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Further Marketisation in Higher Education:

March 8, 2011

Back in December, before the parliamentary votes on raising the tuition fee cap, we were constantly encouraged by members of the coalition government to study the proposals for financing higher education.  The difficulty facing anyone considering this advice was, and is, that no draft legislation has yet been put before the public which would allow the proposed scheme to be considered in its entirety. 

February saw the drip of additional information (Guidelines to the Office for Fair Access – Offa, further information on the National Scholarship Programme and the Student Charters, David Willetts’s speech to Universities UK).  It is now clear that the majority of the Browne review has been rejected.  David Eastman, a panel member, expressed his exasperation in a recent Times Higher Education article and put his finger on two issues where we still do not know what David Willetts and co are proposing: 

  1. Whether they intend to remove the recruitment caps placed by HEFCE on universities.  The Browne review championed student choice and was premised upon removing this state control on ‘supply’ thereby allowing a ‘free market’ in which popular universities could expand to meet demand.
  2. Which students will be allowed to access the loan scheme and thus determine the size of the government’s outlay.

These points are obviously connected. 
Given Willetts’s commitment to allowing students based at for-profit institutions to have access to the loan scheme, and that it will not be possible to exclude EU students, the government look likely to limit the loans given out by continuing with recruitment caps; particularly since it is now clear that the earlier Treasury models were based on a false premise: that Offa had regulatory powers to limit fee levels.

Willetts has now delayed the promised Higher Education White Paper again as the government needs more time to sort out the proposals that were meant to be settled back in December.  To repeat, the tuition fee cap rise was sold on the basis of these proposals.[1]  Incompetence on this scale opens up further scope for continuing political pressure.  But also entails a concomitant demand – to hold the government to the concessions announced prior to December’s votes.[2] 

Activists need to be alert to legislation sneaked into the 2011 Education Bill, which on Tuesday 1 March 2011 reaches the Committee stage in its passage through the House of Commons.  Part 8 of the Bill, barely a page in length, relates to Student Finance.  It returns to the 1998 Teaching and Higher Education Act, which introduced ‘income-contingent repayment loans’ and replaces some wording from subsections 4 and 22.  

In 1998, the Secretary of State was restricted to charging interest rates on student loans ‘no higher’ than that needed to maintain the ‘real value’ of the loan (i.e. indexed to inflation); the new coalition proposals remove that clause and replace it with two options:

‘lower than those prevailing on the market, or no higher than those prevailing on the market, where the other terms on which such loans are provided are more favourable to borrowers than those prevailing on the market’

That is, commercial interest rates or higher if other associated conditions are seen as preferable.

What this means is that the so-called ‘progressive’ elements of the scheme are not written into the legislation.  On 3rd November 2010, Willetts announced:

“We will introduce a real interest rate on a progressive taper. For graduates earning below £21,000 [from 2016], the real rate of interest will remain at zero. For graduates earning between £21,000 and around £41,000, a real rate of interest will be tapered in to reach a maximum of inflation plus 3%. When graduates are earning above £41,000 they will be making a full contribution to the costs of the system but still incurring interest well below normal commercial rates.”

In response to concerted political pressure, Vince Cable made the later concession (immediately prior to the 9 December vote) that the thresholds of £21,000 and £41,000 would be indexed-linked annually to wage inflation.  This should be seen as a major achievement; one that resulted from the various forms of pressure exerted on the coalition.

Why would it be important to legislate on these details rather than treating them as administrative matters to be implemented within the broader power proposed?[3]  Primarily, because under the provisions of the 2008 Sale of Student Loans Act, the government has the power to sell post-1998 loans to third party, private providers without the borrower’s consent and without notice to the borrower.  In 2007, the ‘book’ of outstanding debt was already worth over £18 billion.  The Education Bill makes the necessary amendments to this Act too. 

The commitment to privatisation and profiteering is everywhere in these governments proposals but we have here concrete evidence of the possibilities envisaged further down the line (see my previous article on Mute). Holding the coalition to account over its December proposals and writing the thresholds into legislation would produce a loan scheme which would be a far less attractive purchase for third parties. 

Though incompetent, the conservatives are wily and ideologically-driven; it is no accident that commercial interest rates and a £9 000 fee cap are two of the three bits of legislation so far prepared.  The Education Bill will remain at the Committee Stage until early April.  This is the occasion for building on the strength of recent protests: the December vote was only the first stage in a longer fight over the marketisation of higher education.

originally published on Mute 1 March, 2011


[1] It is likely that the draft legislation will be written in light of the fees universities propose for 2012/13.  In order to secure an Access Agreement from Offa allowing fees of over £6 000 per year, universities have to open negotiations and present its proposed level by this April.

[2] The detail of the trumpeted National Scholarship Programme published a fortnight ago already throws up issues: primarily, that the number of places available to an institution to support its poorer students is determined not by the number of such students enrolled, but by the overall size of the university.  

[3] Crucially, on the day the Education Bill was published, a spokesman for the Department of Business, Industry and Skills only committed to further detailed regulations not legislation.

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2 Comments
  1. Arthur P. Arthur permalink

    Have you met Rod Carr, a university head leading the charge in the marketization of higher education, and in the implementation of tactics designed to stifle all resistance amongst faculty?
    Watch the vid to see Carr instruct faculty members to rat one another one to management in order to save their jobs.

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  1. Letters from Willetts – student loans « Critical Education

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