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Expect the unexpected? Six things to look out for in the Spending Review

  • 25 October 2021
  • By Nick Hillman

HEPI Director, Nick Hillman, looks forward to this week’s Spending Review.

If you made me bet hard cash, I would say it currently seems unlikely that anything positive to do with higher education and research will make up the main story coming out of this week’s Spending Review. On research spending, there are even signs that the responsible Ministers will water down existing commitments.

The Government have generally been ambiguous in their attitude towards higher education, supportive of much of what higher education institutions do but concurrently sceptical of much of it as well. (I have given Government a plural verb as there is more than one view about our sector among the many Government Ministers. Government is rarely a single entity.) One story in the weekend papers about trying to make some creative courses look less attractive than others is a good example of this two-faced approach.

But last-minute decisions are commonplace at spending reviews. Moreover, most politicians – and perhaps Boris Johnson most of all – like to spring unexpected things on voters from time to time. So when it comes to the Spending Review, never say never. At least until something else happens.

Whether or not decisions about higher education appear on the front page of this Thursday’s newspapers the day after the Spending Review, there are at least six things it is worth looking out for when the Chancellor stands up to speak.

  1. 2.4 or not 2.4? Will the past firm commitment to have 2.4% of UK GDP spent on research and development by 2027 be maintained and refreshed, will it drop even further down the priority list or will it be rejected? All three are possible. The Prime Minister had warm words for public and private research spending in his Party Conference speech, implying existing commitments could be restated. But the Business Secretary recently refused one of his predecessors’ request for clarity over the 2027 timeframe. And the majority of such targets around the developed world end up being missed by a country mile. At the time of writing, the most likely outcome (based on this Government’s general attitude towards research spending) would seem to be a watering down, perhaps by delaying the target date for the 2.4% target, but not an outright rejection of it. Rejecting the target would mean admitting we are unable to approach even the average across the OECD (which is now 2.5%, having recently grown), let alone the stellar performance of countries like Germany and Korea.
  2. £9,250 or £7,500? Various accounts suggest recent debates in Whitehall on the headline tuition fee cap for degree courses in England have been particularly lively. The Augar recommendation of a cut of almost 20%, to £7,500, has come to look implausible, especially in the context of rising inflation, as it would have a dramatic impact on institutional finances. Imagine being a Tory MP for a red wall seat with a higher education institution that might be pushed to the wall by such a cut: you are not going to hold your seat easily and, therefore, you are not going to support such a change. Slashing fees across the board now would mean Ministers might even have to reverse their recent decision to close the Higher Education Restructuring Regime (HERR) at Christmas. But the idea of a smaller cut of a few hundred pounds seems to have stayed on the table even as £7,500 slipped to the floor and the Augar argument that university-based Foundation years are overpriced still rings in some people’s ears. Perhaps we will see the long-awaited consultation on the Augar proposals at or around the time of the Spending Review but the case against cutting £9,250 by any amount, however small, is very strong, especially given the way inflation is now eating away at the fee cap. So you would want very favourable odds if you were to bet upon a change to the maximum fee.
  3. £27,295 or £21,000 (or £23,000)? On the one hand, people like Lord (David) Willetts in his recent HEPI paper have recommend a reduction in the student loan repayment threshold from its current high level of over £27,000 on the grounds that this would bring the system back into equilibrium. Specifically, a material drop could reduce the loan write-off costs back to where they were meant to be when the current funding system was implemented in 2012. On the other hand, other people, including Alan Roff in his January 2021 HEPI paper, have argued the current system is kaput. Some have tried to paint any change to the terms for existing students / graduates as wrong in principle: in his customary OTT language, Martin Lewis of MoneySavingExpert says a reduction in the repayment threshold would be ‘a breach of natural justice’, though he skates over the fact that he warmly welcomed the last major ‘retrospective’ change. My view is that it is better not to cut a penny from education spending in a crisis but, if it must happen, then tweaks to student loan repayment terms are better than very regressive changes like recapping student numbers. Rumours abound that some people in Whitehall would prefer to change the terms for new students only but, in spending review terms, that is nonsensical: in that case, the higher repayments would not start until after the spending review period is over and they would take many years to amount to anything really substantial.
