Saturday, 4 December 2010

University fees

Taking my oldest granddaughter to a show with her mum last night brought home to me that in seven years' time she will be applying to University and will face very high fees (unless current policy proposals are reversed or modified substantially).

On Tuesday when I accepted a lifetime achievement award, I noted in my acceptance remarks that my father had been a manual worker and that the 1944 Education Act and state grants had made it possible to be the first person on either side of my family to go to university (Lord Kinnock was in the audience and made similar comments many years ago).

My uncle, an intelligent and cultivated man, had started a course at Woolwich Polytechnic (now Greenwich University) but was called back to the family business which was his parents' livelihood. As he told me towards the end of his life, he had spent it 'chained to the shop counter'.

It should be noted, however, that when I went to university the percentage of the age cohort attending was much smaller and hence the costs to the public purse were proportionately lower. I am sometimes asked what percentage of the population should go to university. I don't think that there is any methodology which could give a definitive answer in terms of labour market needs. Saying 'anyone who is capable' just deflects the question on to a definition of capability.

We are making a very sudden switch to an essentially American system of higher education in terms of funding arrangements. Having a taught in an American university, my impression is that arrangements for the less well off are quite robust. Otherwise you have to start saving, as American friends have done, when a child is born.

Clearly higher education brings benefit to an individual and they should make a contribution. But there is also benefit to society as a whole, even from the humanities and social studies which have been hit particularly hard by the removal of their publicly funded teaching grants.

Quite what the split of benefits is cannot be easily quantified. I have seen attempts to do this, but I am not that impressed and I don't think a minister would be. At the end of the day it is a political judgement.

The Coalition Government's proposals will hit 'middle England', those who are not rich but earn somewhat more than the median income. They are also taking hits through the tax and benefit system. They are quite an important group of voters who are capable of switching their vote.

The Lib Dems have clearly suffered considerable damage to their credibility. They must surely have realised that a pledge not to increase fees at all and to try and abolish them was not credible in the current fiscal context. Really it was an opportunistic ploy to win votes by a party that had not had the responsibility of governing for a long time. Now they are paying a political price.

I would not expect the Government to be defeated in the Commons, although they might encounter more trouble in the Lords. Street protests won't deflect them: the analogy with the poll tax is wrong in all sorts of ways, not least that opinion on this issue is more divided and not everyone is affected adversely.

It is often argued that higher education should be free but that means that taxpayers who do not directly benefit have to contribute towards those who do. I heard a NUS spokesman arguing that corporation tax should be put up and the rich taxed more heavily. That would do wonders for the economy, particularly the former, as both firms and rich individuals are mobile. Some firms have already move office operations to Ireland where corporation tax is 12.5 per cent.

These proposals will place a heavy burden on the already over stretched bank of mum and dad. Those who go on to earn incomes above the pay back minimum of £21,000 a year, but not that much more (e.g., teachers, health service auxillary professions), will be hit hard and will find it even more difficult to eventually buy their own home. Those in financial services should be able to pay back loans without too much pain. There is also a great risk that much of the money will not be recovered.

What one could credibly argue for is (i) that the new arrangements should be phased in rather than being introduced in one fell swoop which is already affecting next year's admissions and (ii) one could question whether such a large increase is necessary if there is some social benefit (which would be met by retaining more of the teaching grant). But then the issue would be where the teaching grant that was not cut would come from.

However, given the fiscal context, I doubt whether the Coalition Government will give too much ground. They know the measures are not popular, but they want to get the bad news out of the way quickly, although the effects will continue to be felt.


peateasea said...

I would agree with your idea of phasing in the fees increases, but believe they are necessary and that perhaps you are not right to suggest that it will result in an American-style system and that those earning just above the £21k threshold will be worse off.

My understanding is that US fees have to be paid regardless of subsequent income, unless a scholarship is obtained (I may be wrong - I found it difficult to find out on a quick search).

Clegg suggests here that a £21k earner will only pay £7 a month compared to £81 a month at the moment. Clearly their overall debt and repayment schedule will be larger and longer but I feel there is unnecessary concern that this will act as a barrier to entry for the poor or middle. However I can understand the unhappiness of those that will miss out on the lower fees by a year or two, hence I like your phased introduction idea.

There real inequality is that between the generations of university-goers. However as you touched upon there were far fewer in the past, the current level is unsustainable if the cost is to be met by the taxpayer.

Broadly I am in support of the policy, one addition I would like to see is an incentive for Universities to only run courses / take on pupils they believe are likely to end up paying for their fees through the new system. No-one really benefits from students taking courses that do not make them more employable or productive and the taxpayer should not have to pay for these. I would suggest some rebate for universities whose pupils start to pay back towards their fees. This may also have the effect of Universities directing their efforts towards giving their students the best education for their lives ahead, rather than simply getting them to pass exams effectively.

Wyn Grant said...

Thanks for your full comment. I think you are correct about the American system. However, what often happens (at least to judge by what American friends have told me) is that they start saving plans so that a large proportion of the fees can be paid at the time. Even so, at Boston University (admittedly a private school) the total cost of a year (including everything) is around $50,000.

You are right that there is an intergenerational issue here and that is why some favour a graduate tax, not just for new graduates, but for all graduates. Apart from some practical problems (those abroad would not pay in most cases) there is question mark about whether one wants to increase the tax burden further.

Your idea of a rebate is an interesting one. I think the state of labour market forecasting is such that it is difficult to forecast demand and there is also the supply issue. For example, we are starting to produce more veterinary surgeons in the UK. Demand for them has been quite buoyant (although starting pay is surprisingly low). But could one over produce? Admittedly, not all of them have to go into private practice.

As for the Clegg point, my experience of graduates in social sciences is that a usual starting salary for someone with a good degree is around £23k which you probably need to live in London. This then tends to rise quite rapidly so they will start to pay more relatively quickly.

As it is introducing the scheme in one fell swoop is going to make the admissions process very tricky this coming year. This is exacerbated by the fact that up to now government has placed limits on the number of u/g admissions, although they have said they want to get rid of that restriction.