Student loans: confusion reigns on England’s HE spending

OECD planning to change measures of public spending on HE amid complex picture on student loans

February 18, 2016
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Now you see it: OECD classification of public spending contrary to Westminster’s

The year that England introduced £9,000 tuition fees and cut direct teaching grants to universities also saw public funding for higher education dramatically increase.

That, at least, was the confusing picture presented in the latest edition of the Organisation for Economic Cooperation and Development’s influential Education at a Glance report .

Education at a Glance 2015 saw a big jump in the UK’s public spending on higher education – from 0.9 per cent of GDP to 1.2 per cent of GDP – despite it being the first edition of the report to include data from the £9,000 fee system that England introduced in 2012.

It has now emerged that a couple of factors may have inflated the UK's figure for public spending.

England’s fee loans to students are, in their entirety, classed as public spending within the OECD’s report – running counter to the argument of the Westminster government and some universities that they are private funding given that students repay most of the money. The classification looks even more odd when compared with Australia, which despite having a similar income-contingent student loan system, sees the bulk of its loans counted as private funding in Education at a Glance.

The OECD says that the UK government reclassified student fee loans as public funding for the latest data collection, but the Department for Business, Innovation and Skills denies that any change was made and says that fee loans have always been classed as public funding under OECD methodology.

One change that did definitely happen in the latest edition of Education at a Glance was that the Higher Education Funding Council for England teaching grant was reclassified as direct public expenditure. In previous reports, it was classed as a “transfer” to Hefce, an indirect form of funding not counted as public spending.

“The decision to change the methodology in 2015 was made by a joint Department for Education/Business, Innovation and Skills team, in discussion with HM Treasury,” a BIS spokeswoman said.

On the question of the treatment of England’s student loans, the spokeswoman said: “The UK government continues to provide a considerable public subsidy to higher education, both directly through the Hefce teaching grant, and indirectly by underwriting student loans and maintenance support.”

An OECD spokesman said that it was "working to present measures of public expenditure before and after transfers to make the data more directly comparable, taking into account the changing situations of student loan systems across the OECD”.

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