Bogus accounting and irrelevant populism cannot fill Labour’s £11 billion black hole

Andrew Adonis’s account of how Labour could fund universities if tuition fees were abolished lacks credibility, says David Willetts

September 7, 2017
Falling pound
Source: Daniel Mitchell

Last month, Andrew Adonis, a former Labour education minister, tackled the question of how English higher education could be paid for if his party’s policy of abolishing tuition fees were enacted (“Is abolishing tuition fees regressive? It depends how it’s done”, Opinion, 17 August).

The funding gap that would be opened up by such a policy has been put at £11 billion. Adonis claims, firstly, that since some graduates will not repay their loans in full, the gap falls to £6.5 billion. But that is a highly speculative forecast because nobody can know what will happen to graduate earnings over the 30-year repayment period. There is no existing public spending on loan write-offs that could offset some of the costs of Adonis’s new spending programme. So replacing fee income with public grants to universities would come at full cost.

The loan repayment terms are a matter of legitimate political decision. Jo Johnson, my successor as universities and science minister, is right when he says that it is a deliberate and progressive feature of the system not to collect repayments from low-income graduates – that is why we deliberately increased the repayment threshold to £21,000 from the indexed £15,000 that we inherited from Labour. If Adonis thinks that this threshold is too high and that graduates may not pay back enough, he can change it.

However, he can’t choose what counts as public spending. The rules, which neither are nor should be determined by ministers, put England’s graduate repayment system outside public spending. That makes sense. It would be absurd if a government could treat the shifting forecasts of future loan write-offs as real public spending to be diverted to other purposes. So Adonis still has a funding gap of approximately £1.2 billion for every £1,000 he takes off fees.

Secondly, he suggests increasing revenue from international students. I agree that this is an important source of income, which we should promote. Indeed, that is why it is surprising that he supported the mistaken claims by the Sunday Times last month that international students were displacing domestic students. However, he cannot argue that extra overseas students will result from his policy on fees, so it is not a new source of income to offset that policy’s cost.

Thirdly, Adonis talks about the “bloated overheads, notably the pay of vice-chancellors and other top staff.” Every organisation should, of course, make efficiency savings. But there are about 130 vice-chancellors in England, with average pay of about £250,000. So even if Adonis acquired the power that ministers currently lack to influence their pay, lowering the average by £100,000 would only save £13 million: about one-thousandth of £11 billion.

Finally, Adonis identifies some possible tax increases. But claiming that the tax would come from the affluent does not affect the real political argument, which is about relative priorities between different public spending programmes. He needs to show why it would be a priority to use extra revenues to help graduates – who, on average, earn £31,000 a year, compared with £22,000 for non-graduates.

This takes the debate full circle. It is now 20 years since the Dearing Report – which first recommended fees – landed on then education secretary David Blunkett’s desk. It was commissioned because universities were losing out in the battle for public spending to more popular causes, such as schools and hospitals. The devastating statistic in the report was that spending per student had fallen by 40 per cent from its peak – unlike spending on any other stage of education. Everyone who cared about the future of universities and a fair deal for students realised that the only way out was to end students’ dependence on public spending to finance their education.

Income-contingent student loans are not commercial loans, as in the US, or part of public spending, as the proceeds of a graduate tax would be. Steering a way between these two equal and opposite problems has led all three of the UK’s main political parties to a develop a similar solution when actually facing the practical constraints of government.

Adonis is supposed to one of Labour’s leading education experts, so we must assume his is the best explanation of how the party would compensate universities for the loss of fee income. It depends on bogus accounting, a populist campaign on vice-chancellors’ pay that is irrelevant to the scale of the funding gap, and a gamble on big increases in public spending when there are many other claims on the public purse from far less affluent groups than graduates.

That is not the end of it. Public spending on universities is controlled by limiting student numbers, and it is always disadvantaged groups who lose out, as in Scotland. 

We have an obligation to ensure that the education of our students is properly resourced. After failures by successive governments, we are finally fulfilling it. We must not betray our students again.

David Willetts was minister for universities and science between 2010 and 2014. His book, A University Education, is published in November. He and Andrew Adonis will be taking part in a debate organised by Times Higher Education next week; watch the THE website for details. 

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