The much-awaited major review of post-18 education and funding has arrived. This week, the prime minister, Theresa May, took to the stage at Derby College to announce her plans. All this fanfare provides a clue to just how much the government wants to win back young voters.
Despite this, the terms of reference released by the Department for Education suggest that this major review may be little more than a tinker. The core principles of the current system will persist: tuition fees will remain, student numbers will not be capped. The clichéd objectives of “competition and choice” and “value for money” are beats of the same drum we’ve been hearing since 2010.
The truth is that this major review is a money-saving exercise. The terms of reference state that the outcomes “must be consistent with the government’s fiscal policies to reduce the deficit and have debt falling as a percentage of GDP”. A change to headline fees does not benefit students or graduates – many of whom will not repay them in full anyway – as much as it benefits the Treasury and the taxpayer. It’s easy to forget in the current system that the Treasury still picks up a substantial part of the bill for higher education, subsidising around 40-45% of the total, depending on the estimated rate of student loan default. The government spends more outright per student on universities than it does on early years, and nearly as much as on primary schools. But these figures conceal the courses that cost the government more. New Longitudinal Education Outcomes data, which links graduates’ student loan, tax and benefits records to show how much they earn, reveals that large numbers of graduates in creative arts, media and communications and agriculture are earning substantially less than the student loan repayment threshold, now at £25,000. This means that the taxpayer and the Treasury are making a higher contribution.
LEO also illustrates the areas of over- and under-supply of skills in the labour market. In an uncapped student numbers system, where the courses on offer are determined by what young people want to study, the government has no means for regulating its spending on courses where graduates will barely repay any of their loans. Forcing some of these courses to charge less, as mooted by the education secretary, Damian Hinds, is how they plan to limit their subsidy.
It’s critical to remember that it’s the government’s liability that is being limited, not that of students. Cutting headline fees to £7,500 or less will not make a difference to the take-home pay of most graduates, particularly those on the lowest salaries. Neither will a cut to the interest rate on student loans.
Furthermore, LEO data must be used with caution. A graduate’s gender, race, class background and location determine salary outcomes as much as university and course of study.
Real help for students and graduates would be better achieved through more generous maintenance grants to support the cost of living while at university. The government could also help middle-earning graduates by reducing the repayment rate. The problem is that this costs the government money, rather than saving it. If, as has been hinted, this review results in more generous student maintenance, the money will have to be found from elsewhere in the sector.
Tweaking headline fee levels seems an odd way to solve the Treasury’s problem. It’s unclear whether enforced differential fees will help or hinder student demand for higher-cost subjects in areas with a skills shortage, such as the sciences and engineering.
But one impact of lower fees in particular subjects is obvious – reduced income for the universities that teach them. Though the government may be reluctant to admit it, this may be an intended outcome of the review. Thanks to tuition fees, universities have not suffered the pains of austerity in the past decade anything like other parts of the public sector, and remain relatively generously funded on a per student basis compared to schools and colleges.
Some in government believe that efficiencies should be squeezed out of the sector through cuts to income as well as through the competitive pressures applied by the market. This may prove too much for some institutions. After years of relative protection, the sharp edge of austerity may finally be coming.
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