My blog yesterday showed the perils of writing about a White Paper based on the rumours that inevitably precede it. I wrote about the Government allowing expansion of degree places only for institutions charging below £6,000 on average for fees, when in fact the threshold will be £7,500, and there will also be unconstrained recruitment of those students gaining grades of AAB and above at ‘A’ level. But my basic point still holds.

The issue is the danger inherent in the expansion of degree places based on price – the problem being the Government setting a threshold average-fee charge below which institutions are allowed to compete for extra students beyond their ‘core’ allocation. In one sense the policy here is quite clever: at first there will only be 20,000 places in the ‘margin’ for which institutions can compete. Over time, the margin will increase in relation to the core. This will introduce competition slowly, ensuring institutions are not suddenly destabilised by massive fluctuations in student numbers, and that good institutions can grow and bad ones shrink.

But my point from yesterday is still relevant – why is there any price restriction at all on the extra places for which universities compete? Surely, if a student wants to use price as a factor in choosing an institution he or she will do so? But we might see that in fact, the expansion of places will occur on more costly courses at more expensive institutions because students value quality of education over price. Or we might see that students want to study the cheaper courses at an institution whose average costs are higher than £7,500. Why should the Government rig the market against such possibilities? Why should the Government decide how much new provision will cost beyond the bounds of the £9,000 upper limit? How does this fit with institutional autonomy and student choice?

Of course the reason is that the Government wants to manage the costs of student loans, all for the sake of staying within deficit-cutting constraints. But the extra investment needed for loans so that student choice really does drive expansion of places would be minimal compared to much government spending. Also, we might ask if we are setting up a higher education system for the next few decades or the next few years. If the former, the Government’s unnecessary constrictions on choice and institutional autonomy seem short-sighted.

Another issue from the White Paper is the new freedom for all insitutions charging below £6,000 for their fees to gain access to loans for all their students. The Government has quite rightly extended this freedom to institutions that are not HEFCE funded (eg new private providers). But ministers need to be careful. If new entrants cut costs by radically drawing back employee benefits this could really spark a race to the bottom that would destabilise institutions and lower quality in the long-term. The Government needs to ensure this doesn’t happen by regulating how institutions treat their staff within the HE sector, not just what they can charge for fees. Institutional economics are relevant here as well as those of supply and demand.

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