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Opinion forming on fees

James Purnell says linking tuition fees to inflation seems unpopular but should not be unthinkable

We should be very proud of Britain’s higher education sector. It’s no wonder that more than 750,000 people applied for undergraduate places last year. British universities enrich students both in the knowledge and skills they need to succeed at work and in expanded cultural horizons. They contribute £116 billion a year to the economy, which benefits everyone. Eight British universities are in the world’s top 100 and dozens of world leaders studied in the UK, making universities a source of international influence

Universities need to be defended against the harmful rhetoric that insists too many people attend them. In this, universities have the public’s support. The Millennium Cohort Study found that 97 per cent of new mothers want their children to go on to higher education. That data is from 2000 and the children of those mothers will now be among current cohorts and recent graduates, which is in no small part thanks to decisions taken by successive governments to expand the sector.

But past successes cannot guarantee the sector’s future. It’s estimated that, by 2030, 131,000 more 18-year-old school and college leavers in Britain will be looking to go to university, thanks to demographic change. If applicants increase but funding continues to fall, we face two equally disheartening possibilities: either fewer applicants are successful, which is likely to hit those from poor households particularly hard, or funding per student is reduced, which would damage the quality of university education.

Funding shortfalls

The problem here, then, is about funding. Last year, according to analysis by the Russell Group of British research-intensive universities, the average university had a funding shortfall of approximately £2,500 for every home undergraduate student. Present trajectories suggest that could grow to £5,000 by 2030.

The current system for paying back a student loan is unfair. Because higher-earning graduates pay off their loan faster, lower and middle-earning graduates must pay more, both in absolute terms and as a percentage of their income. In short, a nurse pays more than a banker. That’s on top of a system in which maintenance loans have not been uplifted in line with inflation, with many students struggling financially.

Reform of the funding system, then, is evidently needed. In 2022, University of the Arts London commissioned London Economics to model what a fairer, more sustainable higher education funding system would look like. A fresh report by the consultancy published in February concludes that adding one per cent to the real interest rate of loan repayments, for example, would save enough money to raise maintenance support in line with the living wage. It would also leave enough money spare to invest in university education through the teaching grant.

Alternative options

So, how to begin changing policy? While there is public support for universities, research by think-tank Public First also found a high level of public support for reducing or even abolishing fees outright. In one scenario, the firm surveyed public support for reducing fees to between around £6,000 and £7,500, and this received the highest net support—more so than abolition. But let’s take a moment to consider the impact. A cut of this kind would be a £3bn cut in income when the sector is already in deficit.

Tuition fees have, in real terms, already been cut. Fees were raised to £9,000 a year in 2012-13 and have only increased by £250 a year since then. The £9,250 fee charged in 2012 would only be worth the equivalent of £6,500 in today’s money, with high inflation further eroding its value. 

Rather than cut fees and deepen the university funding crisis, the sector needs to explore other options. One such option could be to link the tuition fee to inflation, which would ensure no further cuts to the value of the fee in real terms.

The Public First polling suggests that the public—as well as politicians—would need to be persuaded of the need for such a rise, but that does not mean it is impossible.

Policy vs popularity

When I was working for the BBC, polling would often show opposition to the licence fee. Yet when we asked the same people whether they supported the BBC as an institution, they invariably did. Ultimately, it was the job of the BBC to ensure it had enough money to provide quality programming.

Similarly, as a government minister, I had to make the case for raising the retirement age—by no means a popular policy. But its purpose was to ensure the pensions system could accommodate growing numbers of retirees. Today, pensioners are less likely to be poor than working-age people, and 10 million more are saving into their pension

The lesson here is that good policymaking is about results, not whether policy is popular to begin with. Polling can tell you the arguments you should make but not the policy you should choose.

James Purnell is president and vice-chancellor, University of the Arts London