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Why the issue of tuition fees will not go away

Average institutions charging top-rate fees will prove a continuing headache for the government.

Oxford's announcement that it will charge £9,000 for undergraduate tuition fees is no surprise. It is the fourth university to confirm that it will charge the maximum amount, after Cambridge, Exeter and Imperial College London.

These announcements will not worry the coalition. All have an excellent reputation. What will concern the government, however, is a constant trickle of lesser universities announcing that they, too, will charge the maximum amount for tuition.

The Lib Dems have already gone on the defensive. Nick Clegg said this weekend: "I cannot think of anything more absurd than a university saying, to prove that they can offer a good education, they can whack up the price to £9,000. They are not Harrods." He is right – it is absurd. But what did he expect?

There is a market in higher education – one heavily weighted in favour of universities. Every single university in the UK has more applicants than places. Vince Cable's threat that "at some point, a university committee will destroy their own student base unless they are very, very careful" is as empty as they come. Universities call the shots when it comes to admitting students. They will not charge £9,000 to show off – they will do it because they can.

Even average universities are vastly oversubscribed. According to Ucas, the University of Chester had almost ten applicants per place in 2010. Kingston University had 44,083 applicants, of whom only 7,524 were accepted. Even the University of Lincoln has nearly five applicants for every place. Unless there is an improbably large drop in demand for higher education, practically any university in the UK could charge the full £9,000 and still fill every single place.

This leaves the coalition in a pickle, with little recourse other than to appeal to a university's sense of what's right and fair, as the government's universities minister, David Willetts, did last month. "Unless universities can prove that there will be a commensurate and very significant improvement in the education on offer, it is difficult to see how such an increase could ever be justified," Willetts claimed. It could, however, be justified by pointing to the 80 per cent cut in the teaching grant that the coalition introduced.

Justified or not, raising the cap and then castigating universities that decide to raise their fees accordingly is policy at its most incoherent. The government failed to make a convincing case for higher fees and is now attempting to compensate for its failure by intimidating universities. The coalition's policy is a mess. Its problems with higher education are not over yet.