Student finance: reviewing the reviews

20 Feb 18

Conor Ryan looks back at the thorny history of tuition fees and offers his thoughts on the latest review of post-18 education announced by the prime minister this week.

It was 16 months before the 1997 election and Conservative education secretary Gillian Shephard had a problem. It was a time of austerity. University intakes were growing rapidly. New ways had to be found to fund higher education that didn’t simply involve the taxpayer.

So she approached David Blunkett, her Labour shadow for whom I then worked, to support her in setting up a review – with explicit backing from Don Foster for the Liberal Democrats – under the late Ron Dearing. The review would report after the general election and would be wide-ranging in its outlook. But it is remembered for one thing: it led to the introduction by the new Labour government of tuition fees paid by students (then opposed by the Conservatives and Liberal Democrats).

In 1998, the decision was also taken to convert all maintenance grants to loans (some had already been converted), but to means test fees. Those who faced new fees also got higher interest-free loans repaid after graduation for those earning over £10,000 a year.

Since the Dearing review, we have had other big changes to the system. In 2006, fees were increased to a maximum of £3,000 – after a big argument in the Labour Party against variable fees that led to the plans almost being defeated – and income contingent loans were explicitly available for fees. By then, Scotland had already abandoned fees. Means-tested maintenance grants were reintroduced and the repayment threshold was raised to £15,000.

Peter Mandelson set up the Browne Review in 2009, which reported to the coalition government after the 2010 election. It led to a £9,000 fee maximum and no more variability in reality than the 2006 reforms despite the government saying it expected many students to pay just £6,000. Repayments now started at £21,000 – a hugely expensive concession to the LibDems that ensured that many loans would never be repaid – and a real rate of interest was introduced that would only start to bite when inflation picked up more recently. Tinkering since then has seen maintenance grants scrapped and – at a cost of £3bn a year – the barely noticed raising of the threshold to £25,000.

That’s the background to the latest review announced by Theresa May yesterday. But the background also includes rising student numbers – touching the 50% of young adults entering higher education by age 30 target set by Tony Blair in 1999 – and some narrowing of the access gap between disadvantaged and better off students.

Perhaps more importantly, the political backdrop includes a popular pledge by Jeremy Corbyn to scrap fees that undoubtedly helped win seats like Canterbury and Reading East for Labour at last year’s election. So rather than seeking cross-party consensus, this review is more about neutralising a perceived party disadvantage.

But the confused history of fees is reflected in the confused nature of the review. A bizarre flurry of weekend briefing – propped up by secretary of state Damian Hinds in his first TV interview – suggested that a key outcome of the review might be universities charging more for courses in expensive STEM (science, technology, engineering, mathematics) subjects and less in humanities. Given the importance of STEM subjects to the economy this could perversely discourage students from doing those subjects and harm social mobility by encouraging poorer students to take cheaper courses. One can only assume its intention was to distract attention from reports that fees would fall to £6,000 a year, which ministers feared would raise expectations that might not be realised.

And the review has not exactly had an auspicious start. It is good that it is looking at the too often overlooked further education sector and at the paucity of apprenticeship options – barely 10,000 young people a year start higher or degree apprenticeships compared with 330,000 freshers at university – but it will be vital that the review panel feels able to take a hard look at the whole funding system and the interaction between different levers.

Modelling by London Economics for the Sutton Trust in November showed that it would cost about £1bn to restore maintenance grants. It was a mistake to remove them, even if students got higher loans, and this should be the first priority for the panel. Then if the committee wants to look at fees and variability, they should be varied according to family income not the cost of the course. A model that would reduce average fees to £3,500 a year could – with restored maintenance grants – reduce debts for the 40% poorest students from over £50,000 to £12,700 and increase the proportion of loans repaid from 55% to 65%. The total cost of this would be up to £3bn – about the same as the threshold change announced last October. Less radical means testing could cost less. There is also a need to get better value from the £800m a year that universities spend on access and outreach in England, building a reliable evidence base on what works. But the priority should be leveraging this existing money to achieve better outcomes for young people from disadvantaged backgrounds, rather than to risk stalling progress with cuts.

And then the review should take a long hard look at what’s on offer for those who go don’t go to university. For all the words about apprenticeships, the brutal reality is that less than a third of those taking higher apprenticeships are aged under 25 (let along being 18 or 19). Most apprenticeships for young people are limited level 2 programmes with few career prospects and patchy progression to higher levels. If anything, the apprenticeships levy is reinforcing a bias towards adults doing higher apprenticeships as the levy lacks the levers to prevent it being used simply to upskill existing staff. Addressing that issue and the quality of technical and paraprofessional education in colleges is as important to social mobility as changing the funding of higher education.

This week’s review may have had a pretty inauspicious start. But as the panel deliberates over the next year they have the chance to make a real difference to social mobility – if they get their priorities right.

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