Why higher tuition fees have left a £1bn-a-year black hole

Nick Clegg said the deficit meant fees had to rise. But the new system will cost the government more.

In defending the coalition's decision to triple tuition fees from £3,000 to £9,000, Nick Clegg has frequently pointed to the size of the deficit. For instance, he commented in 2010:

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 [sic].

In reality, for the reminder of this parliament at least, the reforms will cost the government more, not less. The new fees only came into effect this year, which means repayments won't kick in until 2015 for a three-year course. In the intervening period, the government will be forced to pay out huge amounts in maintenance loans and tuition-fee loans, not least because three-quarters of universities are planning to charge £9,000 for some courses next year, with a third charging the maximum fee for all (minister previously insisted they would only do so in "exceptional circumstances").

As a result, according to a new report by the Higher Education Policy Institute (HEPI), the coalition faces a £1bn-a-year black hole in university funding. Having "seriously understated" the cost of its reforms, the report warns that the government will either have to dramatically reduce student numbers, ask graduates to make higher repayments, or pass the bill on to future taxpayers.

It cites three reasons why the new system will cost the government more than previously thought. First, while ministers predicted an average fee of £7,500, the actual figure is £8,234, forcing students to take out higher tuition fee loans. Second, while the Treasury expects a 32 per cent shortfall in loans repayment, the Institute for Fiscal Studies believes the figure will be closer to 37 per cent. The government currently assumes that the average male graduate will be earning £75,000 a year in 30 years time (a reduction from an earlier estimate of £100,000) , a figure that looks excessively optimistic. Finally, the new fees system adds 0.2 percentage points to CPI inflation, triggering rises in benefits and pensions of between £420m and £1.14bn a year (unless, of course, the government, as has been widely speculated, freezes benefits).

The report concludes:

A slightly higher [repayments] cost or a slightly greater inflationary effect than the most optimistic that we have considered here would mean that the present policy is actually more expensive than the one it has replaced.

With the government likely to simply pass the cost on to the taxpayer (as would happen in a purely state-funded system), Clegg's party is entitled to ask, what was all the pain for?

Student demonstrators march against higher tuition fees in London in 2010. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty
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UnHerd's rejection of the new isn't as groundbreaking as it seems to think

Tim Montgomerie's new venture has some promise, but it's trying to solve an old problem.

Information overload is oft-cited as one of the main drawbacks of the modern age. There is simply too much to take in, especially when it comes to news. Hourly radio bulletins, rolling news channels and the constant stream of updates available from the internet – there is just more than any one person can consume. 

Luckily Tim Montgomerie, the founder of ConservativeHome and former Times comment editor, is here to help. Montgomerie is launching UnHerd, a new media venture that promises to pull back and focus on "the important things rather than the latest things". 

According to Montgomerie the site has a "package of investment", at least some of which comes from Paul Marshall. He is co-founder of one of Europe's largest hedge funds, Marshall Wace, formerly a longstanding Lib Dem, and also one of the main backers and chair of Ark Schools, an academy chain. The money behind the project is on display in UnHerd's swish (if slightly overwhelming) site, Google ads promoting the homepage, and article commissions worth up to $5,000. The selection of articles at launch includes an entertaining piece by Lionel Shriver on being a "news-aholic", though currently most of the bylines belong to Montgomerie himself. 

Guidelines for contributors, also meant to reflect the site's "values", contain some sensible advice. This includes breaking down ideas into bullet points, thinking about who is likely to read and promote articles, and footnoting facts. 

The guidelines also suggest focusing on what people will "still want to read in six, 12 or 24 months" and that will "be of interest to someone in Cincinnati or Perth as well as Vancouver or St Petersburg and Cape Town and Edinburgh" – though it's not quite clear how one of Montgomerie's early contributions, a defence of George Osborne's editorship of the Evening Standard, quite fits that global criteria. I'm sure it has nothing to do with the full page comment piece Montgomerie got in Osborne's paper to bemoan the deficiencies of modern media on the day UnHerd launched. 

UnHerd's mascot  – a cow – has also created some confusion, compounded by another line in the writing tips describing it as "a cow, who like our target readers, tends to avoid herds and behave in unmissable ways as a result". At least Montgomerie only picked the second-most famous poster animal for herding behaviour. It could have been a sheep. In any case, the line has since disappeared from the post – suggesting the zoological inadequacy of the metaphor may have been recognised. 

There is one way in which UnHerd perfectly embodies its stated aim of avoiding the new – the idea that we need to address the frenetic nature of modern news has been around for years.

"Slow news" – a more considered approach to what's going on in the world that takes in the bigger picture – has been talked about since at least the beginning of this decade.

In fact, it's been around so long that it has become positively mainstream. That pusher of rolling coverage the BBC has been talking about using slow news to counteract fake news, and Montgomerie's old employers, the Times decided last year to move to publishing digital editions at set points during the day, rather than constantly updating as stories break. Even the Guardian – which has most enthusiastically embraced the crack-cocaine of rolling web coverage, the live blog – also publishes regular long reads taking a deep dive into a weighty subject. 

UnHerd may well find an audience particularly attuned to its approach and values. It intends to introduce paid services – an especially good idea given the perverse incentives to chase traffic that come with relying on digital advertising. The ethos it is pitching may well help persuade people to pay, and I don't doubt Montgomerie will be able to find good writers who will deal with big ideas in interesting ways. 

But the idea UnHerd is offering a groundbreaking solution to information overload is faintly ludicrous. There are plenty of ways for people to disengage from the news cycle – and plenty of sources of information and good writing that allow people to do it while staying informed. It's just that given so many opportunities to stay up to date with what has just happened, few people decide they would rather not know.