Lucky election winners face cash hangover

March 21, 1997

In the run-up to the election Huw Richards analyses the higher education

Conventional political wisdom holds that there are few votes to be won in higher education, but a fair number to be lost. And the experiences of the last two politicians to attempt a radical reform of the system's pivotal worry - its funding system - are calculated to inculcate caution.

History should treat Keith Joseph and Jeff Rooker more kindly than their contemporaries did. Both have subsequently seen their ideas - Sir Keith's desire to shift the Conservative party away from a purely statist funding model and Mr Rooker's attempt to persuade Labour that expecting students to repay part of the cost of their studies was actually a progressive measure - join the mainstream.

But politicians, particularly in an election year, are short-termist, more concerned with the next poll than with the verdict of history. What they remember is that Sir Keith was the only Conservative minister during Thatcherism's most confident and purposeful years to be forced into backtracking on a policy while Mr Rooker, his party policy paper suppressed, was returned to Labour's back benches.

That wariness explains the appointment last year of the Dearing Inquiry into Higher Education. The central problem remains the same. All three major parties backed the expansion that has raised higher education participation from around one in eight in 1979 to a little under one in three today. Paying for the expansion is a different matter. Expansion has been accompanied by an inexorable squeeze on resources. Staff pay has been held down at the same time as they are expected to teach larger number of increasingly-indebted students in deteriorating buildings.

Liberal peer Lord Russell, a professor of London University, has labelled the past decade "the age of deferred expenditure".

As the financial projections from the Committee of Vice Chancellors and Principals in the bar chart below show, the funding gap could reach Pounds 5.8 billion by 2005-6. Extra money has to be found. Where to find it is the central issue the political parties hope the Dearing inquiry will solve. But unless they are prepared to leave themselves entirely in the hands of Sir Ron, they will have to do some thinking for themselves.

The money-raising possibilities of various tax and excise changes are shown in the box on page 7.. But tax aversion, in particular income tax aversion, is firmly built into the political psyche of the two main parties. And even if the next government does reverse this trend, there are other claimants well ahead of higher education in the queue for extra cash.

So if public money is unavailable, sources will have to be private. Students have looked the likeliest target since Sir Keith Joseph's attempt to make parents liable. It foundered on backbench fears of a Middle England backlash against means testing. Numerous longitudinal studies have shown that possession of a university degree greatly increases likely lifetime earnings, making it possible to argue that expecting some form of contribution is equitable as well as potentially lucrative. Few doubt that some form of student contribution will emerge from the Dearing process.

But if the broad principle of student contributions is largely accepted, their precise form is still contentious. There are four unanswered questions:

* Should students be liable for maintenance, tuition, or part or all of both?

* Should the system remain "free at the point of entry", with contributions through repayments, or should there be payments upfront?

* Should we retain a broadly national public service model of provision, or move towards a more commercially-oriented system with each institution setting its own fees?

* How can part-time students, currently charged full fees and lacking maintenance, be put on an equal basis with full-timers?

There is also the question of whether students should be the only beneficiaries expected to pay. The Association of University Teachers has applied the "who benefits" test elsewhere, noted the Confederation of British Industry's belief that more graduates are essential to decent economic performance and argues that business is also a beneficiary, putting forward its own scheme for an interest-bearing "Learning Bond" to be funded out of corporation tax.

COSTS OF EACH EQUIVALENT STUDENT BY SECTOR

* Higher education Pounds 5,015(1993-94)

* Further education Pounds 2,670 (1993-94)

* Secondary education Pounds 2,245 (1993-94)

* Nursery and primary Pounds 1,640 (1993-94)

At these prices an extra Pounds 100 million buys:

* 19,440 higher education places

* 37,453 further education places

* 60,970 nursery and primary places

Source: DfEE (THES calculations)

HIGHER EDUCATION PAY BILL

* Higher education's total wage bill for 1994-95 is Pounds 5.6 billion, of which academic pay is Pounds 3.25 billion

* A 5 per cent increase in academic pay would cost Pounds 162.5 million

* An 11. 4 per cent increase to restore 1981 parity of average academic and schoolteacher pay would cost Pounds 370.5 million

* A per cent increase to restore 1981 parity with non-manual average would cost Pounds 877.5 million

* A 37.7 per cent increase to restore 1981 parity with MPs would cost Pounds 1.225 billion

Sources: CVCP/ AUT/National Statistical Office Earnings Survey.

DEBTS AND LOANS

Total number of student loans paid in 1995-96: 560,000

Number of students eligible: 946,000

Take-up rate: 59 per cent

Total paid out: Pounds 701 million

Average amount per loan: Pounds 1,252

Average debt of 1996 finalists: Pounds 1,982, (of which loans are largest single component)

Likely loans plus interest debt of 1996 intake: graduating in 1999 Pounds 5,485; in 2000 Pounds 7,811

Average debt (1995) for students aged 17-21: Pounds 1,548; 22-26: Pounds 4,301; 26-plus: Pounds 7,187

Source: Student Loans Company/Barclays Student Debt Survey 1996/ Committee of Vice Chancellors and Principals/National Union of Students.

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