. However, I doubt that government ministers will be too impressed. After all, they had been hoping fees would not (on average) exceed £7000-7500.

The danger is that this gamble may backfire. If the government sticks to its guns, then it has threatened to claw back monies elsewhere to cover the teaching grant: they say there is only a limited pot available to fund higher education. Thus, universities charging higher fees might still receive these fees, but they would face bigger than expected cuts elsewhere: higher fees might mean less (even much less) than expected income. The incentive for universities would be to charge what they can: if everything holds constant, then they will be better off; if there are clawbacks elsewhere, then they will be better off than if they charged a bit less in fees.

So LSE is to be commended fro bucking the trend, but it really hasn't bucked it by too much. A clear public message is being sent by this announcement, but I suspect it is a bit different than that stated.

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