Current £9K fee system ‘fails sustainability test’, says report

The current £9,000 fee system is financially unsustainable and puts higher education at risk from a failed market, according to a report

November 18, 2014

The Higher Education Commission’s report, published today, is co-authored by Ruth Thompson, a former director general for higher education in the then Department for Innovation, Universities and Skills.

Among the findings of the report are that the “current system fails to meet our test of financial sustainability and further work needs to be undertaken to arrive at a better higher education funding model”.

It also says that the government should “monitor its plans to lift student number controls and be ready to reverse them if further research and experience shows they have had a damaging impact on students, universities or government finances”; and that the government “should not place too much reliance on market mechanisms given the absence of an informed consumer market”.

The report looks at positives and negatives in six options for the future: the status quo, a graduate tax, lowering fees and increasing direct grant, lifting the fee cap, a “hybrid” system involving a levy on fees above a “soft cap” of £6,000, and differential fees.

The Higher Education Commission describes itself as “an independent body made up leaders from the education sector, the business community and the three major political parties”, set up “in response to demand from Parliamentarians for a more informed and reflective discourse on higher education issues”. The report took nine months to compile after hearing from more than 60 experts on higher education, the commission says.

The commission is “powered” by thinktank Policy Connect and chaired by Lord Norton of Louth, the Conservative peer and professor of government at the University of Hull, who also co-authored the report.

The report, titled Too Good To Fail: The Financial Sustainability of Higher Education in England, calls the current funding system “the worst of both worlds. The government is funding HE by writing off student debt, as opposed to directly investing in teaching grants.

“This has created a system where the government is investing, but not getting any credit for it, damaging the perception of the public value associated with higher education. Students feel like they are paying substantially more for their higher education, but are set to have a large proportion of their debt written off by the government.”

On the government’s plan to remove student number controls in 2015, the report says that “the potential decline in quality for students, and the lack of control on public funding of student loans could prove problematic”.

It adds that “student numbers should be expanded, but in the current system this puts the financial sustainability of the sector at risk” and that the “student loan book should not be sold to fund this expansion”.

The report also says of the £9,000 fee system that “there is a serious issue with implementing a policy that dramatically increases the costs of student loan write-off for future governments, without being able to make a strong estimate of what that write-off will be”.

And it argues that the government’s plan to create a market in higher education where fees were driven down by competition “has not happened”, with many referring to what instead exists as a “pseudo market”.

“We agree that the idea of a market is flawed,” the report continues, adding: “Introducing market forces to a sector that does not operate as a market puts the financial sustainability of the sector at risk; the commission recommends retreating from this notion.”

Megan Dunn, vice-president (higher education) at the National Union of Students, said: “This is yet another report which joins a long line of disappointing revelations that have consistently shown that the current funding system is entirely unsustainable…The current system is bad for students, bad for the sector and bad for the taxpayer.”

Nick Hillman, director of the Higher Education Policy Institute and former special adviser to David Willetts in his time as universities and science minister, said the report was right to say that “recent higher education reforms are something of an experiment. So it’s perhaps a little surprising that the options for the future that are proposed are even more experimental.

“We shouldn’t forget that the funding model we have could well prove better than many of the alternatives. It is not perfect, but it does deliver well-funded universities with lots of places.”

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Reader's comments (1)

Tuition fees were introduced because Britain was bankrupted by Labour and the Tories preferred social exclusion over cuts to the welfare or war-fare budgets. If the government has to take on £36k debt for a 4 year university course or if this government debt is past onto an individual is an accounting exercise. It does not change the excessive levels of debt (public and private) in this country!! But as private household can’t print money to pay off their debts, private household debt reduced economic growth more than public debt. Sixth formers with foreign language skills could always opt for university education in France, Belgium, Holland, Germany or Spain and return to work in the UK, where they would be thousands of pounds better off (per year) than their UK educated colleagues. Instead of calling it "tuition fees" lets call it a tax on not having learnt another European language. Take the example a BSc in Engineering at KIT, Germany's largest teaching research institute. The all inclusive, year round living expenses (including insurance, fees, flat, internet, phone, transport etc) are 680 EUR per calendar month. Return flights from Stansted are usually about £60. While German engineering courses are much more comprehensive, they are tougher, require more independent learning and have a 48% drop-out rate!! The 52% who graduate tend to have a guaranteed job at the end with an average starting salary of 42,000 Euros (that's considerably higher than Engineering graduates from e.g. Imperial College).