News on current funding debate — March 2014

Parliamentary Questions regarding University fees and student loans

PQ No. : 2013/3264:  THURSDAY 20 MARCH 2014

Liam Byrne (Birmingham, Hodge Hill): To ask the Secretary of State for Business, Innovation and Skills, what recent estimate he has made of the RAB charge on student loans. (192816)

Rt Hon David Willetts: This Department has been reviewing our modelling of the RAB charge on student loans. We currently estimate the RAB charge on student loans to be around 45%, which reflects our current estimate of the costs to Government of the higher education subsidy to students.  By its nature an estimate is subject to change as it is highly dependent on macroeconomic circumstances, and the growth of graduate earnings over the next 30 years.

We will continue to review our estimates in line with the latest data and advice from experts and stakeholders.


 And here’s Liam Byrne’s response:

This is fresh evidence that our university finance system is turning into a money pit. The system is now haemorrhaging cash that will never be repaid and reinvested in the next generation. It’s high time David Willetts came out and told us exactly how much this strung together system is costing the taxpayer, rather than dress it up with clever accounting tricks. First, he tells us that the RAB charge is 35%, then 40% and now it hits 45%. It’s time to call a halt to this descent into chaos. Their funding model fails the sector, it fails our students and it fails those whose hard earned wages continue to prop it up.

Commenting on the HEFCE grant letter published today, Shadow Minister for Universities, Science and Skills Liam Byrne MP said:

 “Today’s announcement lays bare the black hole ministers have created in student funding. Ministers’ dogma in giving students at private colleges complete access to the student loan system has resulted in an unsustainable system and now they are hitting poorer students to make up the shortfall. The fact that cuts are being targeted at support for the poorest students at university and the skills budget tells you everything you need to know about this government’s values and their ambitions for Britain’s future.

 “I’m glad that months of campaigning and pressure by Labour and others have prevented the government axing the student opportunity fund – but cuts to the lifeline that keeps the poorest students at work and a huge 20% cut to the skills budget risk throwing social mobility in our country into reverse at the very time we need to earn our way out of the cost of living crisis.”


 Editor’s notes

1. Total cuts to the HE budget look like over £100M. The Access to Learning Fund will now be merged with Student Opportunities and cut by £37m. Funding per student is set to fall as the government has refused to set out how many of the forecast extra 30,000 students will start next year.

 2. Minister for Higher Education and Science David Willetts admitted to Liam Byrne that giving students at private colleges unfettered access to the Student Loan System is set to cost over £600 million next year (2014/15).

 Ed Miliband talks of ‘radical offer’ on fees

Times Higher Education online, 25/03/2014, David Matthews

Ed Miliband has said that Labour wants to give voters a “radical offer” on tuition fees at the next election, a possible hint that the party could replace tuition fees with a graduate tax.

“Young people feel they have no control because they are going to get into mountains of debt if they go to university,” he said during an appearance on ITV1’s The Agenda programme. “We do want a radical offer on tuition fees because the future of our young people – something totally absent from [last week’s] Budget – is a massive issue that our country faces,” he added. In December last year, Liam Byrne, the shadow universities, science and skills minister, said that Labour’s election manifesto for 2015 could include a “long-term shift to a graduate tax”.  Currently, Labour policy is to cut tuition fees from a maximum of £9,000 a year to £6,000, although Mr Byrne said at the time that this “is what we would do if we were in government today”.

 Ed Miliband speaks out (by George Eaton New Statesman,   Published 25 March, 2014)

Faced with the most significant period of Labour discontent since last summer, Ed Miliband retained his preternatural calm on ITV’s The Agenda last night. “I took this job on three and half years ago and always knew this was going to be a close election,” he said in response to the narrowing opinion polls.

To a degree under-appreciated in Westminster, Miliband’s strategy has been shaped by the constitutional novelty of a fixed-term parliament. As one shadow cabinet member put it to me, “We know the date of the next election. There’s no danger of the government cutting and running . . . So we can work backwards. We know when we need our pledge cards by, our manifesto by and our party candidates selected by.” With major policy work on the economy (The Adonis Review), low wages (The Buckle Review), social policy (IPPR’s Condition of Britain) and devolution (Local Government Innovation Taskforce) due to be completed before the National Policy Forum in July, Labour strategists are confident that the detailed agenda craved by activists will begin to emerge.

In this regard, the most notable remarks made by Miliband last night were on tuition fees. After businesswoman Laura Tenison raised the plight of the young, he replied:

Young people feel they have no control because they are going to get into mountains of debt if they go to university. We do want a radical offer on tuition fees because the future of our young people – something totally absent from this Budget – is a massive issue that our country faces.

The promise of a “radical offer” on tuition fees was flagged up by Labour sources as “significant” and “worth listening to”.

Miliband has previously promised to reduce the cap on tuition fees from £9,000 to £6,000, but it has long been clear that his ultimate ambition is to replace fees with a graduate tax, the policy he argued for in the 2010 leadership contest. In an interview with Labour List last year, he said: “We’re definitely looking at [a graduate tax]. I think there’s been some work going on at IPPR looking at the options too. We’ve said £6,000 [as a cap] before, and we’re looking at all of these issues for the manifesto, and what can be done.”

The report on higher education published by IPPR (one of the most influential sources of Labour policy) last year, modelled an option under which tuition fees and student loans would be abolished and replaced with a higher rate of tax for graduates. This would consist of levying an additional 2 per cent of tax on all income over £10,000 for a period of 40 years (Labour may wish to adopt a graduated version).

The policy enjoys the support of the NUS and other higher education organisations and, as the report noted, “is one of the most progressive forms of repayment system, since high-earning graduates will continue to pay the tax for 40 years, meaning they will contribute a greater share of the total cost than under the current system (when their contribution stops once they have repaid their loan)”.

One of the most common complaints made by Labour figures about the current system is that it allows the rich to contribute less than others by paying off their loan at a faster rate (thus avoiding interest on the debt). As well as ending this unfairness, the introduction of a graduate tax would also eliminate the fear of debt that deters some from applying to university.

And it would enable Miliband to make the politically potent pledge to “abolish fees”, the policy proposed but not delivered by the Lib Dems. With Labour reliant on the support of Lib Dem defectors and the young (it leads the Tories by 42-28 per cent among 18-24-year-olds) to maintain its slight poll lead, a radical offer in this area is rightly viewed as crucial to election victory. Miliband’s comments last night suggest it may be coming soon.

Universities need to look beyond higher tuition fees  Vice-Chancellors should join the discussion about alternatives to the current model.  by John Denham MP  

New Statesman, The Staggers blog, 25/03/2014,  Labour MP and former universities secretary John Denham says universities need to start discussing alternative ways of funding higher education.

Ed Miliband’s promise of “radical” policies for higher education funding is welcome. It reflects the reality of an unsustainable system that will have to be changed whatever happens. As Labour develops its new approach, are England’s universities are up to the challenge they face?Last week the rate of debt cancellation reached 45 per cent. Of every £1,000 lent to students for fees and maintenance, £450 will never be repaid. The bill for this write off falls on the taxpayer. In round terms, each year the government will borrow £14.8bn, knowing it will never see £6.6bn again.Many in the university sector don’t seem to see a problem with this level of waste. High fees have done them well for three years, letting higher education escape the worst of the pressures felt by the NHS or local government. That boost is slowly petering out as research funding falls and the fee is eroded by inflation. But many vice chancellors seem quietly confident that, sooner or later, government will crack and let fees go up again. David Willetts has certainly not ruled it out.

As loan write-offs hit 45 per cent, that confidence is surely misplaced. Even if politicians had the stomach for higher fees in what is already the world’s most expensive public HE system, the maths is against them. If fees rise further, even fewer graduates will pay back in full and the cancellation rate will rise steadily until it is over 50 per cent. What responsible government is really going to fund universities through a route that wastes one pound in two? More trouble is looming from George Osborne’s decision to fund further expansion from the sale of the student loan book. As the Public Accounts Committee has warned, selling the loan book may only be possible at a huge loss to the taxpayer. Selling an underperforming capital asset to pay your running costs is never a good idea, and no one knows what happens when the money runs out.

After three good years, the financial underpinning of universities is looking increasingly shaky. Vice chancellors who told themselves that high fees would bring independence are now more exposed to government decisions on public funding than for a long time. Something has got to give. Maybe, if the coalition won again, a few universities would be allowed to break ranks (giving us Ivy League fees but none of the Ivy League’s social responsibility) while the rest would have funding remorsely screwed down or undercut by private institutions. The alternative is to recognise that higher education will always have to be a public and private partnership, and this partnership should be as clear and transparent as possible. Scrap the ideology of high fees and put every penny of public funding you can into teaching. Fees will fall, public debt will fall, the cost of debt cancellation will fall, and more graduates will actually repay what they borrow.

We could take the opportunity to bring about much-needed change, giving employers financial support to co-sponsor degrees and promoting more routes for older and part-time students. Do this and, according to Commons Library modelling, we could see fees at around £3,500 a year for a three year degree and give universities an additional £1bn of usable finance every year.  The vice chancellors’ confidence in further fee hikes looks misplaced. It will be interesting to see when they join the discussion about alternatives.

John Denham is Labour MP for Southampton Itchen and former universities secretary 

Clegg insists there is no need to raise tuition fees level again

The Guardian, p.7, 26/04/2014, Rowena Mason

Nick Clegg has insisted there is “absolutely no need” to raise tuition fees, although he sidestepped a question on whether he would rule out such a move out altogether. The deputy prime minister made his comments in the Commons as Labour taunted him over reports that the government’s tripling of tuition fees to £9,000 was “on course to end up costing the taxpayer more than the system it replaced”.

Scottish independence: Universities Scotland call for clarity over post-Yes tuition fees

BBC News online, 25/03/2014

The body that represents Scottish universities has called for more details on charging tuition fees to students from the rest of the UK after independence. Prof Pete Downes, from Universities Scotland, was giving evidence to Holyrood’s education committee. He said he would like to see how the Scottish government would ensure it complied with European law. Students from other EU countries are entitled to free tuition in Scotland. The Scottish government has said it could continue to charge students from the rest of the UK if there was a “Yes” vote in September’s referendum.

Universities warned over ‘sleepwalking’ into Ofsted-style regime

Times Higher Education online, 25/03/2014, Jack Grove

Writing on a new blog launched by the Higher Education Policy Institute, Andy Westwood, chief executive of GuildHE, has warned tht universities may be ‘sleepwalking’ away from their current system of self-regulation via independent peer review towards a new external quality control system based on Ofsted-style inspections.