A fall in university applicants is a failure for the coalition

Ministers have always wanted more people to go to university. But 38,000 fewer are.

Are higher tuition fees deterring people from applying to university? "Yes" is the answer from the Independent Commission on Fees, chaired by Will Hutton, which has released its first findings today. Applications from English students are down by 8.8% (or 37,000) this year compared with 2010, before the new fees regime was announced. Of note is that the fall in applicant numbers has not been replicated elsewhere in the UK, where fees are lower or non-existent. In Scotland, where home students do not pay fees, applications are up by 1%, while in Wales, where fees are capped at £3,465, they have risen by 0.3 per cent. In Northern Ireland, where fees are also capped at £3,465, applications have fallen by 0.8%. As Hutton notes:

This study provides initial evidence that increased fees have an impact on application behaviour. There is a clear drop in application numbers from English students when compared to their counterparts in Scotland, Wales and Northern Ireland.

Of some comfort to the government is the fact that there has been almost no decline in applications from poorer students, with applications from the most disadvantaged fifth of the population down by just 0.2 per cent in England. In addition, the reduction in overall applications is partly explained by a fall in the number of young people. But only partly. The inescapable fact is that fees of up to £9,000, the highest public university fees in the world, are deterring would-be students. For the coalition, this is a clear failure of policy. Unlike some Conservatives, higher education minister David Willetts has always insisted that he wants to see more people going to university. In 2011, he said: "It's important that prospective students are not put off applying to university." But the initial evidence suggest that they have been.

The key question is whether this is likely to be a temporary or a permanent reduction. When Labour tripled fees to £3,000, student numbers fell by 15,000 (3.7 per cent) in the first year (2006) but they later more than recovered. Thus, as Hutton says, "it is too early to draw any firm conclusions". But should the reduction prove permanent, the fall in applicants will harm both the UK's long-term growth potential and its levels of social mobility. For Nick Clegg, who has made widening opportunity his priority in government, it is an unhappy prospect.

A fall in university applications could harm Nick Clegg's goal of increasing social mobility. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty Images
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There are risks as well as opportunities ahead for George Osborne

The Chancellor is in a tight spot, but expect his political wiles to be on full display, says Spencer Thompson.

The most significant fiscal event of this parliament will take place in late November, when the Chancellor presents the spending review setting out his plans for funding government departments over the next four years. This week, across Whitehall and up and down the country, ministers, lobbyists, advocacy groups and town halls are busily finalising their pitches ahead of Friday’s deadline for submissions to the review

It is difficult to overstate the challenge faced by the Chancellor. Under his current spending forecast and planned protections for the NHS, schools, defence and international aid spending, other areas of government will need to be cut by 16.4 per cent in real terms between 2015/16 and 2019/20. Focusing on services spending outside of protected areas, the cumulative cut will reach 26.5 per cent. Despite this, the Chancellor nonetheless has significant room for manoeuvre.

Firstly, under plans unveiled at the budget, the government intends to expand capital investment significantly in both 2018-19 and 2019-20. Over the last parliament capital spending was cut by around a quarter, but between now and 2019-20 it will grow by almost 20 per cent. How this growth in spending should be distributed across departments and between investment projects should be at the heart of the spending review.

In a paper published on Monday, we highlighted three urgent priorities for any additional capital spending: re-balancing transport investment away from London and the greater South East towards the North of England, a £2bn per year boost in public spending on housebuilding, and £1bn of extra investment per year in energy efficiency improvements for fuel-poor households.

Secondly, despite the tough fiscal environment, the Chancellor has the scope to fund a range of areas of policy in dire need of extra resources. These include social care, where rising costs at a time of falling resources are set to generate a severe funding squeeze for local government, 16-19 education, where many 6th-form and FE colleges are at risk of great financial difficulty, and funding a guaranteed paid job for young people in long-term unemployment. Our paper suggests a range of options for how to put these and other areas of policy on a sustainable funding footing.

There is a political angle to this as well. The Conservatives are keen to be seen as a party representing all working people, as shown by the "blue-collar Conservatism" agenda. In addition, the spending review offers the Conservative party the opportunity to return to ‘Compassionate Conservatism’ as a going concern.  If they are truly serious about being seen in this light, this should be reflected in a social investment agenda pursued through the spending review that promotes employment and secures a future for public services outside the NHS and schools.

This will come at a cost, however. In our paper, we show how the Chancellor could fund our package of proposed policies without increasing the pain on other areas of government, while remaining consistent with the government’s fiscal rules that require him to reach a surplus on overall government borrowing by 2019-20. We do not agree that the Government needs to reach a surplus in that year. But given this target wont be scrapped ahead of the spending review, we suggest that he should target a slightly lower surplus in 2019/20 of £7bn, with the deficit the year before being £2bn higher. In addition, we propose several revenue-raising measures in line with recent government tax policy that together would unlock an additional £5bn of resource for government departments.

Make no mistake, this will be a tough settlement for government departments and for public services. But the Chancellor does have a range of options open as he plans the upcoming spending review. Expect his reputation as a highly political Chancellor to be on full display.

Spencer Thompson is economic analyst at IPPR