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How higher tuition fees will cost the government more

Ministers face a spiralling bill for loans after underestimating how many universities would charge

The hike in tuition fees is set to create a huge financial black hole because the government underestimated how many universities would charge the maximum £9,000 fees, according to a powerful committee of MPs.

A report by the Public Accounts committee suggests that the funding gap could cost the taxpayer an extra £95m a year and lead to a reduction in the number of undergraduate places. Tougher restrictions on student places will be deeply unpopular after several years of increasing competition and fewer job opportunities.

When the government lifted the cap on fees last year, ministers said that the top rate of £9,000 could only be charged in "exceptional circumstances". However, 60 out of 124 higher institutions have said they will charge the highest rate for at least some of their courses.

105 universities had declared the fee they will charge, with an average of £8,765. The government modelled its plans on an average fee of £7,500.
This means that the current balance of outstanding loans -- £24bn -- is expected to rise to £70bn by 2015-16, the report says.

This is ironic, given that reducing the deficit and solving the funding crisis in universities were the justifications for increasing fees. Lest we forget, Nick Clegg justified his U-turn on tuition fees thus:

At the time I really thought we could do it [not increase tuition fees]. I just didn't know, of course, before we came into government, quite what the state of the finances were.

So not only will the increased fees actually increase the strain on the public purse, they also fail to do anything to combat the funding crisis of higher education that motivated the Browne Review in the first place, coming as they do in conjunction with savage cuts to university budgets.

The Department for Business, Innovation and Skills says the full cost will not be known until September 2012, after students have received their loans. It is impossible to know whether the trebling of fees will have an impact on student demand, and how many students will waive their loans. Conversely, as my colleague George Eaton pointed out in March, the funding gap could end up being much higher.

Given the speed with which the legislation was rushed through, it is unsurprising that serious problems have surfaced. With Oxford University considering a vote of no confidence in the government's higher education policy today, waiting til freshers' week does not seem like an adequate solution.