The long awaited review of funding across the whole of English higher and further education has been announced by Theresa May – signalling changes to undergraduate fees and loans (again).
The review fulfils a commitment made in the 2017 Conservative manifeso and can be seen as a move by the prime minister to assert her authority over education policy now her new team is in place following the recent reshuffle.
The government is frustrated nearly all university courses now cost £9,250 a year and wants to encourage some sort of variation in fees. Interviewed in the Sunday Times, the new education secretary, Damian Hinds, said the fees for a degree course should reflect:
A combination of three things: the cost (to the university) to put it on, the benefit to the student and the benefit to our country and our economy.
This approach would produce variable fees, with arts and social science courses being cheaper. Australia already has fee bands – with law, medicine, accounting and economics subjects in the highest fee band, and nursing and humanities among the lowest. “National priority” subjects – such as mathematics and sciences – have been charged at an ever lower, subsidised rate.
While there may be some logic to varying fees for different subjects, a model along these lines would create endless disputes. Similarly, a model based on graduate earnings would only serve to reinforce the idea that the only benefits of a degree (to the graduate and to the country) are economic.
Why do we need a review?
The review is unlikely to develop new funding models, rather it will help the government choose which they think is best. There are various ways of funding undergraduate education – and many have already been tried or proposed.
Under the current system, students can take out loans to cover their fees and living costs. Repayments of 9% of their salary start when they earn £21,000 (rising to £25,000 from April).
Advocates of this model, such Lord David Willets, argue that a graduate only pays for their education when they are benefiting from higher earnings – so fees should not put anyone off going to university. But some groups, such as mature students, are discouraged from applying by the current price tag.
Before this system, a means-tested fee model operated in England between 1998 and 2005. This meant a student’s fee level was based on their parents’ income. The fees were capped at £1,000 but there were no student loans available for fees. At the time, although a third of students paid nothing, this was perceived as the abolition of free education. But university fees weren’t actually new. From 1962, students from wealthier families paid fees as part of the then new students grants system.
Liberal Democrat leader Vince Cable has endorsed the option to replace fees with a “graduate tax”. Advocates of this idea argue it would reduce the amount younger people pay, double the amount of money currently raised for the treasury and end inter-generational unfairness.
The current Labour policy is to abolish undergraduate fees completely. But this option has already been ruled out by the Conservatives.
What about universities?
There are no guarantees universities will be fully compensated for the money lost through a reduction or abolition of fees.
This is because when higher education is funded through general public spending, it typically loses out to compulsory education. This has been true in the UK historically, and is the case in Australia.
Universities cannot be sure that all the money raised through a graduate tax will find its way to them either. So university leaders are worried about a return to the previous situation where higher education was not as well funded at it is today.
Reforming the system
Perhaps the problem then isn’t the current system, but how it has been implemented. But it could easily be modified – a simple move would be to reduce the headline fee. London Economics looked into the reduction of fees to £6,000 and found it would cost the government £1.169 billion – assuming universities received the same funding after the cut.
But the previous education secretary, Justine Greening, has cautioned against cutting fees, arguing it could harm social mobility.
The current system would also be viewed more favourably if the interest charged on the loans was reduced – something recommended by the Treasury Committee of MPs. The system would also receive a boost in popularity if maintenance grants were reintroduced – this would prevent poorer students graduating with the largest debts.
The vocational option
The strong emphasis on technical and vocational education in the prime minister’s speech may also lead to more employer sponsored routes. This could be based on the Apprenticeship Levy, and might help reduce the funding gap universities fear. And it has been argued that because employers benefit from the knowledge and skills graduates bring, they should contribute to the cost of their studies.
The various options will be explored by a review group who will finish their work in early 2019, so any changes will not affect students going to university this year.