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The NES would need to tackle 'smoke and mirror's' funding system

22 Sep 2017

Labour’s pledge of free university tuition clearly struck a chord in the 2017 general election campaign – so much so that Ministers and many self-appointed higher education gurus have subsequently spent a great deal of energy defending the current system of fees and funding in England while warning that free tuition would undermine progression to university from those from the most disadvantaged backgrounds as well as the country’s finances. There is much more to say about the economic merits of these arguments and the claim that the £9k (and rising) fee system is ‘progressive’ – a claim that relies on massive sums in unpaid loans being written off by taxpayers.

In contrast, Labour’s manifesto commitment to create a National Education Service (NES) on the lines of the NHS deserves more attention than it has so far received. The promise to develop opportunities for life-long learning in the context of an NES potentially opens the book on a new approach to further, higher and adult education and their funding. It also stands in sharp contrast to the approach adopted by the Conservative government which has favoured the application of market principles to the delivery of tertiary (i.e. post-secondary) education, the idea that students are consumers and replaced direct public investment in universities and colleges with indirect funding provided by student fees.

As a result, there has been no direct grant available for university courses in the arts, humanities, social sciences, computer science, design, architecture and economics courses – to name just a few of the subjects affected - since 2014-15. With a decrease in student numbers (demand fell after £9k fees were introduced in 2012), a requirement for universities to fund programmes previously supported by government, a decline in capital investment and an 80% cut in teaching grant, it is unsurprising that universities will charge the maximum £9,250 fee for courses commencing in 2017-18. Equally unsurprising, many students, graduates and their families appear to feel that they are unfairly picking up the tab for the costs of a higher and further education system which provides wider benefits to employers and non-monetised benefits to society at large.

Ministers cite an increase in the number of students from disadvantaged backgrounds progressing to university at 18 as evidence of the success of their approach. This ignores the rising levels of graduate debt and the effect of the higher ticket price on part-time and mature students (not necessarily one and the same) whose numbers have declined significantly since the fee cap was raised in 2012. This has impacted adversely on those, mainly modern, universities which have historically recruited a more inclusive student cohort by mode of study and age, and on individuals already in, or hoping to return to, the workforce with new skills and career options. The decline in mature student applications following the abolition of NHS bursaries for nursing, midwifery and other allied health professional courses in 2017-18 (programmes that have traditionally attracted older students including those from BAME backgrounds) is further evidence that a new and more holistic approach to life-long learning is long overdue.

But it is not just universities and higher education students that have been required to manage dramatic changes in their fees and funding regimes. Further education colleges have been subject to significant cuts, area reviews and mergers. Much less publicised but equally important has been the replacement of direct funding by student loans for many courses. Since 2011 direct investment in courses at level 3 and above has been cut for older learners who, if they are unable to pay fees upfront, must take out an advanced learner loan if they want to continue their studies. For courses starting before 1st August 2016, this funding regime applied to students who wanted to study for a level 3 or 4 course when they were 24 or older. For those who became 19 after 1st August 2016, advanced learner loans have replaced direct funding for qualifications at levels 3, 4, 5 and 6, e.g. A Levels, BTECs or graduate certificates.

Limits have also been placed on the number of advanced learner loans, including by the application of a number of byzantine conditions. For example, prior to 1st August 2016, students could not take out another loan to take the same level of a course, for the same level qualification even though the course itself was different. Students who have taken out one advanced learner loan e.g. for one level 3 course and then want to study for a further qualification at the same level, are still required to make repayments on their first loan if their earnings exceed £21,000 pa. The only exception is Access to HE courses where loans for these courses are written off if the student successfully completes an undergraduate qualification.

The same terms and conditions of repayment and addition of interest now apply to both advanced learner and higher education loans. Prior to 2012, interest on loans taken out after 2006 was 3% plus CPI. Since 2012, new student loans have been subject to an interest rate of 3% plus RPI from the moment they are taken out. As a result, from September 2017, interest of up to a usurious rate of 6.1% will be applied.

In fact, government accounting rules mean that reducing the direct, public funding of teaching in universities, colleges and adult education, and abolishing student maintenance grants, all cut the Public Sector Borrowing Requirement (PSBR) and thus the deficit. However, this is a sleight of hand because the government continues to borrow and use taxpayer resource to fund the Student Loan Company instead of universities and colleges. The SLC then lends money to students for fees and their maintenance support and in turn, they pay the course and tuition fees that universities and colleges have no option but to levy.

This money merry-go-round of indirect funding of further and higher education has the convenience of appearing to reduce the PSBR but in fact, adds to the cumulative net public debt requirement of the government. Inevitably, it increases the loans and debts of students and graduates and the likelihood that all taxpayers will write-off unpaid loans during and at the end of the 30-year repayment period. As MillionPlus warned before the 2010 parliamentary votes to increase the higher fee cap to £9,000:

Any gains made in reducing the deficit by withdrawing public funding for higher education will be cancelled out. In the long-term, taxpayers will pay much higher loan write-off costs than at present... the Exchequer will not generate significant savings, will need to borrow more and further the Government will create a more complex system with massive administrative burdens.

A new funding regime is key to fair access but Labour must also avoid supporting a system which divvies up education, qualifications and institutions into technical or academic as proposed by the Sainsbury review. A National Education Service should have no truck with the ‘sheep and goats’ mentality’ by which students are directed into vocational or academic routes. This approach has bedevilled British education since 1944 and ignores the fact that many courses and qualifications, including those offered by modern universities, are professionally and technically focused and combine both the ‘academic’ and the ‘vocational’. A National Education Service, underpinned by direct investment and the principle of collaboration rather than competition, has much to offer and huge potential to ensure that tertiary and adult education is accessible to all.

It is well-known that older students are more likely to come from a more disadvantaged demographic but individuals who want to step back onto the education ladder or commence their journeys into higher education when they are 19 or over by participating in level 3, A-level or other vocational courses, now incur greater debts than those who enter university aged 18. It is difficult to see how the current system supports social justice, the reskilling of those in the adult workforce who did not obtain level 3 qualifications during their secondary education or those who want to return to education for its own sake as adult learners.

The costs to students of higher education were further increased by George Osborne, then still Chancellor of the Exchequer, in his 2015 Summer Budget. According to Osborne, maintenance grants for full-time students were ‘unaffordable’ and were replaced by maintenance loans from the 2016-17 academic year. Labour’s manifesto promised to restore these grants but this change alone has affected nearly half the new undergraduate student population in England with those from the most disadvantaged backgrounds coming off worse. As a minimum, debt on graduation from a three-year course will increase by an extra £13,500 (before interest) if full entitlement to maintenance loans is taken up. The switch from maintenance grants to loans will mean that students from the poorest 30% of households will repay an average of around £3,000 more overall (at 2016 prices).

If Labour’s National Education Service is to promote fair access and life-long learning, it is imperative that it revisits the funding regimes that currently apply to students wherever, however (full-time or part-time) and at whatever age they study. This can only be achieved if the NES is underpinned by the return of direct investment in universities and colleges. This means that Labour will have to tackle head-on the arguments that have been used to justify the current funding system and the ‘smoke and mirrors’ accounting rules that have allowed Ministers to claim that the public funding of further, higher and adult education unfairly benefits those who participate at the expense of those who do not.

The original article under the headline 'The NES: ending sheep and goats in FHE?' can be read in the SEA magazine here: