There is an alternative - investing in growth

The government is caught in a contradiction over its policies for university tuition fees. The Browne Review recommended variable fees with no upper cap. In order to retain support from the Liberal Democrats, a cap of £9,000 was introduced alongside a loan system with a £21,000 repayment threshold. This has had several consequences. Most English universities set fees close to the fee cap, with serious consequences for the prospective costs of the loan system deriving from unpaid loans, not to mention the fee burden on students. The government estimates a default of 30 per cent, but most commentators think it will be higher. Even so, once the system has begun to mature, it will cost taxpayers more than the system it replaces (albeit, not current taxpayers, but the next generations of indebted students as future taxpayers).

There are three possible responses within the government’s flawed logic. The first is to drive down fees closer to £6,000. This is already evident in the management of the system of ‘core and margin’ places and the allocation of half of the latter to further education colleges. The next step is to extend the role of for-profit providers. Neither is consistent with maintaining quality, which is supposed to be the aim of a system with students at its heart. At £6,000, students will pay significantly more than in the old system, for a degree that is financially less well-resourced.

Second is a reduction in the number of places. These have already been reduced despite significant unmet demand. For example, it is estimated that 97,000 applicants failed to get a place in 2010, and the number of available places has fallen since then. This reduction takes place at a time when EU reports suggest that international competitiveness requires greater participation in higher education than at present. 

Each of these responses has given rise to arguments for more funding. But within the logic of the present policy this can only come from students. One argument comes from some Vice-Chancellors who argue for a lifting of the fee cap. This, it is suggested, will make it easier for the government to drive down fees at other institutions and break-up the clustering around a fee that is higher than the government wishes. 

The UK already has one of the lowest public investments in higher education, significantly below that of the Organisation for Economic Co-Operation and Development (OECD) average. At the same time, students in England will now pay, on average, the highest fees among OECD countries. The OECD also argues that investment in higher education is an integral part of growth strategies in a recession. The UK government is seeking to leverage that investment from students, despite the wider public benefit of economic growth. As the OECD says, “public investments in education, particularly at the tertiary level, are rational even in the face of running a deficit in public finances. Issuing government bonds to finance these investments will yield significant returns and improve public finances in the longer term”.

There is an alternative and it is fair. And it need not involve variable fees either. That alternative is the continued public funding of higher education.