By Lucy Phillips
17 November 2010
The new arrangements for student tuition fees in England amount to a ‘quick win’ for the Treasury and are less fair and progressive than a graduate tax, Public Finance has been told.
The government plans to cut the higher education teaching grant by 80% from 2012, taking £3bn per year off the public sector borrowing requirement.
Universities will be free to charge fees of up to £9,000 a year, up from £3,290 currently, to help plug the funding gap. This will shift the national debt to personal borrowers, leaving only the write-off costs for student loans on the Treasury’s books.
But Pam Tatlow, chief executive of universities think-tank Million Plus, described the move as ‘a sleight of hand’. Taxpayers would be hit in the long run, she said, because only half of graduates are expected to pay off their loans within their 30-year limit. She estimated that the write-off costs would increase from about 27p in every £1 currently to 42p in every £1 under the new system. This would thwart attempts by the government to sell off the student loans book and damage the prospects of getting a good capital receipt for the taxpayer.
The proposed changes to university funding came earlier this month following recommendations in an independent review by former BP chief Lord Browne. The analysis was commissioned by the previous government to look into all options for future student finance.
Students have already staged a mass protest in London against the changes, which will treble student debt. The Liberal Democrats have come under particular criticism for reneging on a pre-election pledge not to raise tuition fees.
Tatlow also told PF that the government had failed to properly explore the alternatives to raising tuition fees. She said this was for for ‘political and ideological reasons’ because ministers wanted to promote differential fees and encourage private providers to enter the market.
Million Plus’s modelling of graduate tax showed it was ‘fairer and more progressive’ than both the current and proposed system, she said. Graduates on the lowest incomes would pay less and perceptions of the costs of going to university would be altered, improving participation rates and social mobility.
Business Secretary Vince Cable had initially pushed for a graduate tax but ditched the idea shortly before the publication of the Browne review, which ruled out the option on the grounds that it was ‘unworkable’, regressive and would not be self-funding until 2041.
A spokesman from the Department for Business, Innovation and Skills denied the government was looking for a quick win, saying the proposals would ensure the future funding of universities in England was ‘put on a sustainable footing’. All options for future student finance had been thoroughly considered by the Browne Review, he added.
Labour leader Ed Miliband and other members of the shadow Cabinet have expressed support for a graduate tax but shadow chancellor Alan Johnson is against the policy, leaving the party line unclear.
A vote is needed in both houses of Parliament in order to raise the fees. This is expected to take place before Christmas.
See also MartinPliener's blog.
