Is there a Funding Gap in Higher Education?

Another November, another student anti-fees protest. Sadly, it attracted neither the numbers nor the media interest of times passed. The awful weather did its part to dampen turn out (and the marchers). The heavy policing of previous demonstrations wouldn't have helped, nor that the LibDem-supported Tory fee regime is now an accomplished fact. It is, after all, harder to undo something than stop it in the first place.

But there is something incredibly confusing about the changes this government has made to tuition fees. Under the previous regime, you paid upfront directly to your place of study. While the government continued to subsidise the major proportion of course costs, monies from the student at least went to the institution. As some folk say of the Thatcher years, you might not have liked it, but you knew where you stood.

As everyone knows, universities can now charge up to £9,000/year tuition. As per the incompetence we've come to expect, this government thought only a small minority would levy the full whack. Little did they realise that the price of a degree would reflect on the status of the university, and so all with pretensions of being a top tier institution had no choice but to list courses at maximum prices. Those the next step down could not risk their prestige and future market positions by undercutting them too far either, and so you have many New Universities charging in excess of £7,500. This unpleasant surprise wasn't the first time the Tories had designed a policy with scant knowledge of what they were legislating for, and it won't the last either.

One welcome change the government did was to adopt the student loan repayment scheme for fee payments, and put in a higher earnings threshold from which repayment installments kick in. This, however, is where the problem begins.

The government are monomaniacal about clearing the deficit, despite only managing to cut it by 2%. So while it is used to justify every single cut, they make such a hash of it that hidden costs and unforeseen consequences gobble up a huge proportion of the savings. This stupidity shows itself up here. The government are cutting the contribution taxpayers' cash makes to universities from £6.6bn last year to £3.7bn by 2014-15. The total share of university funding from the public purse will fall to around 15%, the lowest since the *1890s*.

The funding gap will be made up by tuition fee payments. According to the same Telegraph article, this will account for around the 47% of university funding by the next general election. BIS suggest the sector's income as a whole will rise by 10%.

The problem, as I see it, is that the government has made a fatal assumption. Previous tuition fee payments went directly into the system. Under the new arrangements, the taxpayer will lend universities the fees, which the government will later ask back when a graduate is earning over £21k. However, the graduate job market isn't in rude health, nor is there any guarantee that sufficient numbers will be earning over the threshold for repayments to start. The economy could pick up between now and 2015, but we will need strong, sustained growth to provide the requisite numbers of sufficiently remunerated graduate jobs. Without that, a gap will very quickly open between what the government puts in and what repayments it receives. And there very quickly goes its spending targets for HE.

I'm no education policy wonk, but surely a government underling has spotted this problem. It could be the Tories have cooked the books so it merely looks like public funding will fall over time. Or that non-repayment has been factored in, and the figures above are based on the percentage of instalments likely to make their way back to the exchequer.

Am I being dumb and missing something obvious? I don't know. Do you?

Photo credit: Marc Fairhurst