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It ain’t broke

Nick Hillman argues that the English student finance system needs less fixing than assumed

Since the government finally published its response to the Augar report, I keep seeing knowledgeable people argue that the current funding of university teaching in England is unsustainable, with or without the latest tweaks.

Yet the current high-fees system has already lasted longer than Tony Blair’s £1,000 fees (1998-99 to 2005-06) or his £3,000 fees (2006-07 to 2011-12). The new tweaks make it inevitable that it will last longer than the period of ‘free’ higher education too. That lasted just over a decade—from the late 1970s, when fees were abolished, until 1990, when maintenance loans came in.

The current system has continued through three different types of government (coalition, minority and majority), three different prime ministers (Cameron, May and Johnson) and three unprecedented upheavals (Brexit, Covid and the reclassification of billions of pounds of student loans as public spending).

Of course, the existing rules will not last forever. No policy ever does. Given that ministers have taken to boasting about “seven years of fee freezes”, institutions are particularly worried about the income they get for educating each home student (the ‘unit of resource’). Rising inflation combined with a fixed fee cap makes life harder. The modest increase in the teaching grant will do little to ameliorate that.

Muddling through

But just because universities are (rightly) worried does not mean the system is bound to be ripped up any time soon. The unit of resource dropped from the mid-1970s until the late 1990s, which is a much longer period than the current one, so it would not be unprecedented to witness years of decline. Moreover, just because something is regarded as bad policy by those it affects does not make change inevitable. Muddling through is the traditional British way.

It is possible that a future Labour government could change direction by ripping up England’s current model of higher education finance altogether, and many people in universities would like to see such a government elected. But the last time the Labour Party entered an election with a leader keen on capturing the centre ground, it had a policy that was remarkably similar to the current government’s approach.

Ed Miliband’s higher education policy had four planks: somewhat lower fees; sympathy for number caps; extra support for science and engineering; and earn-as-you-learn degrees. Given that inflation is chipping away at the £9,250 fee cap, that ministers are contemplating reintroducing a student numbers cap, that the extra teaching grant is to be focused on science, technology, engineering and maths and that the government wants to focus on career-focused courses, it is clear Miliband won the war even if he lost the battle.

The government’s latest proposals put another point of recent history into sharp relief too. They confirm that it is the tweaks introduced after the coalition left office that are the cause of the biggest problems. Like a souped-up engine that keeps misfiring, it is not the original engineering that is to blame. For example, the big jump in the student loan repayment threshold announced by Theresa May in 2017 pushed the student loan write-off costs ever higher. This forced the Office for National Statistics to change the accounting treatment of student loans, adding billions to the deficit, which is the single biggest driver of the latest reforms aimed at controlling the cost of student finance and bringing the system back into equilibrium.

Lifelong loan doubts

The boldest measure in the government’s package is the forthcoming lifelong loan entitlement, which seeks to bring large numbers of part-time and mature learners back. In one sense, it feels like this should have had more of the attention. That has not happened because the consultation on the lifelong loan entitlement is remarkably vague and does not provide the level of detail that we were expecting. So there is a limited amount anyone can say about the idea.

Personally, I remain doubtful that the entitlement will do all the things that have been promised. Even if the design challenges can be solved, it seems likely that a Treasury pushback will limit the supply of eligible courses, while remaining obstacles to learning will limit demand from potential punters. But like others, I sincerely hope this is too pessimistic and that the lifelong loan entitlement does become a truly transformative policy—and not just another example of muddling through.

Ministers hope to fix the damaging tweaks made to student finance in recent years and to rejuvenate part-time learning. While their reforms may not go far enough to protect either university or student incomes—I would like to have seen the return of maintenance grants—they are likely to protect the current student support system as it approaches its difficult teenage years.

Whether the changes are sufficient to make the system sustainable for the long term remains an open question, but it is naive to think it is guaranteed to fold in on itself any time soon. Despite all the controversy, the current student finance regime has protected the quality of the higher education sector for a decade already, while enabling the absorption of far more young, full-time students.

Nick Hillman is director of the Higher Education Policy Institute.