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Fees frees from government control …

July 25, 2017

Jo Johnson’s speech and newspaper article at the end of last week succeeded in driving the news agenda back towards an idea first raised by IFS back in April: addressing existing student loan debt, particularly the tuition fee debt taken on by those who started at university in 2012 and after.

In the light of Labour’s pledge to abolish tuition fees, the latter group look like being hard done by. The cost of abolishing their tuition fee loan debt is much lower than the £100billion figure for the loans outstanding across the UK: assets worth £20bn would be erased with the cost appearing in the national accounts as a one-off £30bn hit to capital expenditure.

Johnson can consider his intervention to have been successful as it has distracted the media from his own travails over interest rates on student loans. As explained last week, the latest DfE accounts show that student loans went £500m over their “impairment” budget last year. Given that Justine Greening is also looking for large savings across the department, this might explain why Johnson was unable to indicate that he would be reviewing the interest rates due to come in this September (that 6.1% that’s cited everywhere).In fact, he made so bold as to tell his listeners to think about student loan repayments as a ‘graduate contribution’ and that anyway they wouldn’t find a better loan deal:

There are no commercial loans that offer this level of borrower protection. At 7.5%, the Bank of England’s reference rate for unsecured personal loans is materially higher.

Contempt for students has been a feature of the last decade in HE policy (both from politicians and senior university management). Johnson’s casual dismissal of concerns ignores the fact that much of the discussion in the broadsheet press has been dominated by the middle classes’ ability to remortgage (ie secured loans) and that alternative financial companies are offering CPI-only deals (but with administration fees and more onerous repayment terms). No defence of student loans can be premised on challenging students ‘to find better’.   It must be demonstrated to be a good deal for all borrowers, not just the credit-constrained. To that end, the government must discuss repayments frankly: at a minimum, ohnson  needs to require the Student Loans Company to restore the calculator, which was taken down last year after this website showed the flaws in its workings.

On a similar note, the DfE accounts might also provide further context for Johnson’s failure to announce the maximum tuition fees for 2018/19. It was expected that he would use Thursday to announce another inflation-indexed rise before Parliament closed for its summer recess. Perhaps the ‘value for money’ evoked in his speech’s title suggests a freeze is on the cards?

In which case, there would be added irony to one of Johnson’s key themes: how tuition fees ensure freedom from central government control.

Removing fees, and making the taxpayer bear the full cost of our higher education system, would have calamitous consequences for social mobility, it would be disastrous for teaching and research and it would be a hammer blow to taxpayers.

Why?

The immediate effect would be the reintroduction of strict student number controls, which would disproportionately reduce attendance by poorer young people with potential but without the grades.

… The second effect would be to starve universities of resources by making them compete head-on with all the other pressing claims on government spending, including our schools and our NHS. The experience of direct grant-funded HE systems, from Scotland to Continental Europe, is that they struggle to sustain per student funding.

In Scotland, the average Scottish-domiciled university place was underfunded by 6% in 2014/15, according to Audit Scotland. In Germany, which is debating reintroducing fees, per-student funding levels have fallen 10% since 2008. And we have our own experience of what can go wrong: in the two decades before England introduced fees, resource per student fell by over 40%.

I will finish this post with the following graph on “the unit of resource”. In his final sentence, is Johnson effectively saying, “Learn to love tuition fees, because they’ve spared you from the Conservatives”?

New Picture

Source: BIS, Research paper number 10: Review of Student Support Arrangements in Other Countries (September 2010), page 10.

 

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