Budget 2015: Osborne moves towards fees market

But chancellor’s move to change student loan repayment rules presents risks

July 8, 2015

George Osborne may have paved the way for a fundamental move towards truly variable fees in today’s Budget – and also risked looking like he has broken a commitment to students.

The Budget Red Book stated that institutions “offering high teaching quality” would be allowed to “increase their tuition fees in line with inflation from 2017-18, with a consultation on the mechanisms to do this”. But getting this initial move towards differential fees through Parliament could set the path towards a true market in fees, where charges vary widely between different institutions.

How exactly does the government go about raising fees? In 2010, it happened through the relatively straightforward means of secondary legislation.

Can the creation of a system of variable fees, where some institutions are allowed to charge fees above £9,000 and some are not, be achieved just as easily as the lifting of the cap in 2010? Would it require more fundamental changes in primary legislation? If it did, the Tories could run into trouble in the House of Lords – which traditionally holds back from challenging secondary legislation.

Another question is why Osborne and the Budget Red Book were so coy about mentioning the teaching excellence framework – the plan to drive up the quality of teaching announced by universities and science minister Jo Johnson last week – as the means to measure teaching quality. Neither used the phrase. The list of abbreviations in the Budget Red Book included “TEF”. But there was no mention of the TEF in the document itself, suggesting that it was chopped out at the last minute.

The government’s plans to let fees rise above £9,000 from 2017-18 would require judgements well in advance of that about which institutions could go above the threshold. All of which sounds like an extremely tight timetable for results from the first TEF to be available. So is the government planning to grant permission for higher fees on some measure of teaching quality other than the TEF? If so, what will it be?

Another challenge for the government will be fending off claims that it has broken pledges to students on student loan repayments. Osborne announced that there would be a consultation on plans to freeze the threshold at which repayments kick in at £21,000 for five years. That means graduates paying more for their loans.

It goes against what the government said when the £9,000 system was created, when the public was told that the £21,000 threshold would be increased in line with earnings from 2017.

“We will increase the repayment threshold to £21,000, and will thereafter increase it periodically to reflect earnings,” David Willetts, who was then universities and science minister, told MPs in November 2010.

Universities – and Willetts – have recently lobbied for a freeze to ease worries about the public cost of the new student loans system.

Martin Lewis, the TV presenter and creator of MoneySavingExpert.com, had already said that he would “organise protest” if the government backtracked on its commitment to increase the threshold. Lewis was enlisted by the government to explain the new system to students. “The £21,000 threshold is scheduled to rise in line with average earnings,” explains a “Student Loans Mythbusting” article by Lewis on his site. “This will start in April 2017 (a year after the first graduates under the new system – 2012 starters – are eligible to repay).” Looks like that may need an update. Details of Mr Lewis’ protest may follow.

john.morgan@tesglobal.com

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