23 May 2013

Higher Education Funding in England - Do the alternatives add-up ?

Amid questions about the sustainability of the Coalition Government’s reforms to higher education funding in England, a new report from the university think-tank million+ and London Economics, Higher Education Funding in England: Do the alternatives add up? reviews the costs and benefits of two alternative funding proposals that have been put forward. The first involves lowering fees to £6,000 and the second involves a new graduate tax system in which no fees would be levied and graduates would contribute to the costs of higher education based on a stepped proportion of their earnings. 

Few details have emerged about these alternative systems but the report adopts two assumptions: first, that any alternative system should be cost neutral to the Treasury in economic terms and second, that universities should be no worse off. Under the Government’s 2012 reforms, universities receive the majority of funds for teaching from student loans and can levy fees of £9,000 per year.

Pam Tatlow, Chief Executive of the university think-tank million+, said: ‘Questions remain about the sustainability of the Coalition’s higher education reforms and their impact on participation but few details have emerged about the alternatives. Higher education funding has been the subject of debate for more than a decade and it is vital that any alternative proposals add-up.

‘With London Economics, we have reviewed the costs and benefits of the two alternative funding systems proposed to date - lowering fees to £6000 and a graduate tax  - and compared them to the 2012 system. The modelling shows that these two alternatives could be introduced at no additional cost to the Treasury while also preserving the unit of resource in universities.

‘However, while graduates would leave university with lower levels of debt they would not necessarily contribute less towards the costs of higher education. This could change if different assumptions were adopted’.

Professor Michael Gunn, Vice-Chancellor of Staffordshire University and Chair of million+, said: ‘The UK spends less on higher education than many competitor nations. It is crucial that the unit of resource in universities is maintained and there are strong economic and societal arguments for funding to be increased, even in times of austerity. Any proposals to alter the higher education funding system should be based on the sort of comprehensive modelling outlined in this report.

‘We all have a responsibility to consider how any funding system impacts on participation. This is particularly true for political parties. Any discussion about alternative funding systems should also trigger a wider debate about the role that universities can play in delivering our aspirations as a nation’.

Dr Gavan Conlon, Partner at London Economics, said: ‘Alternative systems of funding could be introduced at no additional economic cost but current Treasury accounting rules mean that a graduate tax option would appear to cost more even though it is cost neutral for the Exchequer compared to the 2012 system. There is a strong case for transparency so that taxpayers get a more accurate picture of the comparative costs of different higher education funding systems’.


Notes to Editors

For interviews with Pam Tatlow or Professor Michael Gunn please contact Pam Tatlow on 07795 645241

  1. million+ is a leading university think-tank, working to solve the complex problems in higher education.
  2. London Economics is one of Europe’s leading specialist economics and policy consultancies, and undertakes work for a range of public and private clients, including Government
  3. The report is the third in the million+ / London Economics Behind the Headlines pamphlet series reviewing higher education funding.
  4. Alternative funding systems have been proposed by different political parties. The Labour Party has said that it would introduce fees of £6,000 if it was currently in government and it has also been reported that the Liberal-Democrats have examined this option as part of a policy review. Previously Labour’s leader Ed Miliband has spoken in favour of a graduate tax and the 2010 Liberal-Democrat Conference voted to explore this system. Neither Party has published any details about how these alternatives might be progressed.