The Tory-Lib Dem university battle isn't over yet

Lifting the penalty on early student loan repayments won't be enough to keep the Tories happy.

The government's tuition fees package, you'll recall, was filleted with "progressive" amendments designed to persuade recalcitrant Lib Dems to back the plans. But we learn from the Daily Telegraph this morning that one of those concessions - fining graduates who pay off their student loans early - has been revoked.

Vince Cable had planned to impose a five per cent charge on the value of early repayments in an attempt to prevent "wealtheir students" from avoiding interest charges. Back in October 2010, the Business Secretary said:

There is an issue about people who go on to very high-earning jobs and who therefore pay off relatively quickly and we do have to think about how to find a way by which they make some sort of contribution towards low-earning graduates.

It was always a dubious proposal. Some of the wealthiest students (or, more accurately, the children of wealthy parents) bypass the loan system altogether by paying their university fees upfront. Indeed, as the liberal think-tank Centre Forum observed, it would likely be low-income graduates who lost out since "debt aversion not affluence is the biggest cause of early repayments".

But this isn't just about bad policy. The Lib Dems agreed to abandon the proposal as a quid pro quo for the appointment of Prof Les Ebdon as the director of the Office for Fair Access. Although Cable's favoured candidate, Ebdon was attacked by the Tories as a supporter of "social engineering", with Michael Gove privately lobbying against his appointment and the business select committee voting against it.

One Downing Street source cheerfully tells the Telegraph:

The Lib Dems were very keen to appoint Ebdon and we felt very strongly about penalties for early repayment of loans. This is hopefully good news for tens of thousands of families, as well as many Conservative MPs who had raised concerns about the penalties.

But it's hard to imagine Tory MPs will be so sanguine. It is they, rather than the Lib Dems, who look like the losers from this affair. The abandoment of early repayment charges is a minor concession that, in most Tories' eyes, hardly compensates for Ebdon's three-year appointment.

To the consternation of the Russell Group, Ebdon has threatened to forbid universities from charging the maximum £9,000 tuition fee if they do not meet targets on widening participation. An option he describes, in language strikingly reminiscent of Cable, as "the nuclear button".

Cable will confirm Ebdon's appointment next week but expect Tory MPs to take every opportunity to undermine him.

George Eaton is political editor of the New Statesman.

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Autumn Statement 2015: George Osborne abandons his target

How will George Osborne close the deficit after his U-Turns? Answer: he won't, of course. 

“Good governments U-Turn, and U-Turn frequently.” That’s Andrew Adonis’ maxim, and George Osborne borrowed heavily from him today, delivering two big U-Turns, on tax credits and on police funding. There will be no cuts to tax credits or to the police.

The Office for Budget Responsibility estimates that, in total, the government gave away £6.2 billion next year, more than half of which is the reverse to tax credits.

Osborne claims that he will still deliver his planned £12bn reduction in welfare. But, as I’ve written before, without cutting tax credits, it’s difficult to see how you can get £12bn out of the welfare bill. Here’s the OBR’s chart of welfare spending:

The government has already promised to protect child benefit and pension spending – in fact, it actually increased pensioner spending today. So all that’s left is tax credits. If the government is not going to cut them, where’s the £12bn come from?

A bit of clever accounting today got Osborne out of his hole. The Universal Credit, once it comes in in full, will replace tax credits anyway, allowing him to describe his U-Turn as a delay, not a full retreat. But the reality – as the Treasury has admitted privately for some time – is that the Universal Credit will never be wholly implemented. The pilot schemes – one of which, in Hammersmith, I have visited myself – are little more than Potemkin set-ups. Iain Duncan Smith’s Universal Credit will never be rolled out in full. The savings from switching from tax credits to Universal Credit will never materialise.

The £12bn is smaller, too, than it was this time last week. Instead of cutting £12bn from the welfare budget by 2017-8, the government will instead cut £12bn by the end of the parliament – a much smaller task.

That’s not to say that the cuts to departmental spending and welfare will be painless – far from it. Employment Support Allowance – what used to be called incapacity benefit and severe disablement benefit – will be cut down to the level of Jobseekers’ Allowance, while the government will erect further hurdles to claimants. Cuts to departmental spending will mean a further reduction in the numbers of public sector workers.  But it will be some way short of the reductions in welfare spending required to hit Osborne’s deficit reduction timetable.

So, where’s the money coming from? The answer is nowhere. What we'll instead get is five more years of the same: increasing household debt, austerity largely concentrated on the poorest, and yet more borrowing. As the last five years proved, the Conservatives don’t need to close the deficit to be re-elected. In fact, it may be that having the need to “finish the job” as a stick to beat Labour with actually helped the Tories in May. They have neither an economic imperative nor a political one to close the deficit. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.