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Stand by for a cut-price adult education course

After a decade of neglect by policy-makers, fees are back in vogue for adult learning. This month's announcement on the learning and skills budget from Bill Rammell, the minister for further and higher education, is expected to re-emphasise their importance.

The message from government on adult funding is clear. After a seven-year increase in public spending, expect restraint. The Learning and Skills Council budget may rise but will be directed to the four priorities: sixth-formers, apprentices, skills for life and the employer training programme.

Many of the problems with the new fee policy have been well rehearsed. The years in which government encouraged colleges to widen participation have resulted in a culture of low fees and, in a few cases, no fees. Reversing this implies steep increases for people like access-course students and pensioners.

There is confusion between the message of higher fees and the message of free training in the National Employer Training Programme. Adult learners will be expected to pay their higher fees up front. Meanwhile, the Government lends up to pound;3,000 a year to university students to cover their fees until after they finish.

Whatever is said today by the minister, these issues remain. Colleges will hopefully work with government to address them. The current student finance campaign in higher education provides an interesting model with all parts of the system working together to talk up the value of university and to encourage potential students to apply. A similar campaign may be needed in the world of adult learning.

Before it can happen, some building blocks will need to be in place. First, the Government could not launch a student finance campaign if the Learning and Skills Council continues to cut financial support for adult learners as it did in 2005-6. And, second, it may be time for ministers to accentuate the positive messages about colleges rather than focus on the small number of negatives. Without this type of change, the policy to drive up fees will turn into a cut in funding.

That said, many colleges will do what they have always done and respond with determination. This could be interesting because the economics of colleges point in the direction of variable pricing. Like airlines and bus companies, colleges have a high proportion of fixed costs tied up in their plant and their staff. National Express has its depots, its buses and its drivers; colleges have their buildings, their learning resources and their staff. These costs are fixed, whether there are 10 or 20 people in the bus.

Likewise, it doesn't cost a college much to add one extra student to the class. These are the economics which persuaded the travel industry to offer cheap fares to stand-by passengers. Similarly, colleges occasionally cut their fees late in the day to fill up classes.

It doesn't take long for cut-price fares to lead to bankruptcy. This is where variable pricing comes in. Better to give away the cheap seats to those who sign up early and charge more to those who book at the last minute.

Even better, find a way to distinguish between the prices charged to off-peak customers - happy-hour drinkers, for example - and those who can only come when it's really busy. Soon enough, we're in the territory of yield management. Hotel chains and low-cost airlines use sophisticated technology to maximise their income while lowering their prices; health clubs take a different, more personal, approach. There are no price lists.

Every customer is offered a special deal after a chat with an adviser.

Colleges are a long way from either scenario but the economics are the same. A generation of customers brought up on Ryanair and Primark likes a bargain and, increasingly, understands what they need to do to get one. A few colleges already offer early-bird discounts, 2-for-1 offers on courses, and different fees depending on whether the course takes place in the early evening or morning. If survival means fee income, then more will follow suit.

Some people are horrified by this sort of language. A former colleague told me I was treating "education as a commodity". Perhaps it is just that.

Variable fees could also make life more difficult for policymakers and officials. A less transparent fee policy is less easy for outsiders to control and monitor. So be it. If fees are needed, it's a bit rich to over-specify the terms.

Nevertheless, it will be interesting to watch the political reaction to changes.

It leaves us with one of the following scenarios for the financial future of adult learning: either fees don't work, learners and employers don't pay and we're heading for the bleak prospect of cuts; or they do, but with more flexibility, less transparency and less predictability; or, finally, government may reconsider its policy and go back to find the future.

Julian Gravatt is director of funding and development for the Association of Colleges

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