The Telegraph
Since 1st March, 1999
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- State financing of higher education has become illogical

The author is an economist at the Indian Statistical Institute, New Delhi

Sometime ago, The Telegraph reported that the chief minister had declared that the state government would not invest any further resources in setting up undergraduate colleges in the state. Speaking at a meeting of the All-Bengal Teachers Association, he went on to state what would have been heresy only a few years ago: “We seek participation from the private sector in this segment.” Buddhadeb Bhattacharjee also went on to make a statement which was tantamount to a drastic reversal of the declared policy of practically all major political parties in India — that only those students coming from families with incomes below the poverty line would get free education from school up to university.

The first step towards raising fees in institutions offering higher education has been taken, with the state government announcing that the monthly fee for medical colleges would be raised to Rs 1,000 from the next academic session. Not surprisingly, this announcement has generated protests from practically everyone, and it remains to be seen whether the government will actually be able to implement the new policy.

Coincidentally, the issue of raising university fees is currently also one of the most controversial issues in Britain. University fees for “Home” students (that is, students from the United Kingdom and European Union countries) is currently only £ 1,100 — even this fee is not paid by roughly half the students. The government pays each university roughly £ 4,000 per student per year, asking universities to raise their own resources to cover costs which are substantially higher than the sum received from the government. That is why the most well off British universities are now those which have a large foreign enrolment since foreign students pay fees which are several times the fees paid by Home students.

Universities are also starting special courses which are designated “self-financing”, with fees as high as £ 10,000 to make ends meet. However, there are only limited options as far as “special” courses are concerned, and almost all universities are struggling to balance budgets.

Practically everyone agrees that British higher education is faced with a crisis. The expenditure per student has declined steadily. The inevitable consequence has been a steep rise in student-teacher ratios, deterioration in university buildings, facilities and equipment, and a fall in university remuneration relative to salaries in other public sector jobs — of course, salaries in the private sector are astronomical compared to what university professors earn.

Higher education in West Bengal (indeed in all states in India) must be passing through a similar crisis. To set things in the proper perspective, consider the following figures. The state government spends Rs 1.5 lakh over five years to turn out a doctor, but recovers only Rs 1,500 from each student. Of course the shortfall in degree colleges is not so large since expenditure per student is much smaller. Nevertheless, against a backdrop of burgeoning expenditure and stagnant fees (which have typically not been changed since independence), all institutions of higher education are living a precarious existence. The financial crisis of universities is magnified by the fact that state governments themselves are practically bankrupt.

Unlike in West Bengal, it is the universities in Britain which have been clamouring for a substantial increase in fees — in current jargon, universities are seeking permission to levy “top-up” fees. Tony Blair and his government are faced with an embarrassingly small menu of choices.

University fees cannot be raised during the life of this parliament since the Labour Party had promised not to raise university fees as part of its election manifesto. On the other hand, the government’s financial situation will not allow it to dole out higher grants to the universities. It is not clear what option the government will choose. Meanwhile, newspapers and magazines have been engaged in a lively debate on this issue.

This would have become a “non-issue” if the state had adequate funds. One proposal, which has been mooted in Britain to increase government revenues, is a “graduate tax” — a special tax levied solely on graduates to at least partially recover the costs of higher education. This has the merit that only the actual beneficiaries pay for the cost of education, and that too through future earnings. Unfortunately, this proposal does not seem practical in India. Which state will keep the revenue from such a tax on a student working in Maharashtra but educated in Bengal'

So, who should pay for higher education' To many, even asking this question is sacrilegious. “The state of course” is an immediate retort. However, this ignores the fact that the “state” represents the interests of everyone in the society. Every rupee that the state spends on subsidizing higher education is a rupee less that it can spend on a primary health centre in rural Bengal. And surely a landless labourer’s health deserves priority over the middle-class Bengali’s need for higher education'

The case for state financing of higher education becomes even weaker when it is recognized that the benefits of higher education are essentially reaped by the individual acquiring higher education — the future earnings of the individual typically constitute an adequate return for the gross investment spent in obtaining higher education. This is in sharp contrast to the gains from primary education, which have a social value exceeding the narrow private benefits accruing to individual beneficiaries. For instance, there is overwhelming evidence that literate mothers reduce the chances of epidemics caused by cho-lera and dysentery, perhaps because it is easier to inculcate in them the importance of elementary hygiene.

Proponents of state financing of higher education also argue that the poor simply cannot afford higher education if they have to pay for it. Of course, this is almost tautological. But, the relevant question is whether universal subsidization of higher education is the best method for promoting the interests of the poor.

There are two issues here. First, a large proportion of students who acquire higher education actually come from relatively well-off families. It seems extremely inefficient to promote the interests of say 30 poor students by providing free education to 100 students. Second, the state has other instruments at its disposal. For instance, it can offer scholarships to the needy or provide loans at highly subsidized rates of interest. Of course, it will be difficult to target loans and scholarships perfectly, and there will be leakages. But, universal subsidization of education constitutes a leakage which is several times larger and grossly unfair. As a minister in the Blair government has remarked, “Why should the dustman subsidize the doctor'”

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