The confirmation from the Office for National Statistics today that, from September 2019, student loans will be reclassified on the public accounts may be the first time that such a seemingly arcane change in accounting practice has hit the mainstream news headlines.
The change has already sparked sharp debates about the level of tuition fees and the cost of removing them altogether. And the headlines are well justified.
For England and Wales, which have fully loan-based systems, this will mean that many billions of pounds – possibly £12 billion to £17 billion a year – will fall on the current (day-to-day) expenditure of the Department for Education.
It will so because the ONS report says that “a portion of the student loan outlay is considered…a capital transfer to the borrower” rather than a conventional loan asset and liability, as it had been thought of previously.
The change may well be a boon for the Scottish government, which could see a windfall to the tune of £1 billion a year in its Barnett formula allocation, without having to incur the cost of reclassifying loans (because it does not have them).
This new approach will clearly be a challenge for the Post-18 Education and Funding Review panel, who are charged by the government with devising recommendations that “must be consistent with the government’s fiscal policies to reduce the deficit and have debt falling as a percentage of GDP.”
The chief executive of the Institute of Fiscal Studies, Paul Johnson, however, reminded us rightly today that this is an accounting change, and as such should be a secondary consideration in deciding how to invest in higher education and how much to invest. Changes to rules such as these should not determine public policy decisions, only set the context for them.
The risk for potential future students from the outcomes of the Post-18 Education and Funding Review, whether they are currently in school or college or already adults, is that the government will react with draconian new caps on student numbers, damaging social mobility in England in the process.
One of the most invidious ways in which caps might be reintroduced, according to supposed leaks from the Augar review, is by limiting numbers through an arbitrary minimum grade threshold.
This single measure would risk many of the gains that have been made in recent times to spread opportunity and empower aspiration. It affects disproportionately the most disadvantaged, means that university entry criteria become driven by the Treasury and that ability to progress to higher education becomes based on past performance in a very different environment – this is morally wrong and not supported by the evidence for success at university.
There is also a parallel risk that the review may consider a reduction in the unit of resource for teaching by lowering the general tuition fee cap, so that students see a lower headline fee, but without replacing this reduction with teaching grant. This would threaten the quality of the student experience and seriously hinder the ability of universities to provide crucial core services such as mental health and well-being support or employability skills.
The “capital transfer” aspect referred to in the ONS report could be considered just that, capital investment in our people that does not fall on the current deficit, the government’s main deficit metric.
This may appear an abstruse point but, again, it could be a key way in which investment in provision for students can be justified and maintained.
Universities and education bodies should be marshalling arguments that a portion of public investment in people’s education and skills should be considered capital spending, in the same way that investment in building new railways or research facilities is considered in government expenditure.
The Treasury’s internal – and so far rather off-the-radar – review of human capital should be at the forefront of the sector’s influencing efforts.
2019 will surely be a make-or-break year for higher education and universities’ capacity to contribute to critical agendas including boosting productivity and ensuring social mobility.
The outcome of the Post-18 Education and Funding Review will be central to this: will the panel dial back England’s commitment to spreading opportunity and life chances for all?
Will the panel return us the era of the 1980s and 1990s, when the unit of the resource was whittled away and students were short-changed by an inferior all-round student experience?
Brexit will need the UK to turbocharge education, training and innovation, particularly through the skills acquired in higher education.
The wrong reaction to the ONS’ accounting change from the post-18 review will damage the UK’s efforts to boost social justice and economic productivity.
I am confident that by marshalling arguments and presenting the evidence coherently, we can ensure that these accounting changes and the Augar review help, not hinder, the prospects for success of future students.
Greg Walker is chief executive of MillionPlus, the association for modern universities.