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Mandelson's third way on tuition fees

Mandelson says that Labour would have increased fees but would "never have trebled" them.

Peter Mandelson's comments on Ed Miliband at last night's Progress event have received a lot of attention this morning but some of his most revealing remarks were on another subject: tuition fees.

Mandelson conceded that Labour would have increased tuition fees but added: "We would never have trebled them and cut the teaching grant by so much." The Tories have often pointed out that Labour commissioned the Browne Review, implying that the opposition would have adopted the same policy, but Mandelson's comments suggest that Labour could have charted a third way.

Had the coalition not chosen to triple fees to £9,000 - the highest public university fees in the world - it could at least have minimised the tuition fees fiasco. The cost to the state would have been no greater since ministers would have been required to provide fewer subsidised loans (many of which will never be paid back in full), and the charge that students from poorer backgrounds will be deterred from applying would not be so strong. It was the coalition's decision to slash the teaching grant by 80 per cent that prompted around two-thirds of universities to charge the maximum £9,000 a year.

Mandelson was also right to call for Labour to "revolutionise its funding sources". As I've pointed out before, the party is now an almost wholly owned subsidiary of the trade unions. Back in 1994, when Tony Blair became Labour leader, the unions accounted for just a third of the party's annual income. They now account for more than 60 per cent.

In the last quarter, private donations represented just £59,503 (2 per cent) of Labour's £2,777,519 income. Just two individuals donated to the party, one of whom was Alastair Campbell. By contrast, union donations accounted for 90 per cent of all funding. I'm a strong supporter of the trade union link, but it's unhealthy for a progressive political party to be so dependent on a few sources of income. Mandelson was right to argue that Labour must widen its funding base as a matter of urgency.