Newby attacks funding system

February 10, 2006

Former Hefce chief claims student-support package is 'socially regressive', Lee Elliot Major reports

Government support for students and universities is unsustainable, unfair and unrealistic, according to the man who has been responsible for funding English higher education.

In a surprisingly candid interview, Sir Howard Newby, the out-going chief executive of the Higher Education Funding Council for England, said that the system of loans, top-up fees and university grants amounted to a public subsidy for the middle classes and was stifling the growth of the sector.

He also predicted that students could pay fees of up to £5,000 a year from 2010.

Sir Howard said that the Government had failed to put enough money behind its drive to attract more working-class students on to degree courses. And he called for a single funding body for higher education that would distribute university grants, as well as grants and loans for students.

His views represent a damning appraisal of the Government's higher education policies.

Sir Howard, who took up the post of vice-chancellor of the University of the West of England this week, is one of the most influential figures on higher education issues in Whitehall. Until now he has been careful not to contradict the views or policies of his former political masters. Sir Howard said: "I understand the political necessity of what we have now, but it is not a sustainable settlement. It will have to be looked at.

"I think the big issue we now face is that the student support arrangements are highly socially regressive because middle-class kids can pick up a subsidy on the zero interest rates applied to student loans. The costs of these arrangements are a major constraint on the expansion of universities.

That's a funny way to manage a higher education system."

He proposed that students from wealthy backgrounds instead be charged a real rate of interest on their loans - saving up to £600 million a year in public subsidies, which could be channelled back into universities to boost undergraduate numbers.

He said the Government had "not committed enough money to widening participation".

Sir Howard said that he could not envisage an early end to the cap that restricts top-up fees to £3,000 a year in England. However, he added that in 2010, under a new Parliament, "the most radical change that might happen will be maybe to lift the cap to £5,000 a year".

As Hefce's chief executive, Sir Howard was responsible for distributing more than £6 billion in grants to universities every year and said it was time to consider the creation of a single funding body for higher education.

This would replace the arrangements being introduced as part of the top-up fee reforms from this autumn. Under these, state funding for university teaching is delivered in a block grant from the funding council while the public contribution to tuition fees is channelled to universities through the Student Loans Company. The SLC will also distribute student loans.

Means-testing to gauge how much the state contributes to a student's tuition fee is carried out by their local education authority.

Sir Howard said: "I think there are some strong arguments - particularly if there was post-qualifications entry for students - for bringing the whole funding package together into one pay/funding body as opposed to the current separation of institutional support and student support."

Students would then find out about financial support as soon as they were admitted to university.

Sir Howard said that the Government's planned review of top-up fees in 2009 would have to consider wider reforms of the student-support arrangements.

He was equally blunt about the limited research aspirations of the sector.

Sir Howard said: "Under current levels of investment, there are only five or six world-class research universities (in the UK) with top researchers across the board, and perhaps 25 to 30 institutions with pockets of excellence."

He reported that when he arrived at Hefce five years ago there were four or five institutions on the high financial risk list used by the council, but there was none on the list when he left.

He also mounted a strong defence of Hefce. "The sector is absolutely crazy if it thinks it can obtain a better deal out of funding directly from government rather than through Hefce. All the evidence all over the world is that if you are directly funded by government it curtails the ability of universities to innovate and to be responsive to the market.

"I think the idea that any government will sign a cheque for £12 billion and send it in the post to universities and say 'here you are, do what you like with it' is quite frankly fatuous."

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