Scotland's fees anomaly comes under challenge

Does charging English students tuition fees violate human rights law?

In just over a year's time, English students will be charged the highest public university fees in the world. Despite ministers promising that only an "exceptional" number of institutions would charge £9,000, 47 of England's 123 universities plan to levy the maximum fee for all courses.

By contrast, courtesy of Alex Salmond's SNP administration, Scottish students will continue to enjoy free higher education. But while the country's universities are legally obliged to also offer free entrance to EU students, a legal loophole means that they are able to charge students from England fees of £1,820 ( £2,895 for medicine) per year - a sum that will increase to £9,000 from 2012. In other words, under European law, it is permissible to discriminate within states but not between them.

Now, this anamoly is under challenge from human rights lawyers. Phil Shiner, of Public Interest Lawyers, argues that the system contravenes article 14 of the European Convention on Human Rights and could also be in breach of the Equality Act. He says that Scottish ministers have "misinterpreted the law" and that "the argument about domicile and nationality doesn't hold water".

It's no surprise that this issue has arisen now. When I interviewed Steve Smith, the recently-departed head of Universities UK, last month, he told me that the status quo was untenable.

"That announcement shocked me," he said. "They [the SNP] had made such principled statements in the past about how iniquitous fees were and then they announced that they were going to allow institutions to charge £9,000." He added: "I suspect the government will do something ... It does seem very odd to me that someone can come from France and get the same terms as someone in Scotland but if they come from England they pay £9,000. That seems to me an anomaly that can't stand in the long-run."

The Scottish fees policy is often wrongly perceived as anti-English (the Daily Mail refers to it as "the fees apartheid") but it's simply aimed at maximising revenue for universities. Students from Wales and Northern Ireland also pay fees and the SNP is attempting to ensure that EU students do likewise. The number of EU students at Scottish universities (widely viewed as "a cheap option") has doubled to 15,930 over the last decade, at an annual cost to the Scottish taxpayer of £75m.

For the left, Scotland should serve as a reminder that tuition fees are a political choice, not an economic necessity. The British government can afford to fund free higher education through general taxation, it merely chooses not to. In public expenditure terms, the UK currently spends 0.7 per cent of its GDP on higher education, a lower level than France (1.2 per cent), Germany (0.9 per cent), Canada (1.5 per cent), Poland (0.9 per cent) and Sweden (1.4 per cent). Even the United States, where students make a considerable private contribution, spends 1 per cent of its GDP on higher education - 0.3 per cent more than the UK does.

Nick Clegg was never more wrong than when he said the "state of the finances" meant the coalition had no choice but to increase fees. In reality, for the reminder of this parliament at least, the reforms will cost the government more, not less. The new fees won't come into effect until 2012, which means repayments won't begin until 2015 for a three-year course. In the intervening period, the government will be forced to pay out huge amounts in maintenance and tuition-fee loans.

If English students win free entry to Scottish universities, while their friends pay £9,000 per year, it will only increase the pressure for an end to fees across the UK.

George Eaton is political editor of the New Statesman.

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Stability is essential to solve the pension problem

The new chancellor must ensure we have a period of stability for pension policymaking in order for everyone to acclimatise to a new era of personal responsibility in retirement, says 

There was a time when retirement seemed to take care of itself. It was normal to work, retire and then receive the state pension plus a company final salary pension, often a fairly generous figure, which also paid out to a spouse or partner on death.

That normality simply doesn’t exist for most people in 2016. There is much less certainty on what retirement looks like. The genesis of these experiences also starts much earlier. As final salary schemes fall out of favour, the UK is reaching a tipping point where savings in ‘defined contribution’ pension schemes become the most prevalent form of traditional retirement saving.

Saving for a ‘pension’ can mean a multitude of different things and the way your savings are organised can make a big difference to whether or not you are able to do what you planned in your later life – and also how your money is treated once you die.

George Osborne established a place for himself in the canon of personal savings policy through the introduction of ‘freedom and choice’ in pensions in 2015. This changed the rules dramatically, and gave pension income a level of public interest it had never seen before. Effectively the policymakers changed the rules, left the ring and took the ropes with them as we entered a new era of personal responsibility in retirement.

But what difference has that made? Have people changed their plans as a result, and what does 'normal' for retirement income look like now?

Old Mutual Wealth has just released. with YouGov, its third detailed survey of how people in the UK are planning their income needs in retirement. What is becoming clear is that 'normal' looks nothing like it did before. People have adjusted and are operating according to a new normal.

In the new normal, people are reliant on multiple sources of income in retirement, including actively using their home, as more people anticipate downsizing to provide some income. 24 per cent of future retirees have said they would consider releasing value from their home in one way or another.

In the new normal, working beyond your state pension age is no longer seen as drudgery. With increasing longevity, the appeal of keeping busy with work has grown. Almost one-third of future retirees are expecting work to provide some of their income in retirement, with just under half suggesting one of the reasons for doing so would be to maintain social interaction.

The new normal means less binary decision-making. Each choice an individual makes along the way becomes critical, and the answers themselves are less obvious. How do you best invest your savings? Where is the best place for a rainy day fund? How do you want to take income in the future and what happens to your assets when you die?

 An abundance of choices to provide answers to the above questions is good, but too much choice can paralyse decision-making. The new normal requires a plan earlier in life.

All the while, policymakers have continued to give people plenty of things to think about. In the past 12 months alone, the previous chancellor deliberated over whether – and how – to cut pension tax relief for higher earners. The ‘pensions-ISA’ system was mooted as the culmination of a project to hand savers complete control over their retirement savings, while also providing a welcome boost to Treasury coffers in the short term.

During her time as pensions minister, Baroness Altmann voiced her support for the current system of taxing pension income, rather than contributions, indicating a split between the DWP and HM Treasury on the matter. Baroness Altmann’s replacement at the DWP is Richard Harrington. It remains to be seen how much influence he will have and on what side of the camp he sits regarding taxing pensions.

Meanwhile, Philip Hammond has entered the Treasury while our new Prime Minister calls for greater unity. Following a tumultuous time for pensions, a change in tone towards greater unity and cross-department collaboration would be very welcome.

In order for everyone to acclimatise properly to the new normal, the new chancellor should commit to a return to a longer-term, strategic approach to pensions policymaking, enabling all parties, from regulators and providers to customers, to make decisions with confidence that the landscape will not continue to shift as fundamentally as it has in recent times.

Steven Levin is CEO of investment platforms at Old Mutual Wealth.

To view all of Old Mutual Wealth’s retirement reports, visit: products-and-investments/ pensions/pensions2015/