Peter Ainsworth is the Managing Director of EM Applications.

It is how a society educates its young that determines its economic success and the survival of its culture. The misnamed “Teaching Excellence Framework” proposed in a current Green Paper by the Government puts both at risk.

The Green Paper, responses to which will be accepted until 15th January, includes proposals to create a new lead regulator for universities, the “Office for Students” (OfS). It will be given a statutory duty “to promote the interests of students to ensure that the OfS considers issues primarily from the point of view of students, not providers.” The OfS will be headed by a panel, comprised one third of student representatives, which will be empowered to rule on the standard of teaching at an institution. That determination will affect the reputation of a university, the level of fees it can charge, and its financial prospects. This structure is derived from the stated intention to “reshape the higher education landscape to have students at its heart” in order “to reflect the way higher education is now funded by students”.

It is commonplace to think that 30 or so years ago a university education was “free” whereas now students “pay” for their education, turning them into “customers”. In fact, university was never free, students don’t pay anything – it’s graduates who pay as taxpayers – and students are not customers. Treating them as such has had, and will continue to have, negative effects on their qualifications and socialisation.

When tuition fees were introduced in 1998 it was presented as being for the purpose of having students contribute to the cost of their education. The real motivation was to remove the financing of higher education from the government’s balance sheet in order to make it appear that the budget deficit was being reduced. By portraying the monies advanced to the students as “loans” that are “repayable” by graduates, the applicable accounting standards allow the government to avoid including the funding amounts in measures of state borrowing.

Yet these are not “loans” as any ordinary person would understand them. Repayments are proportional to the amount a graduate earns in excess of a certain level – exactly the same way income tax is charged. All that has actually changed is that the obligation to repay the cost of a university education is charged as a distinct tax item rather than being hidden within general taxation – an improvement in transparency but nothing more. The “old way” was that the government paid the universities up front, borrowing in the financial markets to raise the funds. When the students graduated, they, as graduates, paid taxes roughly in proportion to their earnings and part of those taxes went to repay the government’s borrowing. The “new way” is exactly the same save that a part of the tax bill is now explicitly hypothecated as a “Student Loan Repayment”.

So the idea that “higher education is now funded by students” is wrong. Taxpayers foot the bill, with most tax – whether characterised as a “Student Loan Repayment” or not – being paid by graduates on above average incomes, as has always been the case. Students pay nothing when at university and nothing as graduates if their income never rises above the hurdle level.

That, in itself, is not harmful. Indeed, as a university education is an investment with an uncertain outcome, it’s appropriate for the system to be paid for after the investment has completed and in proportion to the benefits gained from the investment. Milton Friedman proposed this in 1962. But because the language used has been of “students paying” and of their being an obligation to repay a “loan”, the second fallacy – that students are customers – has taken root.

For this to be true a higher education would need to be a consumption good with an immediate payoff whereas a university education is an investment in the future. The sole obligation of a customer is to pay for the good or service received. A student has a greater duty – to actively engage and work hard to acquire knowledge and skills. Treating students as customers is not just incorrect but also damaging as it encourages the idea that the student is just a passive recipient of an “education” and diminishes their own sense of responsibility for acquiring knowledge.

Its deleterious effects include grade inflation – as “customers” prefer higher marks – whereby over 70 per cent of graduates now get a First Class or 2:1 degree, compared with just 47 per cent in the mid-1990s. Courses that suit the student as client but not the graduate as employee contribute to at least 20 per cent of graduates not working in high skilled employment even three and a half years after graduation, with most employers of STEM graduates saying there is a shortage of high quality applicants.

In surveys, these student customers say that one of their priorities while at university is: “having more hours of teaching”.  This is symptomatic of customer-centric thinking – believing that the university is there to spoon-feed them rather than direct them in their own journey of self-advancement. Unfortunately, if the objective is, as the Green Paper claims, to produce “highly skilled graduates who are ready to enter the workforce”, encouraging students to think that more handholding will help them will have the opposite effect. Employers do not want staff that need constant direction and oversight. The best employee – the one most “ready to enter the workforce” – is the one who can act on their own initiative and take it upon themselves to learn what they need to know to carry out a requested task.

Indeed, after the event, students understand this themselves. In the HEPI student experience survey, 36 per cent admitted that the main reason that their experience of a university education had not met their expectations was that: “I haven’t put in enough effort myself”. Indulging the student as a customer does not help the graduate.

The purpose of a university education goes beyond the narrow demands of the jobs market. The public benefit of the higher education system lies in the socialisation of students. Mixing with other students of different backgrounds and outlooks should breed tolerance. Coaching them in the scholarly method of dialectical reasoning – a discourse between two or more people holding different points of view – should open their minds and enable them to advance the state of knowledge.

Both of these traits require effort to develop. It is easier to limit one’s social circle to a clique of those with a similar background or opinions and there is less exertion involved in refusing to consider an alternative perspective than arguing against it. The student as investor in their own human capital will be motivated to expose themselves to unfamiliar people and uncomfortable ideas, better able to decide the merit of new and competing concepts later in life; the student as customer will be complacent about facing up to these challenges. As Joanna Williams writes in her book: “in giving students consumer status, lecturers are encouraged to avoid intellectually or emotionally challenging content so as not to upset student consumers”.

Resistance to alternative points of view by students’ unions has become so common that the current affairs magazine, Spiked, was driven to create its “Free Speech University Rankings” to track the phenomena. Disturbingly it showed that the majority of universities now either actively ban certain ideas or intervene to limit free speech.

While treating students as customers has effects which negate the purpose of a university education, it would be equally wrong to leave all to the discretion of the academics, who themselves are responsible for many poorly designed and taught courses and for many of the restrictions on free speech. To its credit the Green Paper suggests using HMRC data on graduate employment outcomes as a metric for assessing teaching quality.

This is to be encouraged. The measure is quantitative rather than qualitative and can be adjusted to take account of subject and social background. It offers a pure measure of value added that will align the true long-term interests of students and academics. If used in isolation it would reduce bureaucracy, end the damaging effects of student satisfaction surveys and allow universities to manage their affairs consistent with what they can prove is in the best interests of their charges.

The so-called “Teaching Excellence Framework” has resulted from the Government’s propagation of two economic fallacies – that universities are funded by students and that students pay for their education – which has led to the erroneous notion that students are customers. The new regulator should instead be called the “Office for Graduates” to acknowledge that it’s graduates who pay and graduates, once in the workforce, who best understand what they needed from university. Student satisfaction data should play no more than a marginal part in the metrics used to evaluate universities and the dominant measure should be the HMRC data on employment outcomes.

It is essential that reforms to university funding and regulation recognise that students are not customers but investors in their own skills. If treated as the former, many students will be poorly trained for the workforce and antagonistic towards western liberal values, as the latter society will be in good hands.