This guest blog has been kindly written for us by Professor Tim Blackman, Vice-Chancellor of Middlesex University and author of HEPI Occasional Paper 17 on The Comprehensive University. Professor Blackman writes here in a personal capacity.
The Government’s terms of reference for the ‘independent’ panel undertaking the current Review of post-18 education and funding in England exclude abolishing university fees. Instead, the panel is to work with the principle that students should contribute directly to the cost of their education. Since the Labour Party is committed to abolishing fees, these terms of reference position the review as party political rather than independent. The ideological choice in England will be clear at the next general election: higher education as a market place or as a public service.
Labour’s policy has been criticised as both unaffordable (for the taxpayer) and unfair (to non-graduates). Unaffordability is a strange criticism given that higher education has to be paid for somehow, whatever the ‘unit of resource’ per student and value for money from that unit of resource. Unfairness mainly concerns the many taxpayers who are not graduates having to pick up a large part of the bill for educating those who are, and who on average enjoy higher incomes as a result. Cross-generational fairness is also an issue although less discussed. Many older graduates had a free higher education and means-tested maintenance grants.
The Government’s attempts to recast the amount of unpaid graduate debt as a taxpayer contribution appear unlikely to make headway with convincing many of the public that such large headline debts are fair. While changing from fees and loans to a graduate tax would in practice be quite a small change to a system that is anyway much more like a graduate tax than commercial loans, this would still presumably include a contribution from general taxation to reflect the wider societal benefit of graduates.
There is, however, a much simpler solution and that is to raise the higher and additional rates of income tax for all taxpayers in these bands. Given the proportion of graduates in these higher bands – about two-thirds – they are ready made combinations of a ‘graduate tax’ (with built-in cross-generational equity) and wider taxpayer contribution (from non-graduates, but only if they are higher earners, thus avoiding the issue of a low paid caretaker whose children go into work at 18 having to pay towards other children’s higher education). Another way of looking at this is that it raises the repayment threshold from £25,000 for the current loan system to £45,000, where the higher rate of income tax starts, except that all higher earners contribute (including, potentially, the caretaker’s children – especially if they get to university).
The cost of abolishing fees has been estimated as around £7.5bn per year. An increase in the higher rate of income tax from the current 40% rate to a rate of 45% would raise £6bn. An increase in the additional rate (above £150,000) from 45% to 65% would raise the further £1.5bn needed. These might seem significant increases, but not when compared with indebted graduates paying 9% extra ‘taxation’ above just £25,000 p.a. – and with no adjustment for tax free personal allowances.
Writing off the loans of existing graduates, estimated at around £20bn for the £9k fee regime, is a different matter and very costly. It has been proposed by some because of the perceived inequity of new cohorts of students having a free higher education while recent and past cohorts are still paying off their loans. But this is less of an issue if the tax contribution comes only from higher rate taxpayers. Graduates still paying off their loans will know that new cohorts paying no fees will still contribute if and when they become higher earners. Existing higher rate taxpayers will be contributing towards educating future generations of graduates, possibly while still paying off their student loans, but often after they have stopped because they have reached the 30 year limit after which the loan is written off. This is also likely to be a time of high earnings for many graduates.
These higher and additional rate tax increases do not include paying for maintenance grants which, if re-introduced, would add significantly to the required tax rises. Arguably, given that most of the need for maintenance grants is associated with students choosing to live away from home rather than attending a local university and commuting, there is still a case for these to be loans rather than grants because students choose to incur the additional cost of moving away from home.
The tradition of students moving away from home to attend a residential university is unusual internationally and a legacy of the boarding school model introduced to educate the children of colonial administrators. While this tradition is often defended as being good for young people, there is no evidence of which I am aware that this is the case, and it could nevertheless be available as an option via a loan. There would also still be a need for help towards the cost of commuting but this could be addressed by more generous student discounts on public transport, which could be delivered cost-neutrally by redistributing concessionary fare budgets. Transport for London, for example, spends £55m annually on free travel for over-60s compared to just £30m p.a. for a 30% student discount. There is a strong argument for shifting the subsidy from older to younger generations.
A policy of encouraging local study has many benefits. It is less costly to students and taxpayers, greener in transport terms and would take pressure off many local housing markets. It also offers an option for phasing in free higher education. Just as going to university ‘in state’ in the United States means considerably lower fees than studying out of state, free higher education in England could at least initially be restricted to studying ‘in region’, based on the Government Office regions abolished in 2011. Studying out of region would mean paying a regulated fee, at a level to be decided, but similar in principle to how students from Scotland pay fees to attend English universities.
A policy of free local study would not be necessary in order to abolish fees, but it would help cushion the cost by both reducing the need for maintenance grants and some students opting to move region and pay. The latter, of course, is potentially an argument against this idea if local study becomes the only choice for many people from low income households because they cannot afford the out-of-region fee or lack the resources to maintain themselves away from home. This would only really be an issue of educational disadvantage if the effect was to narrow the choice of types of university or course, but this choice is already narrowed by ‘top’ universities using academic selection in a way that excludes many such people, whose prior attainment tends to be significantly lower than those from better-off households.
The answer – and one that would be a truly radical and democratic reform of the sector – is to do what I argued last year in my HEPI booklet The Comprehensive University and require all universities to have more diverse intakes – socially, ethnically and by ability. Comprehensive reform of higher education is long overdue, with its likely social and educational benefits from a ‘diversity bonus’ in all our institutions.
The idea that it is only by moving many miles away from home to study that students meet people from different backgrounds would be shown to be the myth that it largely is, given that currently our university system sorts students into institutions where they study mostly with other students like them. This would also be likely to set higher education down a path of more regionalisation and a greater choice of courses within each region (such as we have seen with the recent announcement of additional medical schools) which would benefit meeting skills needs and collaboration with further education.
I have long been a supporter of modest fees and not especially critical of the current loans system with its important progressive features. However, the Government’s decision to rule out abolishing fees as an option in the current tertiary education review has made me question this – because it reveals an ideological commitment to the market in higher education that seems to blind policy-makers to the sheer overhead costs and social divisiveness of our system.
It also seems possible that with this review we will see the progressiveness of student loans for degree study being criticised as a market distortion, tempting students who would be better opting for shorter vocational courses or apprenticeships. Not only does that threaten to undo the progress made so far with widening access to degree study, but it fails to address far more important issues about what we are teaching and how, such as replacing outmoded academic years and credit with more flexible competency-based learning and assessment.
Abolishing fees and instead funding higher education from higher and additional rate taxpayers is a simpler, fairer and cheaper alternative to the current system and any minor reforms of it such as varying repayment thresholds and interest rates. The expected future rise in the number of young people aspiring to enter higher education (as outlined in HEPI report 105) will challenge any funding system, but loans no longer mean that student number controls are off the agenda given the level of taxpayer contribution to settle unpaid debt and support high-cost subjects. The idea that fees and loans would guarantee university autonomy and funding has also worn thin with the Office for Students’ new regulatory regime and a further fees freeze.
Institutional quotas incorporating a required balance across entry grades and social background – basically an elaboration of current access benchmarks – would provide a basis for the diversification I advocate even without initially confining free higher education to local study. But it would enable such a policy to be managed so that there are enough free local places for the range of prior attainment in any region.
Above all, at a time when young people are under pressure from so many directions, and the number of part-time adult learners is collapsing, abolishing fees and using higher rate tax bands to pay for it would be an important statement about those who are successful in their careers and businesses investing in young people and adult learning.