Universities with “high-quality teaching” will be allowed to raise tuition fees in line with inflation from 2017-18, George Osborne has announced.
The chancellor also confirmed in today’s Budget that student maintenance grants will be scrapped and switched to loans from 2016-17 onwards for new students.
Mr Osborne also said that “to ensure our university system is sustainable, we’ll consult on freezing the loan repayment threshold for five years”.
The plan would mean graduates paying more for their loans, but has been called for by some in the sector to address concerns about the public cost of the new student loans system.
When the £9,000 system was created, the coalition government said that the repayment threshold would rise in line with earnings from 2016 onwards.
On fees, Mr Osborne announced the lifting of the £9,000 fee cap when he said that “we’ll link the student fee cap to inflation for those institutions that can show they offer high-quality teaching”. That appears to be a reference to the government’s recently announced plans for a teaching excellence framework, aimed at driving up teaching quality, which has been widely seen as offering a possible mechanism for the government to allow fees to rise.
Mr Osborne also said that the government’s removal of the student numbers cap was not affordable “unless we tackle the cost of student maintenance grants – that is set to almost double to £3 billion over this decade”.
He added: “There’s also a basic unfairness of asking taxpayers to fund the grants of people who are likely to earn a lot more than them.”
Mr Osborne said that without change “then our universities will become underfunded and our students won’t get places – and I’m not prepared to let that happen”.
He continued: “So, from the 2016-17 academic year we will replace maintenance grants with loans for new students – loans that only have to be paid back once they earn over £21,000 a year.
“And to ensure university is affordable to all students from all backgrounds, we’ll increase the maintenance loan available to £8,200 – the highest amount of support ever provided.”
Mr Osborne also said that the government would “open the whole sector to new entrants who can deliver the highest standards”.
He called the package “a major set of reforms to make sure Britain continues to have the best universities in the world. It is fair to students. Fair to taxpayers. And vital to secure our long-term economic future.”
Reaction to the higher education measures in today’s Budget:
Sally Hunt, general secretary of the University and College Union, condemned plans to convert university maintenance grants for low income students into loans of up to £8,200.
The UCU will also oppose proposals to increase the maximum tuition fee in England beyond £9,000, she added.
“Maintenance grants are crucial for engaging students from disadvantaged backgrounds who are already daunted by cripplingly high tuition fee debt,” Ms Hunt said.
“Increasing the debt burden on students will act as a disincentive to participation, and it does not make sense for the taxpayer either as the extra loan amount is unlikely to be repaid in full.”
Sir Peter Lampl, chairman of the Sutton Trust and the Education Endowment Foundation, warned that the grants change “could also put off many low- and middle-income students and tip the balance against their going to university”.
“Since grants were reintroduced, there have been significant improvements in participation from full-time less advantaged students, and this will be put at risk by today’s Budget plans,” Sir Peter added.
“The reality is that the government has miscalculated the levels of repayments it will get from its student loans under the new fees system. Rather than penalising poorer students, it should have a fundamental review of the repayments system. We need long-term solutions not a short term fix.”
Paul Blomfield MP, chair of the All-Party Parliamentary Group on Students, has condemned the government's decision to end maintenance grants for poorer students.
Mr Blomfield, who has 36,000 students in his constituency and more than any other MP, said grants provided “the last remnant of fairness in the student support system”.
“By cutting these grants, the government is deliberately choosing to attack students from low-income families, while other parts of the Budget give tax breaks to higher-income households and boost the inheritance of those from million pound homes.”
Les Ebdon, director of fair access to higher education, did not criticise the abolition of maintenance grants, but said he understood that “many people might be concerned that this change may deter people from lower-income families from going to higher education”.
“If this change were to adversely affect further progress, I would be very concerned,” said Professor Ebdon.
Previous concerns that fee hikes in 2012 would deter poorer students from applying to university had been unfounded, he added.
“In fact, this has not happened and we are now seeing record numbers of disadvantaged students entering university and experiencing the life-changing benefits of higher education.”
Wendy Piatt, director general of the Russell Group, said that the group “welcome the announcement that from 2017-18 tuition fees will increase in line with inflation for universities that provide excellent teaching”.
She said that inflation has eaten into the value of funding available since 2012, which means that next year the £9,000 fee would in effect be worth £8,200 in 2012 terms.
“Good teaching and world-class facilities require proper investment and indexing the fees cap to inflation is a crucial step towards the long-term sustainability of the UK’s leading universities.
“However, it is vital that appropriate measures are used to judge teaching excellence, without adding to the regulatory burden on universities or stifling innovation,” she added.
Pam Tatlow, chief executive of Million+, said that the government should “commit to reviewing the impact of these changes on students from different backgrounds and ensure that the introduction of maintenance loans has no detrimental effect on university access”.
“This would be a timely opportunity for ministers to review the financial support available for part-time students, who currently do not get any support for their living costs.”
A Liberal Democrat spokesman called the loss of maintenance grants “a direct attack on the poorest families, adding a barrier to young people going to university”.
“The Tories are imposing unnecessary debt on more students, and removing support that helps poorer students into university,” he said.
Maddalaine Ansell, chief executive of University Alliance, welcomed the uprating of tuition fees in line with inflation from 2017-18.
“It is reasonable to link the increase to teaching excellence and University Alliance looks forward to working with the government to work out how this can best be done.
“While we would have preferred increased maintenance grants, we recognise that the government’s commitment to reducing the deficit means that hard choices have to be made,” she added.
“Although the devil will be in the detail, a bigger maintenance loan that provides financial support to the most disadvantaged students is better than a grant that does not.”
Megan Dunn, the president of the National Union of Students, said: “Cutting maintenance grants would be detrimental to hundreds of thousands of our poorest students who currently rely on it, and could risk putting many people off applying to university.
“We know that our poorest students are the most likely to be deterred by debt, but it could also affect where students choose to live and which courses to take. It will mean staying at home instead of moving into halls or shared accommodation and applying for shorter courses to reduce costs.”
David Phoenix, vice-chancellor of London South Bank University, said: “Given that the consultation regarding the Teaching Excellence Framework has yet to begin, the announcement that it will be used to allow some universities to raise fees in line with inflation was a surprise. There is a danger that this becomes a crude tool to influence the market rather than a means to truly engage with all universities around the enhancement of teaching and learning.”
He added: “A system that recognises and rewards excellence in teaching and learning has great potential to help further enhance our standing as a sector, but it must be fair and equitable and without the details being known it is difficult to assess whether this should be linked to pricing rather than direct reward as is the case for research.”
Ryan Shorthouse, director of the Bright Blue thinktank, said: “The current system of maintenance grants is expensive and poorly targeted. A significant proportion of recipients are from affluent backgrounds, because it is possible for them to report only the income of their low-income parent in the case of parental separation. And many will go on to be relatively high earners when they graduate. Shifting maintenance support to loans is therefore a progressive measure. It will give students from low-income backgrounds more generous support to cover their living costs, up to £8,200 a year, but ensure that those who go on to earn more, pay more for the support they received.”