Fees 'largest contributor' to rise in inflation

Higher tuition fees were the biggest contributor to a rise in inflation announced today.

November 13, 2012

Critics have claimed the inflationary impact of higher fees could push up the government's benefits bill, thus wiping out savings from its fees and funding changes in higher education.

The Office for National Statistics announced today that the 12-monthly increase in the Consumer Prices Index measure of inflation rose from 2.2 per cent to 2.7 per cent in October, the first upward move since July.

"University tuition fees were the largest contributor to the rise," the ONS said.

ONS figures show that 0.36 percentage points of the 0.5 percentage points rise came from education.

The inflationary impact of higher fees was originally identified as a key factor in the cost of the government's higher education policy by Andrew McGettigan, a researcher on higher education.

"State pensions, tax credits and some other benefits paid by the Department of Work and Pensions are index-linked to CPI, which is used to calculate their annual increase. The impact of higher tuition fees could add £2.2 billion to the social security budget by 2016 at a time when the chancellor [George Osborne] has...announced that he wants to see cuts worth £10 billion from it," he said in his report, titled False Accounting: Why the Government's Higher Education Reforms Don't Add Up, published in May 2012.

The Higher Education Policy Institute's recent report, titled The Cost of the Government's Reforms of the Financing of Higher Education, gave a lower estimate of the extra annual spending created by the inflationary impact of higher fees of between £420 million and £1.15 billion.

Hepi said that the higher figure of £1.15 billion "would take most of the £1.3 billion per annum savings" that the Department for Business Innovation and Skills projected to make from its higher education fees and funding changes.

Reacting to the inflation figures, Liam Burns, president of the National Union of Students, said: "The government completely failed to take into account the wider impact of their rushed rise in tuition fees and its impact on the public purse or future generations.

"They told us that trebled tuition fees were a necessity to save money but it will actually cost ordinary taxpayers billions more.

"The government was determined to abdicate responsibility for university education and got its sums badly wrong in a way that affects not just students but all of us."

The ONS announcement also appears to call into question comments made by the business secretary, Vince Cable, who rejected suggestions that higher fees would impact on inflation and benefit payments when questioned by MPs on the BIS committee last month.

Mr Cable said that as fees were "not a cash payment, there's no reason why this should figure in the price index at all...I don't follow the logic".


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