Is lowering the fees cap the right policy?

By Nicholas Barr (London School of Economics and Political Science)

Reforms introduced by the Blair government in 2006 provided a progressive strategy for financing higher education, a strategy on which further reforms in 2012 failed to build (Barr 2012). In response, the Labour Manifesto (2015) proposes a reduction in the cap on tuition fees from £9,000 to £6,000, a policy supported by the SNP Manifesto (2015). This note provides a toolkit for assessing that policy. Section 1 sets out the problems with current arrangements and section 2 policies to improve the system.

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 Summary

This note argues that:

  • Central objectives for higher education are quality (higher), access (wider) and size (large enough to accommodate all qualified applicants);
  • In pursuit of those objectives, higher education finance in England is based on the right strategy but with the wrong parameters;
  • There is a good case for some additional taxpayer support for teaching, but the proposal to lower the fees cap is the wrong method at the wrong time.

CURRENT PROBLEMS. There are two major economic distortions of higher-education finance in England:

  • Taxpayer support for teaching in the arts, humanities and social sciences is inadequate in that it ignores their public benefits.
  • The level of income at which graduates start to repay their student loans is too high. The resulting high fiscal cost of loans crowds out desirable spending in other parts of the education system, with adverse effects on efficiency and equity.

In the presence of the second problem, it is an analytical error to consider the first in isolation.

SOLUTIONS. If fiscal stringency allows only one policy, it should be to reduce the fiscal cost of loans, freeing resources which make it easier:

  • To expand the loan system, for example, to increase the maintenance loan and to extend loans to postgraduates and part-time students, to other parts of tertiary education, and perhaps also to apprenticeships.
  • To restore pro-access interventions earlier in the system, for example Education Maintenance Allowances and AimHigher, which were wrongly abolished in 2012.

Additional taxpayer support for teaching is desirable. However

  • It should be in addition to the current fees cap, not a substitute; and
  • It should not come first.

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There’s more to higher education funding than the RAB charge

By Jack Britton (Institute for Fiscal Studies) and Claire Crawford (University of Warwick, Institute for Fiscal Studies)

Higher education funding has been a hotly-debated topic in recent times, with the RAB charge – the government subsidy inherent in the student loan system – a prominent focus of these debates. On the back of new research published today, researchers at the Institute for Fiscal Studies argue that this focus comes at the expense of a wider discussion around how much the government should subsidise the higher education system as a whole, and how best to deliver this. Continue reading →

Labour’s university fees reduction would eventually pay for itself

By Peter Scott (Institute of Education)

In the 2010 election, higher education acquired a surprising prominence, notoriety even, as a result of the Liberal Democrats’ position on student fees. What a U-turn that was – from a promise to abolish fees entirely to acquiescence in a decision to triple them from £3,000 to £9,000.

This time round it looks unlikely there will be the same excitement. In only a small number of seats could the student vote could be decisive. In the last election the Liberal Democrats captured 44% of the (full-time) student vote. According to polling last year, this has plummeted to a miserable 13%.

Although Labour has gained most from the slump in the Lib Dem student vote, no more than 12 seats – six Conservative marginals and six Liberal Democrat seats (not including Nick Clegg’s Sheffield Hallam constituency) – are at risk. And student registration and turnout will be the key. It doesn’t add up to an electoral earthquake even in a tight election. The majority of staff and students will, once again, tilt to the left – but probably to the Greens and, in Scotland, to the SNP as much as to Labour – and without much hope that the tide of marketisation will, or can, be reversed. Continue reading →

Paying for higher education – what are the parties proposing?

By Gill Wyness  (UCL Institute of Education, Centre for Economic Performance, London School of Economics, and EconomicsofHE)

The UK has dramatically increased the supply of graduates over the last four decades. The proportion of workers with higher education has risen from only 4.7 per cent in 1979 to 28.5 per cent in 2011. Rather than this enormous increase in supply reducing the value of a degree, the pay of graduates relative to non-graduates has risen over the same period: from 39 per cent to 56 per cent for men and from 52 per cent to 59 per cent for women. This implies a strong and continuing employer demand for education. Continue reading →

Would capping student fees at £6,000 be as damaging as universities make out?

By Gill Wyness (UCL Institute of Education, Centre for Economic Performance, London School of Economics, and EconomicsofHE)

Labour’s much anticipated but yet-to-be confirmed policy to reduce the cap on university tuition fees from £9,000 to £6,000 a year will be highly expensive, could leave universities £10 billion out of pocket – and would only help richer graduates. That, at least, has been the tone of a growing chorus of alarm sounding ahead of what might be one of Ed Miliband’s key pre-election pledges.

Universities are right to be concerned – they may well lose money out of this policy. It also appears a somewhat opportunistic move by Labour to please a proportion of the electorate. But despite this, there are reasons why the policy should not be totally condemned.

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