How will BIS tackle the HE funding challenge?

Below is a short extract from a speech that Nick Hillman, HEPI Director, made earlier today to a Higher Education Academy meeting of Pro-Vice Chancellors for teaching and learning.

No political party promised to protect the budget of the Department for Business, Innovation and Skills (BIS) in the lengthy general election campaign that has just finished, and every time they promised to protect something else or committed to a tax cut BIS became a little more vulnerable.

The Conservative manifesto gives little indication of how the higher education funding issues to come will be tackled. Predicting the outcome long in advance of a spending review is a mug’s game because things change rapidly in Whitehall. But I shall take a risk and tentatively predict that we could see four changes. These are not recommendations of what should happen; they are rather a guess at what might happen.

First, we may see small rises in the undergraduate fee cap, probably in line with inflation, in the medium-term. The alternative of a big step increase in fees is less likely because: there is no clear majority in the House of Commons for it; students are already querying the value for money they get at £9,000; and each increment above £9,000 raises the proportion of loans that will never be repaid. Of course, an increase in the fee cap does not, in itself, save money but it does ease the financial pressure on institutions and reduce the demand for more direct grant funding via the funding council.

Secondly, I suspect we will see somewhat tougher student loan repayment terms. This was the dog that did not bark during the general election campaign. Yet is easy to see how the Conservative team in BIS might simply not come forward with the long-promised regulations to raise the £21,000 student loan repayment threshold. Don’t forget, the commitment to raise the threshold in line with earnings each year was forced on reluctant Conservatives by their Liberal Democrat Coalition partners. By ensuring more money is repaid, this would reduce the infamous Resource and Budgeting (RAB) charge overnight.

Thirdly, we could see the balance between non-repayable maintenance grants and repayable maintenance loans change, so that the grants fall in value while the loans grow in importance. We know from a leak to the press that BIS has modelled this shift in the past and it helps the public finances partly because of the different ways that grants and loans appear in the accounts.

Fourthly, Ministers may make more demands for information on where students’ fees are going as well as on what students get in return. For good or ill, this will jumpstart a debate about whether all courses should be publicly supported in the way they are currently. This would chime with debates already underway in Australia and the United States.