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The five options for student tuition fees that politicians have to choose from

Four years on, anger at tuition fees hasn’t gone. ucloccupation, CC BY-SA

As we approach the UK general election in May 2015, a number of options are on the table for politicians considering the future of university tuition fees. The parties have not yet fully set out their stalls, but it remains an important issue in the minds of many voters who remember the Liberal Democrats’ U-turn on fees only too well.

1. A £9,000 status quo

The first option is to keep the status quo of the fee cap set at £9,000 a year. Greg Clark, the new Conservative minister for universities and science, said he agreed with predecessor David Willetts that £9,000 was adequate to cover the cost of university teaching.

This position needs to be understood alongside the announcement in last year’s budget (as yet un-costed) that a cap on the number of students universities can admit will be lifted from 2015 onwards. This could potentially increase the exposure of the student loan book.

Keeping the status quo is also the stated position of the Liberal Democrats. They would maintain the existing arrangements that their secretary of state for business, Vince Cable, put in place while retaining a barely credible aspiration towards abolition at some unspecified future date.

2. Higher fees

The second option is for an increase in the maximum value of tuition fees payable through the Student Loan Company (SLC). There is no legal bar to any university setting its own fees in excess of £9,000 but to do so would make it ineligible for other forms of direct funding from the Higher Education Funding Council for England (HEFCE). As a result, and even though that direct funding might be negligible, no vice chancellor has been willing to do this — yet.

There have been voices, such as Andrew Hamilton, vice-chancellor of Oxford University and Wendy Piatt, director general of the Russell Group, calling for an increase in fees to £16,000 a year. This increase, advocates argue, would cover the present funding shortfall of providing an “elite” education.

The reality of any comprehensive spending review in 2015 would be a further cut to non-ring-fenced Whitehall budgets (including the Department of Business, Innovation and Skills). This makes it all politically very difficult for any fees increase in the next parliament, despite Cable’s claims at the Liberal Democrat party conference about the Conservatives’ intentions to introduce one.

3. Fee increases, but not across board

A further option, currently being researched by the Nuffield Foundation, would be to allow a limited number of universities to increase fees. This might be based on the rate that graduates pay back their loans at a particular university. But this would be a fundamental shift in the way universities are funded and would be both politically toxic and very difficult to implement. Other universities would quickly find ways to make the case to access the criteria for increased fees and costs would soon accelerate.

4. Cut fees

The fourth option is a reduction of the fee and a making good of the subsequent shortfall to universities. This is the Labour Party’s current policy. There has been no advance of Ed Miliband’s statement in 2011 of a proposed fee of £6,000. At this year’s party conference in Manchester, Liam Byrne the shadow spokesman on universities, said that Labour would cover any subsequent shortfall in income.

Yet Labour have not as yet laid out their plans on fees. They remain torn between the demands of a shadow treasury team (which includes Shabana Mahmood, the previous universities spokesperson) who are eager not to be seen to make unaffordable promises and a political opportunity to put a radical offer on tuition fees at the centre of the Labour election manifesto.

This would likely include a degree of debt-forgiveness for loans taken out under the £9,000 dispensation, making it an even more expensive commitment. Labour also remains open to an entirely different funding mechanism in the future, such as a graduate tax, but that would be a long-term prospect and be subject to a further independent review, similar to that run by Lord Browne in 2010.

VC fears over fee reduction

Vice-chancellors, in the form of their representative body Universities UK, have set their face against Labour’s plans. This is not because they would result in a loss of income but because of the conditions that might be placed around accessing the funding difference of £3,000. The restoration of a sizeable teaching grant is highly unlikely. Rather, Labour would want to incentivise the behaviour of universities around issues such as regional development, apprenticeship degrees, and social mobility.

Such a loss of autonomy makes this option unpalatable to many higher education leaders – but potentially good news for taxpayers. Given Miliband’s self-styled desire to take on vested interests, he might find an easy political target in facing down Russell Group vice-chancellors already struggling to justify their own pay awards.

Any Labour announcement on tuition will not happen until after the chancellor’s budget statement in December. Realistically, this means in February or March, only a few months out from the election.

5. Abolish fees altogether

The one option that no one is discussing is the abolition of fees. There is no politician, sector leader, or vice-chancellor making a serious argument for this. It would require the whole of the higher education budget to be funded by direct taxation. This might be the most progressive, most sustainable and cheapest option in the long run, but it would also expose universities to the short-term risks of cuts in public spending.

Cable is ‘not losing sleep’ over student loans. Danny Lawson/PA Wire

Cable stated at the Liberal Democrat conference that the sustainability of the present higher education funding arrangements did not keep him awake a night because he would be over 100-years-old when its consequences came home to roost. The outcome of such complacency will be that the generation of students attending university now will have to pay for higher education twice: once in the form of their own loans, and once in the form of cleaning up the debts left by this I.O.U policy.

Inter-generational justice

At a time when, despite the green roots of recovery, the economic experience of many is still extremely challenging, and with the Russell Group committing to a combined £9 billion building and amenities programme in the next five years, it looks as if certain vice-chancellors just do not get it. The next parliament will see less spending on higher education not more.

In that context, the request for £16,000 fees looks quixotic. In the meanwhile, the value of the £9,000 fee decreases each year with inflation.

There are fiscal arguments for and against income-contingent repayment loans, and their increase or decrease. But ultimately, how universities are funded is not a fiscal decision but a political one. The reason to argue against the present state of tuition fees is not necessarily the cost to the Treasury of a generous repayment threshold or even levels of graduate non-repayment. Rather it is a fundamental question of inter-generational justice.

This is the issue that a Labour election promise could tap into and which many vice-chancellors and the parties of the Coalition seem unexpectedly blind to. But it is questionable whether the political weather in advance of the next parliament is hospitable to this final option of abolishing fees. Germany has recently abandoned all tuition fees for its universities. But who in England will make the case for free higher education now?

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