Bruising but beneficial

The coalition's controversial higher education reforms are delivering a more progressive and sustainable system, argues Vince Cable

November 15, 2012

Credit: Elly Walton

Higher education is of critical importance to the UK economy and an essential part of the country's social and cultural fabric. It affects employment, economic performance and competitiveness, and plays a pivotal role in raising social mobility.

Internationally we perform well and have the most productive research base in the G8. Our higher education system remains second in the global league tables, including Times Higher Education's World University Rankings. It is a beacon of excellence attracting more than £8.2 billion in foreign investment alone. As part of my department's broader work on industrial strategy, David Willetts is developing a blueprint for the long term that further recognises the significance of higher education, which we will publish next year.

It is because the coalition recognises the importance of the sector that our reforms needed to create a sustainable financing model and provide a steady supply of graduates for a growing economy. The reforms may have been controversial and politically bruising - my party in particular took a reputational hit - but the system that has emerged as a result is more progressive, more transparent and more sustainable than ever. Going to university must depend on ability, not the ability to pay. Students will not pay upfront to study; there are more loans and bursaries in place for those from poorer families; and loans will be repaid only once graduates have jobs and are earning more than £21,000 a year. This means that more will never have to pay at all and those obliged to do so will face lower monthly repayments.

The doomsayers prophesied that applications to higher education would plummet. In reality, although there was a drop in applications for 2012-13, it was nowhere near the levels predicted. Applications and acceptances from disadvantaged groups have held up well, as have acceptances to science, technology, engineering and maths courses. A recent report from the Higher Education Policy Institute found no evidence of higher fees having a deleterious effect on application rates from 18-year-olds: in fact, this year's were the second-best on record. And we have reasons to be cheerful about the early data for 2013-14.

Sadly, some wilfully distort the facts about higher education funding to try to score cheap political points. Most young people, however, understand that no eligible student has to pay upfront fees. And we are continuing to work hard to dispel any residual myths. Our Student Finance Tour visited 2,150 schools, colleges and sixth forms in England last year. This year we have broadened its scope, with recent graduates talking to younger pupils and their parents. My colleague Simon Hughes has done a lot of work in this area, for which I am grateful.

The cost of higher education is undoubtedly influencing prospective students to think in a more hard-headed way about the courses they choose. We are putting improved information centre stage to help them with that choice. I recently launched the Key Information Set at Strode College in Somerset - 17 key pieces of data such as employability rates post-graduation, the average salaries of recent graduates, and evaluations of course quality by existing students. A girl studying A levels at Strode told me she had compared courses in Japanese studies and was shocked to find her first choice was poorly rated while a choice lower on her list had scored well. These data will put students at the heart of the system and will ensure that universities deliver - and are held to account for what they deliver.

Funding flowing from student choice improves the incentive structure and balance of contributions within higher education. Despite reports of a financial "black hole", we expect contributions from graduates to rise from around 40 per cent of costs to around 60 per cent. While some claim we have underestimated the public cost of the loans, others argue we are overstating it by using a long-term assumption about government borrowing costs rather than the current low rate. Such long-term estimates depend on a wide range of variables, including the earnings trajectory of graduates. Such estimates have a margin of error, but the Office for Budget Responsibility has checked our estimates. We shall monitor the overall affordability of the system as it beds down and, if necessary, take action to ensure it remains sustainable in the long term. But the Higher Education Funding Council for England offers a positive prognosis for the sector's financial health and the Organisation for Economic Cooperation and Development has said that our changes offer an exemplary model of how to reform higher education.

I know there are challenges ahead, including funding our postgraduate sector and ensuring that the UK remains an attractive destination for international students. And improved efficiency must remain a top priority so that graduate contributions are not based on a "cost plus" model.

Another challenge is increased business collaboration, as recommended by Sir Tim Wilson in his report published in February. I want to see business taking a bigger role in sponsoring students, with a revival of "sandwich" schemes. The World Economic Forum now ranks the UK second in the world (and ahead of the US) for university-industry collaboration in research and development. The level of demand for the Research Partnership Investment Fund has been impressive, and the £300 million on offer will leverage more than twice that amount in private co-investment from major businesses and charities looking to collaborate with universities.

The real story about our reforms is not that some thinktanks differ from others about the long-term forecast for the sector: the real story is that we are reshaping the academy to make it more affordable for the taxpayer, more accessible to students from all socio-economic backgrounds and more competitive in an increasingly global market.

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