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Some further consideration of Labour’s tuition fee announcement

March 2, 2015

Campaign for the Public University has provided five reasons to give two cheers to Labour’s tuition fee pledge.

I am not a cheery soul but I’ll offer three further plus points for fee reductions.They involve taking a wider view of Higher Education policy than the commentators who are narrowly thinking about eighteen year-olds commencing three years of full-time study and their likely repayments. I would add that in itself HE policy cannot address the inequalities in income distribution that animate mainstream media kibitzers, who would normally complain about the 61% marginal take from graduate salaries over £41 865 (40% income tax, 12% NI, 9% student loan repayment).

I’ll also add a pet gripe – Labour’s statements have tended to use nominal figures. When you are talking about stocks and flows three decades from now, it helps if the numbers are presented in today’s terms rather than those of e.g. 2045. Though I guess the higher figures are thought to help the case against £9000 fees. When you do the rebasing on, say nominal write-offs, you’ll see that the departmental accruals accounting already has suitable amounts factored in for losses. It should also be pointed out that what is written off in nominal terms from loan accounts is not the same as the ‘write-off subsidy’ which scores in the national accounting at that point.

1 Reducing graduating debt is good for all students.

Student loan agreements contain the following clause:

 “You must agree to repay your loan in line with the regulations that apply at the time the repayments are due and as they are amended. The regulations may be replaced by later regulations.”

That is, terms and conditions on loan repayment are not fixed when loans are taken out. The government has administrative power to alter the repayment threshold, the repayment rate, interest rates and the point at which outstanding balances are written off.

Ministers previously waved away this ‘form of words’ as something inherited from Labour. But former BIS civil servant, Matthew Hilton, expresses a refrain now frequently heard: you can change the terms of repayment for existing borrowers to manage the sustainability of loans using statutory instruments (ie almost no parliamentary oversight).

‘For example, as a matter of fact, the government could reduce the RAB charge to whatever it wanted at a stroke, and within the existing overall policy framework, just by adopting a different approach to the financial management of the student loan book. If interest rates, repayment levels etc. were able to flex in line with the macro-economic context, the RAB issue would go away.’

This is sometimes also referred to as ‘tweaking’ the loan scheme. The most likely candidate for change is the repayment threshold. It is supposed to go up in line with earnings from 2017 onwards, but the relevant regulations have not yet been made. That indexing was a last minute concession to Lib Dem MPs to get them to vote with the government in favour of £9000 tuition fees back in 2010.

The less debt you start with, the less exposed you are to future governments worsening your repayment conditions.

It’s not just that the Conservatives have refused to rule out raising fees, they have refused to rule out freezing the repayment threshold. Actually, you might want to press Labour on that too!

2 A reduction in fees may make part-time study and retraining more feasible for many.

Numbers of part-time students and mature students have drop precipitously over the last few years. A reduction in fees to £6000 for full-time students may make part-time fees more reasonable. Not everyone considering HE has access to loans – for example, those who already hold a first degree or have spent time studying with the benefit of loans and grants.

Labour have promised further announcements on ‘earn while you learn’ degrees and accelerated programmes.

3 Restoring direct funding to HEI’s impedes privatisation

The Conservative party had a clear agenda before the 2010 election: to create as far as possible a level playing field for private HE provision by removing direct grants to universities and making HEI’s overwhelmingly reliant on fees for undergraduate provision. Overnight in 2012 tuition fees at private providers became competitive with those at HEIs and private students were also given access to loans up to £6000 per year for tuition fees.

This policy has led to the rapid expansion of places at private providers. The quality of that expansion is mixed to say the least.

Restoring some block grants for all subjects at established HEI’s undoes the key measure underpinning a troubled policy.


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