Tuesday, 18 November 2014

Tory Higher Education Funding Farce

I never set out to be the blogging equivalent of Mystic Meg, but annoyingly I've had several predictions turn out to be true. Here's one of them. Two years ago, almost to the day, I argued that the new funding regime brought in by the LibDem-supported Conservative government would leave Higher Education with a yawning funding gap. Would you Adam and Eve it, this morning The Indy led with Tuition fees: three quarters of students won't be able to pay off their debt.

I appreciate the intricacies of HE funding is hardly tip-of-the-tongue stuff, so here's a quick overview. Universities are allowed to charge up to £9,000/year course fees. If one has money to spare, these can be paid up front. But the typical arrangement is that the tax payer effectively loans students the fee, which is paid over to the institution. The university gets its dosh, and the student leaves HE with at least £27,000 worth of debt. Then when our graduate is earning over £21k their debt is automatically deducted from one's salary and paid back to the government. Naturally, none of this takes into account debt accrued through student loans and overdraft facilities.

The obvious problem with such a system is that not all students will be in a position to repay. In fact, as the Indy notes, 73% of students are unlikely to have paid the debt off by the time the 30-year write off kicks in. Conceived narrowly, there is then a massive gap between what the government pays in and what it claws back. Meanwhile those fortunate enough to be in a position to begin repayments may feel aggrieved that they have another regular outgoing on a not-terribly-stellar salary, while others won't pay a bean. The policy, therefore, is kaput. Whitehall, we have a problem.

Or do we? The policy was originally designed to reduce the cost to the tax payer and make universities more self-sufficient. Yet it doesn't take a rocket scientist to see that these arrangements were bound to fail. Perhaps that was the intention? Consider what life will be like three years hence with a Conservative or Con-led coalition in charge. Tory front benchers will be able to claim that HE is costing the taxpayer far too much because the government is projected to receive back only a tiny amount it puts in (conveniently forgetting how much HE contributes to the science/technology base, organisation design, service delivery, the knowledge economy etc.). Therefore much more radical action is required - and that will be the wholesale privatisation of the university sector. The American model of extortionate fees fixed to a (from Autumn 2015) free market in HE provision will take the "burden" off the state's hands entirely. The gradual chipping away at the system which begun under Thatcher but - disgracefully - accelerated under Tony Blair's tenure will have been entirely dismantled. Some universities face going to the wall, the range of HE provision is set to contract, and worst of all the chance to study for a degree will be a privilege.

Labour's answer to this - to cap fees at £6,000/year and/or, depending what day of the week it is, a graduate tax does nothing to solve the underlying problem. It's about time we started looking at HE like grown ups. Instead of adopting the narrow measure of taxpayer support, let's talk instead about the net benefits HE has. According to the government themselves, HE contributes to higher productivity, innovation, faster growth, more businesses, and greater tax revenues. Non-market benefits are listed as better health (physical and mental), less crime, greater social cohesion. In other words it has secondary benefits that reduces public expenditure.

Unfortunately, the existing nonsensical policy and the slippery road to privatisation might undo all this. Having debts of around the UK student average of £44k will be like a millstone around young graduates' life chances. They can kiss goodbye to any chance of getting on the housing ladder, for instance.

But it doesn't have to be like this. More investment in HE means more benefits for society as a whole. It's time for Labour to tear up received wisdom on this one and undo the damage it has done to the sector. Tuition fees should be consigned to the dustbin. Who knows, it might encourage enough Labour-leaning young people and their parents in swing seats to turn out for the party next year too.


Chris S said...

We raised this exact point at our last branch meeting. Labour Students pointed out HE is not just first degree, but MA and PhD also and funding for those is almost nonexistent.

The old funding system of direct payment coupled with student grants for living costs was cheaper, more equitable and a lot simpler!

Phil said...


And for the record, postgraduate fees should be funded from general taxation too.