CEO Blog: Kicking the fees debate into touch is a missed opportunity

03 Jul 2017

Damian Green’s suggestion on Sky News that the Conservatives’ approach to student tuition fees might warrant a national debate has seemingly been squashed by Theresa May. This is a missed opportunity that is unlikely to serve the Conservative Party or the country well in the long run.

Unsurprisingly, Michael Gove (now Tory Environment Secretary), and Vince Cable (soon to be crowned leader of the Liberal-Democrats), both architects of the £9k fees system as coalition government Ministers, have been quick to assert how unfair it would be if all taxpayers paid the tuition fees of those who progress to university.

The Gove-Cable line ignores the fact that all taxpayers already pick up the tab for the write-off of the increasing amounts of student loans that graduates have little or no chance of re-paying in full over the 30-year repayment period. It is this ‘write-off’ and the fact that repayments are linked to earnings which lead these politicians and many economists to describe the current fees and funding system as ‘progressive.’

This is not how students, graduates, their families and many voters apparently see it. Contrary to the popular view, it is not how all university Vice-Chancellors see it either. There are real worries that the fees and funding system is not sustainable long-term and is holding back those who want to study for a degree later in life. Conservatives may be surprised to learn that business organisations are also voicing concerns. After all, this is a system that since 2012 has resulted in plummeting numbers of part-time and mature students and made it more challenging for employers to financially support those in the workforce whose further study would add value to their businesses as well as to the lives and careers of the individuals concerned.

The idea that free tuition is a middle-class subsidy, as argued by those who support the retention of £9k fees, is somewhat ironic given the outcomes of the current system. Unsurprisingly students from the poorest households accrue much higher student loans than their richer peers, an outcome made much worse because of the government’s decision to replace maintenance grants with loans. Adding to this inequity, the fee and maintenance loans of all students and graduates increase with interest rates of at least 3% per annum – a rate that will increase to a staggering and usurious 6.1% from September 2017.

Politicians in favour of the status quo would do well to remember that it is not just at university where students are picking up more of the tab. In England, those aged 19 and over who want to study for a level 3 qualification have no option but to take out a student loan unless they can afford to pay course fees upfront.

Notwithstanding all the grand-standing, this is really about government accounting practices and political priorities. As with everything else, there is no magic money tree for universities or colleges but Ministers are not always willing to dwell on one of the primary reasons why the 2012 system was adopted. Of course, the Treasury still borrows money or uses tax receipts to fund higher education. However, instead of funding universities directly, the bulk of the resource for higher education teaching now goes to the student loan company. This in turn lends money to students for maintenance and the tuition fees which tripled in 2012 because the government cut university funding by 80% and culled capital investment in teaching. The student loan company and HMRC then spend 30 years seeking to collect payments from graduates, all the while having to take account of changing interest rates, earnings and circumstances.

This is a not so much a magic money tree as a creaking merry-go-round that is economically inefficient, administratively costly and leaks like a sieve. So why defend a potentially unpopular status quo? The answer is more straightforward than many people realise: funding universities indirectly in this way reduces on paper the country’s deficit since student loan funding is accounted for elsewhere. It is this ‘deficit sleight of hand’ which remains the driving force behind fee levels and a system which some voters, at least, appear to think is unfair. They, and Damian Green, may have a point. It’s just a pity that, at least for the time being, his musings on the need for a national debate have been tossed into the long grass.