More than three quarters of higher education experts do not believe the current loans system to be sustainable, according to research published in the Times Higher Education Supplement.
Within five or ten years there will be yet another significant change in the HE funding model and it is very important that we plan now to ensure that Labour is on the right side of that debate and has the correct policies in a future Labour government.
The Tory solution to the loans time-bomb will be a straightforward one: privatise it. These are loans which charge interest above inflation and are therefore likely to be attractive to banks, up to a point. What would put off banks are all the conditions upon which the loans may not be repaid, therefore these would have to be underwritten by the taxpayer. Over time, the terms of the loans will be changed to make them more commercially attractive, with opportunities for higher rates of interest and fewer “opportunities” to avoid repayment. Without the slight (very slight) moderating impact of Lib Dem partners, this would be the clear and direct path to a fully privatised HE sector, where eventually the government could opt out of the process entirely and the universities would compete in a free market without caps on fees.
I sense there is a mood even among the Labour leadership for a new HE policy. The suggestion that we should cap at £6000 rather than £9000 does not come close to addressing the fatal flaws in the current government scheme. At the recent Yorkshire and Humber Regional Labour Conference, suggestions from the floor that tuition fees should be scrapped altogether appeared to be received positively by Ed Balls and certainly among the delegates.
There are clear reasons why Labour would be reluctant to promise to scrap tuition fees at the next election:
- The Lib Dem factor: will it be viewed as a promise that cannot be kept?
- The last Labour government introduced tuition fees in the first place; arguing that they are unnecessary will inevitably involve a criticism of previous government policy
- The government have successfully managed to link HE funding policy to the issue of the deficit (despite the fact that there is no sensible connection) – therefore the policy could be presented as irresponsible.
All these objections can be dealt with.
Not a penny will be paid back in loan repayments before 2015. The full cost of tuition, up to this point, is met by the state, and repayments are made slowly over 30 years. The idea that this policy ever had any link to bringing down the deficit was nothing more than something behind which the Liberal Democrats could hide their betrayal. The amount of revenue accrued by some new graduates paying back 9% of their income over £21,000 for a maximum period of 30 years equates to a negligible amount if instead paid by all higher-earning taxpayers.
The problem for Labour, of course, is that student loans were always primarily an accounting trick, this is nothing new. Loans (however little might actually ever be repaid) do not count under the “deficit” column in the budget, just as PFI schemes don’t count as borrowing. In the 90s and noughties it was all about the Euro Stability Pact, today it’s all about the deficit, but the desire to fiddle the books is the same. But the price for this fiddle is of course ever-growing. The idea that students starting in September this year will still be paying money back in the 2040s is a pretty horrifying one
The way to make this a policy that can be seen as realistic and believable is actually to agonise over it, to cost it meticulously, and to link it to a much broader policy on higher and further education that could be seen as much as a fiscal stimulus package as a general education policy.
The costing part of this is interesting. To restore the block grant to universities would not actually cost anything (because the taxpayer already pays that money, all be it in under the heading of a “loan”); it is not beyond imagination to actually come up with a version of a zero tuition fee policy that could actually involve a cut in public spending (I don’t advocate that, but it would be a bit of a coup against the government). This would have to involve caps on numbers or more variable block grants – not something that I would consider a positive approach.
This will need to be a root and branch brand new policy. If the tuition fee were scrapped but the current system maintained for maintenance costs, the average graduate would actually pay a similar amount out in loan repayments (because of the perverseness of this ill-thought-out system). A new adult learning policy for Labour must be fundamental and comprehensive.
If the new policy could be unveiled alongside a strong commitment to further education, a robust apprenticeship policy and a renewed commitment to genuine lifelong learning, many of the potential pitfalls of the selling of the policy can be avoided. This would be a broad education policy that is not focused on a privileged minority, but on the whole of society. This is a policy that will enable people to acquire the skills that they require to operate in all parts of the economy, to find jobs and to have confidence to spend, to borrow and to get the economy moving.
This is something that Labour can afford to do. This is something that would be a game-changer in a large number of constituencies. This is something that could get people excited about Labour’s next General Election campaign and attract radical young people to see Labour as home. This is something that will be popular with Labour’s current members, supporters and voters as well as attracting new members. Let’s do what needs to be done to make it happen. When the new NPF reps are announced next week, let’s start lobbying them straight away!