Australian example underlines risks of removing cap on student numbers in the UK, think tank says

The Higher Education Policy Institute (HEPI), which calls itself "the UK's only independent think tank devoted to higher education", commissioned Australian academic Andrew Norton to consider the impact of Australia's demand-driven higher education system. Norton found that the Australian government underestimated the cost of the new system, although the increase in numbers had no impact on the overall quality of teaching.

HEPI director Nick Hillman said that although removing current restrictions on student numbers was the "logical conclusion" of England's recent higher education reforms, the new policy was "fuzzy" and had been put together too quickly.

"There are uncanny parallels between the English and Australian higher education systems and, when Australia followed a similar path, the results were unexpected," he said. "More students enrolled than were predicted, the costs spiralled and there have been knock-on consequences for the whole higher education debate."

"There are strong arguments for giving applicants and universities more freedom to find the best possible match. But it would be naive to think the policy will be simple to roll out, especially if higher education suffers further cuts after the 2015 election. England rapidly needs to consider the positive and negative lessons from the Australian experience if the policy is to be a success," he said.

As part of last year's Autumn Statement, the chancellor of the exchequer announced that 30,000 additional student places would be made available in England academic year 2014-15 ahead of the removal of the cap entirely by 2015. New loans for these students would be financed by "selling the old student loan book", he said; although subsequent press reports have suggested that any sale will not take place before the 2015 general election. Student places in England are funded through the student loans system, and the government currently limits the number of places that are funded for those who did not achieve the grades ABB or above at A level.

Australia fully introduced a 'demand driven' student funding system for all courses except medicine in 2012, although quotas began to be relaxed from 2009. According to figures published by Norton in his paper, enrolments increased by 25% between 2008 and 2013. New students came from "all socio-economic groups, across country and city, across all university types and the vast majority of disciplines", according to the report; with a substantial increase in the number of students with low prior attainment.

Among some of the benefits of the new system identified by Norton were new opportunities for alternative providers, and a growth in online and off-campus learning. Norton said that there was no evidence that these new courses were of poorer quality. In addition, universities themselves had said that increased competition had "focused their attention on the student experience", he said.

"Despite these successes, the demand-driven system's initial design has led to some problems," Norton said. "By only applying to bachelor degrees, publicly-funded access-to-HE courses that help students with weaker academic preparation are only available in limited numbers. By only applying to public universities, student choices are skewed and low socio-economic status students end up paying full-fees in non-university colleges. The government now proposed to fix these problems, but its reforms are caught up in a controversial policy package that includes deregulation of student charges."

Norton said that the demand-driven system was not itself inherently linked to fee deregulation, giving universities the power to set their own tuition fees. However, loosening restrictions on student numbers before allowing changes to fee structures to go ahead did "lessen some concerns about removing constraints on prices", he said. "Deregulating fees but not the allocation of places is a recipe for inflation, which the English experience in 2012 seems to confirm," he said.

Last month, MPs on the House of Commons Business, Innovation and Skills (BIS) Committee warned of the risks to the current student funding model in England if the student numbers cap was removed. The government currently loses around 45p on every £1 it lends to an English student under the current student loans system; a fact which could result in a £5.5 billion budget gap by 2018-19 without changes to the model if numbers were to increase by the government's estimate of 60,000 new students, the committee said.