Here we go again ...

As expected, Labour have now announced their policy of reducing home/EU undergraduate tuition fees in England to £6k per year, from the current £9k. (The policy only affects England, as higher education is a devolved responsibility).

There’s already much argument about the merits of the plan. To summarise, in the Pro camp, you’ll find the observation that the system is broken and something needs to be done, or public debt will spiral out of control; that the perception of debt is a fear as much as the actual debt; and that an increase in the maintenance grant is a good thing. On the Anti side you’ll see the observation that this puts long term university funding at risk; that it benefits only better off graduates; and that there isn’t a long-term problem that needs fixing.

November 2010, 30 Millbank ...

Here’s my take on this.

Firstly, the system is broken. Although forecasts about the RAB charge and the amount of debt that will not be repaid are only forecasts, it is unarguable that the average level of tuition fee actually charged is substantially greater than the £7,500 on which the policy was based. £9,000 was meant to be charged only in exceptional circumstances; it has instead become the universal norm. In these circumstances, it’s hard to believe that there’s no effect on public finances. And as the coalition’s plans for reducing the public deficit have not borne fruit (despite what George Gideon Oliver Osborne says) this must be a problem for the future.

Secondly, it is correct that the money benefit will go to higher earning graduates. This is straightforward mathematics. What is also true is that the perception of debt will reduce, and that will, I think, remove some disincentive to potential students and their families. How much? We won’t ever know, so that’s a matter of faith.

Will it reduce university funding? It all depends on the nature of politics and public funding, and the effectiveness of future HE ministers versus chancellors. So that’ll likely be a ‘yes’, then, but at some unknown and unspecified date. A government response will be that it serves universities right for being greedy in fee setting in the first place, but as the whole £9k fees policy was a dog’s breakfast from the outset this is just name calling.

So let’s speculate that Labour get into government with a working majority. How would this be implemented?

The framework within which fees are charged is that laid out in the 2004 Higher Education Act – there’s a basic amount and a higher amount. The basic fee level was set – after the 2010 discussions – at £6,000 per year; the higher amount is £9,000 per year. These are in the precisely named Higher Education (Basic Amount) (England) Regulations 2010 and the Higher Education (Higher Amount) (England) Regulations 2010.

The way it works is that any approved provider can charge fees up to the basic amount (£6,000); to charge at the higher amount (£9,000) you need to have an access agreement approved by OFFA.

So far, so good. The rub is that the basic fee amount is what private providers (eg BPP University, University of Law etc) can charge; the higher amount applies to HEFCE funded universities. On the World at One this lunchtime Chuka Umunna – Labour’s BIS frontman – said that the intention was to continue to require universities to pay bursaries and support access, implying that the basic/higher levels, and the requirement to submit an Access Agreement to OFFA, will continue to apply.

This suggests that the Basic Amount will be reduced to £3k, and the Higher Amount to £6k. If this is the case, then private providers won’t, without further legislation or specific regulation, be able to charge the £6k they are at present.

If this was part of Labour’s plan I’d have expected it to be talked about: you can make good political capital about “clamping down on dodgy profiteering colleges”, even if this is probably unfair when applied to the larger and more reputable ones.

An unanticipated consequence, perhaps?

A pre-emptive strike

University tuition fees on the BBC from 6am today – there must be an election coming!

The story, of course, is the letter to The Times from UUK’s Board members representing English universities, protesting pre-emptively about Labour’s rumoured plan to reduce the tuition fee cap in England to £6,000 per year. (It's behind a pay-wall so I, haven't linked to the letter, but Wonkhe below gives a link to the UUK press release.)

Wonkhe blogs knowledgeably about the politics behind this, and the key point seems to be that there isn’t really a Labour HE policy yet. So what we’re seeing is an attempt to shape policy, or at the very least make the £6k cap untenable politically. Let’s take a look at that.

Firstly, what is the universities’ case? Deeply flawed though the current English fees regime is, it is possible to say a couple of good things about it.

Firstly, it has increased the money available to universities – and better-funded universities ought to be able to deliver better teaching and research. Plus, and this is a biggie for universities, it is money which comes without many strings attached, thus increasing university autonomy.

Secondly, it hasn’t caused a reduction in participation in higher education. Much like the 2006 increase to £3k, an early dip has been compensated for and the upward march of participation continues.

But, as I said, it is also deeply flawed: it’s very expensive for the country. The repayment rate is capped at 9% above a £21k threshold, and repayments stop after twenty years. Thus there is almost bound to be a built-in default, and the state picks up the tab. It is, of course, a long-term issue (July 2035 will be the twentieth anniversary of the first graduates graduating with higher fee debt) and no-one knows exactly what the default rate will be, but the forecasts on which the policy were introduced look brave at the moment. And, critically, estimates on default rates have an impact on government budgets in the here and now: meaning that real money needs to be found as estimates of default rates go up.

The problem universities have is that reducing the fee cap sounds like a good idea. If students pay less – and £6,000 is definitely less than £9,000, no matter what you think of Ed Balls – then surely it must be better for them? And many people outside HE (and quite a few inside HE) think a £9,000 flat rate is simply too much.

Clement Attlee: £6k fees weren't his policy

It isn’t that simple, of course. Because repayments are capped, graduates on low-ish salaries might still find themselves paying for twenty years, and still owing at the end of it (to be picked up by the state); the ones who would benefit are graduates who go into more highly paying jobs, and so can pay the £6k off within the time limit. And as the graduate social mobility work led by Alan Milburn showed, access to high paying professional jobs is biased towards those from more advantaged backgrounds. So, with a £6k fees policy, the ones who benefit will be disproportionately from richer families. Reducing fees from £9k to £6k doesn’t seem very progressive to me.

But it sounds it. And here’s the problem universities face. The current regime is unsustainable for the state, but is actually pretty good for universities. Any move - eg to a graduate tax – makes things worse for universities, in the sense that they become beholden to the state for money. Remember that the whole fees thing happened because the state wouldn’t pay the cost of expanding higher education whilst maintaining levels of university funding. For universities, a graduate tax is a step backwards.

And as I blogged last week, young people in Labour MPs' constituencies are disproportionately more likely to go to less prestigious universities. And the lower down the league table you go, the more plausible the argument, that £9k is too much, can feel. This is about the heart not the head.

There’s a lot at stake here. If we’re headed for coalition, then the best outcome might be a cross-party consensus not to make HE policy a haggling point. That leads to policy making on the fly, and bad outcomes. So perhaps the real message from universities needs to be “We know the current arrangements can’t hold, but let’s this time think it thought properly”. Not much of a manifesto slogan, but better for policy, I suspect.