Cabinet papers reveal cuts talk

January 9, 1998

Labour considered student loans 30 years ago. The chancellor was pushing for cuts. There was talk of loans replacing grants. And government plans for reviewing university finances were criticised as a potential threat to institutional freedom.

Should David Blunkett think his higher education worries are unprecedented, it is a pity that his predecessor of 1967, Tony Crosland, is no longer around to tell him how it was 30 years ago. The sums of money and student numbers may seem derisory by late 1990s standards but the concerns emanating from the 1967 Labour Cabinet papers, released last week under the 30-year rule, are remarkably familiar.

Chancellor of the Exchequer Jim Callaghan, besieged by a sagging pound, which he was finally forced to devalue in November 1967, and fearful that public spending was running out of control, pushed for Pounds 500 million in cuts. The Cabinet agreed to give him Pounds 400 million, of which the Department of Education and Science's allotted share was Pounds 45 million.

Mr Crosland resisted, saying the amount was "totally unreasonable", but came up with economy proposals that included the partial replacement of grants with loans. The drawbacks, aside from political fallout, were that legislation would be needed, meaning that loans could not be introduced until 1969 and there would be no significant savings until 1971-72.

He offered two options, both assuming that a loans scheme would be run by a commercial organisation and that repayments would be spread over ten years, starting the year after graduation.

One scheme would offer all students a grant of Pounds 200 and the right to take out a loan of up to Pounds 140. The other would give everybody their current means-tested grant, but allow those who received a parental contribution to replace it with a loan entitlement.

The Cabinet, meeting on July 20 1967, chose instead to save on school meals - which went up from 1/- to 1/6 - and laid down a marker for Margaret Thatcher by setting up a committee to ask whether free school milk was still justified. It invited the secretary of state to consult with the chancellor "to consider further the substitution of loans for part of student grants". But both Mr Callaghan and Mr Crosland were in new jobs by late that year. Mr Callaghan swapped jobs with Home Secretary Roy Jenkins following devaluation in November and Mr Crosland became president of the Board of Trade in August, giving way to Patrick Gordon Walker at Education and Science.

Mr Gordon Walker, previously minister without portfolio, chaired the Cabinet home affairs committee, which considered the Public Accounts Committee report on university finances. This had called for the auditor-general to have access to the books and records of the University Grants Committee and universities. Mr Crosland reported that this was the latest of several PAC attempts to secure parliamentary oversight of university finances. "I am convinced that it is politically irresistible and we could not defend a refusal to accept it," he said.

Mr Crosland offered three options: making access for the auditor-general a condition of university grants; incorporating the UGC under Royal Charter; or creating a Commission for University Finance with an associated select committee similar to those for the nationalised industries.

Consulting vice chancellors, the UGC and the Association of University Teachers, he found that all three preferred the status quo.

Mr Crosland himself found the commission options unpalatable, warning: "The need for legislation would require precise definition of the future relationship between the commission, the universities, the government and parliament. Such a definition would be extremely difficult: and it would involve controversial debate both in parliament and beyond on the exact status of universities and indeed the whole of our higher education policy."

The UGC was reported to be unhappy about incorporation, arguing that it would make their chief officer the accounting officer, so inevitably eroding their "buffer" status. "He would come to be thought of as an ordinary civil servant rather than as the chairman of the commission and the friend and defender (as he is now regarded) of the universities", Mr Crosland noted.

Sir Lawrence Helsby, head of the Home Civil Service, liked the commission option. But the home affairs committee, knowing that the prime minister had endorsed Mr Crosland's view, went for the relatively minimalist option of making access a condition of grant. There was only one dissentient, Postmaster General Ted Short, who argued that this would "endanger the academic independence of the universities".

Following the home affairs committee decision, the issue did not go to full Cabinet, and Mr Crosland told the Commons on July 26 that universities would be required to open their books to the auditor general from 1968.

If that did not reach the Cabinet, one issue that did was worry over overseas students. The government had upped their annual fee from Pounds 70 to Pounds 250 in late 1966. The wave of concern so created was assuaged first by the creation of a fund to assist current students to meet increased fees until the end of their courses and then, in April, by the decision to find Pounds 500,000 to fund 1,000 scholarships.

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