04: There are many arguments that suggest that universities should be financed through charging fees to their students. Extract C states that ‘fee income provides the best way of financing the growth of higher education’. One of the most compelling arguments for Universities charging fee’s is the fact that going to university can be considered an investment. The data shown in extract C shows that the average graduate earns £160,000 more than an average non-graduate over a lifetime. As long as the fee’s for the university are less than the average £160,000, which nearly all universities are, then the investment of paying universities fees is profitable for the consumer. There is also an arguments that if universities were financed through the government then there would be significant opportunity costs, such as health care. However if a university charges fee’s and does not receive government subsidies there is no opportunity cost inflicted on the government. However by having fee paying universities you restrict that amount of people who consume the service. It could be argued that only the rich would benefit from the universities as Universities would be income elastic and therefore only people with money would be able to afford the fee’s. This could increase inequality and further the wealth disparity as the rich would get richer (because of the university education) and the poor would stay poor. This would lead to the decrease in the distribution of income and increase elitism leading to a misallocation of resources.

People argue that this idea of fee paying universities only being utilized by the rich, could be resolved by the government financing universities. As you can see from my graph in question 03: University education has positive externalities which are not taken into account by a free markets and are therefore are unconsumed. If universities were financed through the government then you would dramatically increase the amount of consumption of Universities as it has a positive elasticity of demand. Due the increase of consumption, society would benefit from the positive externalities that education has which could therefore increase economic growth in the long run. The general public pay income tax and VAT and so many people think that it is only right that the government should finance university education, plus the government benefit from the economic growth that university education could cause. By government financing university education you open up the amount of people who can utilize the resources that universities have to offer, it is not only the rich elite who would benefit and therefore it could reduce the social inequality so apparently seen in our society. However there is also an argument against this. It is commonly thought that the people who get into the top universities are the people with money, this is due to the fact that they have been able to get a good, and arguably, better private school education. This means that people on low incomes, taxes are being spent to provide education to the elite people with money. People think that this is unfair as the rich have the fund to be able to pay for the universities themselves. People on low incomes might think that they would rather there taxes be spent on welfare and health care, rather than on education for people who could afford to pay for it themselves.

In Conclusion, due to unequal distribution of income, it is very hard to be able to decide whether or not to finance universities through fee’s or through government subsidy. Although there are other ways of financing universities, such as selling their research and receiving private funding from rich individuals, these do not provide enough profitable incentive for a market to keep on allocating resources to universities. This would therefore reduce the amount of universities provided. It all seems to boil down to how much money people have. On the one hand, if universities charge tuition fee’s then the government would have more money to spend on other things, but then again only the rich would be able to afford to go. On the other hand if the government subsidised tuition fees then more people would be able to go, but people would deem it unfair and there would be a large opportunity cost. What I would propose and what meets in the middle of these two conflicting suggestions, is a subsidy based on the income they receive. This would mean that the rich pay more and the poor pay less. This would be the only fair way that i believe this dilemma could be resolved.