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More on fees and loans – Labour announcement

September 25, 2011

Is Labour developing a coherent higher education policy?

Miliband has just announced a proposed reduction of the tuition fee cap, down from £9,000 pa to £6,000.  His spinning of this headline-fodder omits some key details. 

Anyone familiar with the mechanics of the proposed loan scheme is aware that such a reduction makes little difference to graduate repayments, which are far more affected by interest rates and repayment terms. (Although I have some disagreements with Martin Lewis about the details of his student loans calculator, it is very nicely designed and illustrates the general workings of the scheme we’ll see from 2012/13.)

The lower fee cap will however reduce Exchequer exposure on the ballooning portfolio of outstanding loan debt (estimated on official figures to reach £191 billion by 2046), as it will reduce annual outlay and thirty-year write-off costs. 

Although this is nowhere spelled out, I presume Miliband is proposing to maintain funding levels for universities by restoring teaching grant.  It is this which has to be ‘fully-costed’.

“The money for Labour’s policy will come from reversing a corporation tax cut for banks pre-announced by the chancellor, George Osborne, in March – from 28% in 2010-11 to 23% in 2014-15 – and by asking graduates earning over £65,000 a year to pay higher interest rates on their loans.”

Liberal Democrats courted students on the abolition of tuition fees.  Labour may be misguided if they think this reduction in the tuition fee cap will be a vote winner. 

They may be better advised to concentrate on a different element.  Restoring the teaching grant to all subjects would stymie the privatisation of the English university system. 

There would no longer be a ‘level playing field’ to facilitate the entry of for-profit providers, since they are not eligible to receive teaching grants.  With the consequence that traditional degree level teaching would remain competitively priced.  Any race towards the degree shops, or ‘mills’, seen elsewhere would be held up.


  1. According to the FT the proposal has been ‘fully costed’ at £750 million. Even adding in the RAB charged saved on the lower fees, this won’t restore income to the 2012 levels (although it may well restore the 2011 levels). I therefore conclude that this won’t be a vote-winner with a fair few institutions, even if it is with studetns and their parents….

  2. Yes, you’re right. I was just looking at the FT figures. This (fees capped at 6000 + 750m + RAB saving reinvested [?]) is potentially a long way below the cut to undergraduate teaching grants which was originally 2.9bn but seems to have grown to 3.4bn in recent discussions. Not good news. Can we expect a fuller announcement at any point?

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