A £6K fees policy would be disastrous, says David Willetts

The RAB isn’t a magic enabler of cuts to tuition fees, David Willetts warns Liam Byrne, shadow minister for universities, science and skills

September 18, 2014

Dear Liam,

The party conference is a rare opportunity to get through to voters directly, with wide media coverage pretty much guaranteed. Your leader will want to announce new policies that play well with focus groups but cannot be copied by the other parties. A pledge to reduce tuition fees to £6,000 a year fits the bill, and it is believed to be high on the list of options for Ed Miliband’s speech next Tuesday. But you should resist its lure. It would cost universities or the Treasury a lot of money and it would jeopardise Labour’s commitment to educational opportunity. If you get into government it will cause you no end of grief.

The crude arithmetic is very simple. There are about a million undergraduates. So every £1,000 of fees delivers about £1 billion to pay for their education. Cutting fees by £3,000 deprives universities of about £3 billion. If that income is not replaced then you are cutting the university teaching budget by a third. If it is replaced with a big increase in the teaching grant then you either have a black hole in the public finances or you have to pay for it with a new tax increase – not the same old tax increases that have been used to finance Labour’s policy announcements several times over.

You will be tempted to argue that you have a magical device that avoids this dilemma – the resource accounting and budgeting charge: the proportion of student loan debt that will never be repaid. But as a former chief secretary to the Treasury, you should know the truth. The RAB charge is not real money that is actually being spent and that can be diverted to another purpose. It is based on a highly speculative estimate of how much graduate debt will be repaid over the next 30 years. The shift from grants to loans saves public spending because fee loans are not counted as public spending: any public spending occurs only after 30 years if some fee loans have to be written off. That is not money you can reallocate and spend today.

Perhaps you hope you can get extra money out of the Treasury to plug the gap. But is shadow chancellor Ed Balls really willing to spend up to £3 billion a year for this? All the reports suggest that he is not. And even if you do get some money out of him, it will have used up all your political capital with the Treasury. You will find it very difficult to get extra money for other policies in your brief. Research and vocational spending will lose out; I was able to press for extra investment in research because we had already reformed funding for teaching.

Lowering fees would actually jeopardise participation, because one-third of funds currently raised from fees over £6,000 is used to pay for access initiatives

And what would you achieve? There would be no change in repayment terms, so no benefit for younger graduates. And low-income graduates are not paying back anyway, so they would not gain. It would just benefit affluent middle-aged graduates who will find they have finished repaying their loans at age 42 instead of 49. That is hardly progressive politics.

Meanwhile, the losers will be students. If you cannot find the full £3 billion to replace the lost income, there will be more crowded seminars and staff redundancies and labs will be less well equipped. All the progress we are making with the extra cash going into universities for teaching will be put into reverse.

You may claim that reducing fees will help participation. But the latest figures from Ucas show we now have record participation from low-income students. Lowering fees would actually jeopardise that, because one-third of funds currently raised from fees over £6,000 is used to pay for access initiatives. Indeed, when I pressed your predecessor on this, she said that bursaries and summer schools would not be financed under a £6,000 fees policy. And worse, universities would be losing money with every English student they recruited, so they would try to escape their financial pressures by cutting back on the number of home students and recruiting more from overseas. If numbers shrink, it is the students from the tougher backgrounds who lose out.

All three political parties, when faced with the dilemma of how to finance higher education, have reached the same conclusion: that graduate repayment is a fair and progressive solution. Earlier this month, Andreas Schleicher, director for education and skills at the Organisation for Economic Cooperation and Development, went out of his way to praise our reforms as solid and sustainable. You, who are supposed to be a Blairite, are threatening to break with that progressive consensus. Instead, you should focus on the real problems we still have to resolve: how to pay for postgraduates, opportunities for part-time students and ensuring high-cost subjects are properly funded. I respect you and suspect you know all this. Now you have to stand up for it.

David Willetts

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