Financing is the crucial issue

May 25, 2001


Institute for Public Policy Research

The introduction of tuition fees and abolition of grants was a bold political act and long overdue. But the process of reform must not lose momentum.

Differential fees are the fairest and most feasible method of funding and should remain central to the long-term vision for higher education. But this most universally misunderstood and misrepresented of policy proposals is so politically unpalatable that David Blunkett's injunction against their implementation earlier this year, was understandable.

Consequently, the second-term agenda should prioritise strategies to make the system more efficient and equitable as follows:

  • Adopt the Australian model of offering students a choice between deferred and advanced payment. Upfront fees were a political error.
  • Increase the prescribed maximum for tuition fees to £2,000 - students should be allowed to opt to pay the extra on graduation.
  • Introduce a higher education maintenance allowance - a one-year tertiary version of the education maintenance allowance. Cash payments should be contingent upon a contract. A contract with clearly defined expectations and targets should confer greater security and a sense of direction. All financial assistance should be channelled through the means-tested allowance to simplify support. The current funding system is too confusing and many do not realise they are eligible for concessions.
  • Raise the repayment threshold to £20,000 and levy a higher interest rate. This watershed reprieves most public-sector workers at the outset of their career, when they are most vulnerable financially. Rich companies compete with one another by offering the most lucrative salary packages and tend to "absorb" extra costs.
  • Universalise the foundation degree - a two-year programme with work experience should be incorporated into all degrees. The foundation degree is, otherwise, in danger of being perceived as a low-status qualification taken only by "A-level failures".

Wendy Piatt is a fellow in education research, Institute for Public Policy Research.

Adam Smith Institute

A university sector independent of the state, charging differential fees, is probably on the way, almost regardless of what governments want. They can make this transition difficult or easy.

Most of the universities know this, even if the politicians do not. Steps will be taken in the next Parliament to bring to a close the period of state rule.

Universities will become free standing, autonomous institutions. They, not government officials, will decide which departments to expand or contract, and what their admissions policy and fee will be.

State money will continue to fund higher education, but most of it will arrive at the universities via the students. Part of the fees of each British student will be paid by government and part by the students. Separate arrangements will be made for research.

Universities will build up endowment funds, aided from time to time by government, increasing their autonomy further.

The parties respond to this future in different ways.

The Liberal Democrats, if they could, would abolish student fees, and loans. They would restore the maintenance grants that gave middle-class students free board and lodging at the expense of working-class taxpayers.

The Tories are open about endowment funds, but they glide over the time it might take to build up adequate levels, and they are understandably reticent on the degree to which fees will eventually be shifted on to those students who can afford, via loans, to pay.

Labour is less clear. But the odds are that Labour will take us into that same future, but more slowly and less obviously.

Madsen Pirie is president, Adam Smith Institute

Centre for Reform

A graduate tax, levied as a small premium on top of income tax, brings considerable rough justice.

It means that those who benefit, pay, but allows for differential incomes, while benefits are spread over time. Like loans, however, it would mean a big up-front investment by government.

The notion of the baby bond should be extended by giving each 18-year old a set of vouchers entitling him/her to three years further/higher education.

It is not unlike the idea of an individual learning account, with funding in terms of courses rather than money. If a degree required 120 credits (40 per year), then students would be able to cash vouchers against those courses.

Most 18-year-olds would probably stick to the traditional three-year, institution-based degree, but the system would allow for mixing and matching between institutions - FE and HE - and with distance or internet courses. This is attractive for older students with the great advantage of allowing students to proceed at their own pace and to retain and accumulate credits as they proceed. Ideally, all those over 18 should be eligible for social security benefits and the nonsense about those on benefit not being allowed to be full-time students should be ended.

But the costs are great. Reluctantly I accept that this can only apply to mature students (those over 24) and that 18-24-year-olds should be the responsibility of parents, with means-tested grants and a fall-back of loans where parents refuse to cooperate.

Margaret Sharp sits on the Liberal Democrat benches in the House of Lords and speaks for them on education. This article was written in a personal capacity and the ideas are not necessarily those of the Liberal Democrats.

  Election 2001 index page

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