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Telegraph this morning that one of those concessions - fining graduates who pay off their student loans early - has been revoked.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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Why Theresa May won't exclude students from the net migration target

The Prime Minister believes the public would view the move as "a fix". 

In a letter to David Cameron shortly after the last general election, Philip Hammond demanded that students be excluded from the net migration target. The then foreign secretary, who was backed by George Osborne and Sajid Javid, wrote: "From a foreign policy point of view, Britain's role as a world class destination for international students is a highly significant element of our soft power offer. It's an issue that's consistently raised with me by our foreign counterparts." Universities and businesses have long argued that it is economically harmful to limit student numbers. But David Cameron, supported by Theresa May, refused to relent. 

Appearing before the Treasury select committee yesterday, Hammond reignited the issue. "As we approach the challenge of getting net migration figures down, it is in my view essential that we look at how we do this in a way that protects the vital interests of our economy," he said. He added that "It's not whether politicians think one thing or another, it's what the public believe and I think it would be useful to explore that quesrtion." A YouGov poll published earlier this year found that 57 per cent of the public support excluding students from the "tens of thousands" target.

Amber Rudd, the Home Secretary, has also pressured May to do so. But the Prime Minister not only rejected the proposal - she demanded a stricter regime. Rudd later announced in her conference speech that there would be "tougher rules for students on lower quality courses". 

The economic case for reform is that students aid growth. The political case is that it would make the net migration target (which has been missed for six years) easier to meet (long-term immigration for study was 164,000 in the most recent period). But in May's view, excluding students from the target would be regarded by the public as a "fix" and would harm the drive to reduce numbers. If an exemption is made for one group, others will inevitably demand similar treatment. 

Universities complain that their lobbying power has been reduced by the decision to transfer ministerial responsibility from the business department to education. Bill Rammell, the former higher education minister and the vice-chancellor of Bedfordshire, said in July: “We shouldn’t assume that Theresa May as prime minister will have the same restrictive view on overseas students that Theresa May the home secretary had”. Some Tory MPs hoped that the net migration target would be abolished altogether in a "Nixon goes to China" moment.

But rather than retreating, May has doubled-down. The Prime Minister regards permanently reduced migration as essential to her vision of a more ordered society. She believes the economic benefits of high immigration are both too negligible and too narrow. 

Her ambition is a forbidding one. Net migration has not been in the "tens of thousands" since 1997: when the EU had just 15 member states and the term "BRICS" had not even been coined. But as prime minister, May is determined to achieve what she could not as home secretary. 

George Eaton is political editor of the New Statesman.