  4. Minimum entry standards or a free-for all? Spending reviews, as their name suggests, are meant to be about public spending, whereas introducing a new minimum entry standard for higher education is primarily an educational decision rather than an economic one. Depending on the precise details, the most common current idea for backdoor student number controls (minimum GCSE requirements in English and Maths) would be less drastic than some past ideas for minimum A-Level grades and might actually save very little money. But, then again, any reduction in student numbers would have some financial effect by reducing spending on students (for example, by lowering future student loan write-off costs) and any minimum entry standard could be raised over time. The extent of any savings would depend on whether those shut out from higher education were to join the unemployment queue instead (or get jobs and bump others on to the unemployment queue). And if you believe, as the Treasury used to, that more graduates is the best solution to raising productivity, then in the long run it would seem to be economic madness.
  5. Further evolution of skills policy, though dressed up as a ‘revolution’. Alex Burghart, the new Minister for Skills, is fond of talking about his visit to Salford during the Conservative Party Conference to see one of the Boot Camps. It now sounds like the Boot Camps are to be one of the initiatives to benefit from a boost to skills spending this week, alongside T-Levels and traineeships. Conservatism is meant to be rooted in opposition to revolutions, but skills policy tends to be the exception that proves the rule as a ‘skills revolution’ has often been promised by Conservative politicians. It was punted out as a story this weekend just as it was a major plank of their education offer in Opposition – the 2008 Conservative Party ‘skills green paper’, for example, similarly promised A Training and Apprenticeships Revolution. But what we have heard so far sounds like a beefing-up of current policies rather than the change of direction that the word ‘revolution’ more generally means.
  6. Most importantly, look out for the unexpected. Leaks, official and unofficial, are a currency of modern government. Long gone are the days when a Chancellor of the Exchequer had to resign for an off-the-cuff remark to a journalist while on his way into the House of Commons to deliver a budget, as occurred in 1947. So we are likely to know lots about the spending review before Rishi Sunak stands up to speak in the Commons on Wednesday. Yet you can still bet your bottom dollar that there will be some elements of the Spending Review that are likely to remain cloaked until the main event. If there isn’t, the Government will be surrendering the chance to set the next day’s headlines. Any such announcement is likely to be associated with a more salient political issue than higher education (the pandemic, the NHS, climate change, catch up schooling or many other issues) but big fiscal events have also often included something big and previously unspun on higher education, such as freezing research spending (at the 2010 Spending Review), removing student number controls (at the 2013 autumn statement) and abolishing maintenance loans in England (at the 2015 summer budget). So something more significant is far from beyond the realms of possibility – after all, despite the many delays to date, the Government will one day have to respond in detail to the Augar report and explain exactly what it means when it says it supports a new university admissions system.

1 comment

  1. Amanda Huber says:

    I am so very grateful that I grew up in Germany where I could study for free at university. Within two months of starting my first job as a lawyer I had paid off all my debts.

    I am also very grateful to the UK. Life here has taught me how to survive under the harshest conditions. I had to eat a lot of humble pie, swallow my pride, steel myself against the hostility, xenophobia and racism (I have a mixed race daughter) that is so prevalent in this country, work for a pittance, work for free.

    No money, nor help was offered in any form for me to requalify as a lawyer. But I did it anyway. It was difficult bringing up my daughter as a single mother, holding down a full-time job and studying at night.

    Now my daughter is sitting her A-levels and I do not want her to be saddled with eye-watering student debt.

    Overhaul your system! Learn from other countries. But of course if there is no (political) will this will not happen. The government and the Conservatives do not care and do not know about hardship. There is no vision and no wish for a more egalitarian society.

    If people do not like my opinion and say go back home where you came from, I will say, I will not be silenced or intimidated by your remarks.

    Anyway, where is my home? My parents had emigrated to Germany. They were treated well and with respect there. The English have a thing or two to learn….

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