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Private provider growth – new figures from Willetts

March 28, 2014

Back in February, I covered a parliamentary statement from David Willetts on the loan outlay to students at private HE providers. I speculated then on the missing figures for maintenance grants to those students. We have now had revised figures from Willetts which includes grants (which do not have to be repaid and count as cash expenditure).

The estimated costs of support to students at alternative providers are now as follows:

 

£ million
By financial year
2013-14 2014-15 2015-16
(i) Loan outlay (cash) 400 650 600
(ii) Maintenance grantsand allowances 150 250 250

Forecast of expenditure on students at alternative providers remain especially uncertain as we still do not yet know how many students will be paid support in the 2013/14 academic year. All forecasts are based on assumed growth from the 2012/13 baseline.

As Shiv Malik and I write in the Guardian today, this represents astonishing growth. In academic year 2010/11, the first of the Coalition government, only £42million went to students studying at private colleges (£33m in loans and £9million in grants). Four years later, it is expected to hit £900m before dropping back slightly with the impact of the introduction of recruitment controls for private providers this Autumn.

Back in 2011, I wrote a piece for Radical Philosophy on ‘New Providers’ which said:

 Their impact is generally underestimated as it is not appreciated how the government will protect them and support them in the first days of this new era, until they are able to compete.

In Great University Gamble, I pointed to US experience of very rapid growth and suggested it could also happen here. In the four years since 2010/11, we will have seen an increase to private student funding of  2050% according to these new figures.

I underestimated its current astonishing growth rate – which even frightened the government in November. Look back again to that note to the table, ‘Forecast of expenditure on students at alternative providers remain especially uncertain as we still do not yet know how many students will be paid support in the 2013/14 academic year. All forecasts are based on assumed growth from the 2012/13 baseline’.

From the perspective of BIS’s budget, already facing pressures, it is important to point out that maintenance grants are cash expenditure and were underestimated on original projections. In addition, with the estimated loss on loans now at 45 per cent of outlay, there is a £290m loss on the £650m loans to be issued in financial year 2014/15 (with a sizeable part of that going to private colleges directly to cover tuition fees).

The government will therefore hit £0.5billion expenditure (grants + loss on loans) on students at private providers. Many of these colleges are for-profit. The names are unfamiliar to most – you can find a list here of all courses ‘designated for student support’. You can see some of the places operating out of Whitechapel here.

The point to underscore is that big cuts are being made to teaching budgets at established universities to compensate. Some of the ‘major fiscal challenge’ facing BIS is self-inflicted – this policy of ‘diversification’ is a big contributor.

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