Coalition reforms have left students swimming with sharks

If loans are as fair and as sustainable as ministers say, why aren't their terms and conditions enshrined in law? Liam Burns writes

May 24, 2012



Credit: Paul Bateman


The recent move by politicians to use student loans as the principal means of funding higher education in England is one of the murkiest yet by the coalition.

In his new report for the Intergenerational Foundation thinktank, Andrew McGettigan, a researcher on higher education, clears the fog and allows us to see what is really going on.

By switching from a policy of spending to one of lending, ministers had hoped to maintain the level of resource available for universities and contribute to deficit reduction at the same time. This has been described by many as an "accounting trick": if you want to know exactly how this conjuring is done, using the obscure rules of public accounting, asset classes, resource accounting and budgeting (RAB) charges, dubious assumptions and more, False Accounting? Why the Government's Higher Education Reforms Don't Add Up is the report you must read. The case mounted by McGettigan against a policy settlement that looks at best rushed and at worst negligent and reckless is compelling.

Its most striking conclusions are about the problems being stored up for the future - specifically the futures of those entering higher education this autumn. In its haste to get the thing done in December 2010, the government apparently made no assessment of the impact that higher tuition fees would have on measures of inflation, to which the cost of much public expenditure is linked. The rise in fees, McGettigan predicts, will force up inflation and add significantly to the cost of pensions and benefits. This could have dramatic consequences, to the point where any savings from the higher education reform package are simply wiped out. The government appears to be pretending that this is not happening, but it is.

McGettigan's report raises the prospect that the same people will pay twice for their higher education: once by repaying their own debts, and again by paying off in their tax bills the public debt underwriting the enterprise. It would be intolerable if future (or even current) students were asked to pay even more because today's government cooked the books.

Those who maintain that the existing repayment conditions for future graduates are benign should remember that there is no protection against future changes to conditions for loan repayments. The mess created by the government's reforms and a lack of adequate or even basic safeguards has left students vulnerable to being plunged further into debt at the stroke of a ministerial pen, and without a debate or vote in Parliament. If the prospect of such tinkering reappears on the horizon, the Pandora's box of higher education funding policy will be reopened and the political temperature will rise.

We should not forget that the government had another end in mind when it pushed through its funding reforms: it wanted loan "vouchers" in the hands of students to force the development of stronger market forces in the sector. Student loans have long been a key part of the project to marketise higher education and have become a touchstone of capitalist educational economics couched in terms of "putting students at the heart of the system". They are hopelessly utilitarian, divisive and deathly for critical thinking - and they carry a huge future financial cost for today's students.

Vince Cable and David Willetts speak the rhetoric of "student empowerment". The benefits of "placing students in the driving seat" were talked up as ministers embarked on the "hard sell" of the coalition's policies. But the bare truth is that students are in hock to a loan shark. There is no empowerment in that, only the breeding of future discontent.

Throughout the recent upheaval in higher education policy, the National Union of Students has consistently argued for a fairer and more sustainable funding system. While ministers maintain that this is what they have delivered, McGettigan's report provides many reasons to doubt that claim. It provides strong grounds for a challenge to the government: if ministers really believe that the new funding model is both fair and sustainable, why will they not protect in primary legislation the current loan repayment threshold, the write-off period and the interest rate in order to provide prospective students with appropriate reassurances and security?

What we have instead is an embarrassed silence. The gaping black hole in the recent Queen's Speech was the absence of the long-promised higher education bill, which would have given students the chance to push the case for additional rights and protections. We have been denied the opportunity to cement the assurances we have been given, and until they have been secured, they are not worth the paper they have been written on.

We need to see ministers' words backed up by legislative action. Their assurances must now be enshrined in law.

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