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Tory higher education funding farce

tuition fees demoI 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. It’s time tuition fees were 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.

3 Comments

  1. reality is that kids are not worried by the situation. They know (and older siblings tell them) that they will never earn enough to have to pay anything.

    The real crisis is for the taxpayer. The Book as it is now called has a £12billion of unpaid debt and it is growing. In effect we still have a grant system. Vince Cable thought about selling off the book, but had to back off as once the private company started to send the bailiffs in the kick back would be horrendous. How do you take hundreds of thousands of graduates to court?

    You can’t do it. The reality is that kids go to university in increased numbers knowing they will never have to pay. However the government has £12b of toxic debt it can never get repaid. As Keynes said of the banks, if you own a bank £100 you are in trouble. If you owe £100 million the bank is in trouble.

    The government is in trouble especially if the taxpayer ever realizes it has loaned undergrads £12 billion (that is billion) and it can’t get it back

    trevor fisher.

  2. James Martin says:

    Yes, but Trevor the issue of unpaid loans should not be a worry, given that if student grants and no fees had been maintained (as they should have been) then there would never have been any repayment anyway.

    The issue I see as being toxic a a large number of universities these days is that they have already become private sector businesses that just happen to get some extra taxpayer subsidy. Yes, the Oxbridge bodies were long about massive financial investment (Keynes ran stock market investments for Kings College from the 20s to 40s and made them a huge fortune in profits), but we now have modest sized institutions with huge property (student accommodation) empires and overseas investments linked to the foreign student market. As a result many vice-chancellors see themselves as CEOs and have awarded themselves massive pay-rises to match (at the same time as pay for their staff has fallen in real terms due to pay freezes and under-inflation awards). In fact, if I were to be Mystic Meg I would say it is now a toss-up where the next big mass misappropriation of public funds scandal will arise – in the universities or academies and free schools…

  3. unpaid loans are not a big issue for students, since they know they will never have to pay for them. The big issue is whether government, having decided that fees are the big issue, will take the step of having differential fees with the Russell Group going up to £15K pa or more. In this case the fact that the taxpayer is paying huge amounts of money to rich institutions – and you are right, they are very rich – will become a political issue. I think it will.

    Vice Chancellors not only see themselves as CEOs holding down lecturers pay to below inflation and pocketing the proceeds, the fact is that UCU have not been able to make this gross explotation a public issue. Partly I think because they do not link up with the teachers who are being forced down the same route. Russell Group openly brag that they are having a massive capital investment programme. The suprising thing is that the lecturers who are paying for it are less effective than the teacher unions, who are alas not as effective as one could hope

    The scandal is already here, and its not a toss up where the focus will be academies (which legally are the same as free schools) or universities. Its both. The need is to get a united campaign across the board.

    trevor fisher

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