It looks as if many universities will charge the maximum £9000 tuition fee, to the annoyance of David Willetts.
Let’s unbundle this. For a humanities student, teaching comprises lectures, tutorials and reading. What should these cost?
The LSE library charges business users £180 a year (five cards cost £750 + VAT), albeit for limited access rights. It’s unlikely to be subsidizing such users, but let’s err on the side of generosity and price a year’s library use at £300.
Let’s also assume that teachers charge £50 an hour for tutorials and lectures, so someone teaching 25 hours a week earns £37,500 a year. Then a student buying the equivalent of four hours of one-on-one time a week - say, two one-to-one tutorials plus a contribution to lecture fees - would spend £6000 a year.
Combine this with library charges and we have a £6300 fee.
So, where does £9000 come from? Clearly, there are overheads such as the maintenance of wine cellars buildings and the cost of support staff. And it’s possible that humanities students will subsidize more expensive science tuition. But it’s not obvious why a student would want to pay for such things - or, indeed, why he should want to deal with the universities, rather than contract with teachers directly.
I suspect instead that what’s going on is that universities aren’t charging for merely for education at all. They are also acting like nightclub bouncers, limiting access to a prestigious good.
Universities offer more than tuition. They offer credentials, signals. And it’s these that they are charging for.
But they might be mistaken. A lot of the credentials you get from Oxford come simply when you get the acceptance letter, so you don’t need to pay £9000 a year to signal to future employers that you’re good enough to get to Oxford. What’s more, the benefit of this signal is short-lived anyway. Evidence from the US (pdf) (pdf) and Israel (pdf) shows that able people end up earning much the same, whether they go to a prestigious university or not. As Alan Krueger says:
Your own motivation, ambition and talents will determine your success more than the college name on your diploma.
This raises an interesting possibility. If potential students believe this, then - having got their acceptance letter from a “top” university, they would (in a free market*) shop around for a cheaper one. “Top” universities will then no longer automatically get the best students, unless they drop their fees. Which raises the question, of whether they will remain “top” at all.
My point here is one that should have been learned from the experience of top-flight football over the last 20 years. When you start charging a high price for something, you change both the product and the customers. And not necessarily for the better.
* Which we don't have, as students are limited in the options of university they can express. Students are only customers in the sense of handing over money - not in the sense of having free choices.