Australia’s move to scrap fee caps could see England following suit

UK government urged to assess financial fallout before embracing similar system

May 22, 2014

Australia’s decision to abolish caps on tuition fees could embolden those pushing for a similar move in England, experts have predicted.

Last week, in its first budget, Australia’s coalition government said that from 2016 existing variable fee caps of up to A$10,085 (£5,603) a year will be scrapped.

It also confirmed that the demand-driven funding system will be extended to non-university providers and sub-bachelor courses. But public teaching funding will fall by an average of 20 per cent, while the threshold at which income contingent student loans have to be repaid will fall by 5 per cent to A$50,638.

Students will also be charged a real interest rate, based on government borrowing costs, capped at 6 per cent. Universities charging higher fees will have to use 20 per cent of the additional revenue to fund scholarships for disadvantaged students.

The moves have led to fears that universities will ramp up fees, meaning that some students at elite universities would leave with debts in excess of A$100,000.

Ian Young, chair of the Group of Eight prestigious universities, said that the announcements “reconcile access and quality, and make growth affordable”. Having deregulated student numbers – as England will do from 2015-16 – it was “logical” also to deregulate fees.

Warren Bebbington, vice-chancellor of Group of Eight institution the University of Adelaide, added that the moves “will be unpopular with students but will avoid what may have been an eventual collapse of public support for a multiplying national [student loan] debt”.

The Higher Education Policy Institute recently suggested that English policymakers should pay more attention to Australia.

Simon Marginson, professor of international higher education at the Institute of Education, University of London, said that the Australian developments meant that “inevitably there is now a greater possibility of a variable cap, higher cap or no cap on fees in England”.

But he advised the UK government to observe its effects and political fallout before following suit, saying that it would “create irreversible shifts” and pile “uncertainty upon the already present uncertainty about long-term costs”.

That uncertainty would be increased if, as some predict, Australia’s upper house, the Senate, votes down the commercial interest rate on student loans.

Wendy Piatt, director general of the Russell Group, said the failure of the English fee cap to keep pace with inflation meant “leading institutions” struggled to “be internationally competitive, provide a first-rate teaching experience and offer generous support to disadvantaged students”.

One UK vice-chancellor, who asked not to be named, said that whoever won the 2015 general election would have to enable elite institutions to compete globally: a stated aim of the Australian reforms, which he described as “incredibly significant”.

But rather than heaping on to students the cost of meeting the accelerating default rate associated with higher fees, he endorsed the proposal in the 2010 Browne Review for universities to pay a proportion of their additional income from higher fees to the government.

“The big mistake not to repeat would be [for the UK government to say]: ‘You can charge what you want and we will pay for it’. That would be disastrous,” he said.

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