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.

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Would you jump off a cliff if someone told you to? One time, I did

I was walking across the bridge in Matlock park, which is about 12 feet high, with a large group of other kids from my year, in the pouring rain.

Ever heard the phrase, “Would you jump off a cliff if they told you to?” It was the perpetual motif of my young teenage years: my daily escapades, all of which sprang from a need to impress a peer, were distressing and disgusting my parents.

At 13, this tomboyish streak developed further. I wrote urgent, angry poems containing lines like: “Who has desire for something higher than jumping for joy and smashing a light?” I wanted to push everything to its limits, to burst up through the ceiling of the small town I lived in and land in America, or London, or at least Derby. This was coupled with a potent and thumping appetite for attention.

At the height of these feelings, I was walking across the bridge in Matlock park, which is about 12 feet high, with a large group of other kids from my year, in the pouring rain. One of the cool girls started saying that her cousin had jumped off the bridge into the river and had just swum away – and that one of us should do it.

Then someone said that I should do it, because I always did that stuff. More people started saying I should. The group drew to a halt. Someone offered me a pound, which was the clincher. “I’m going to jump!” I yelled, and clambered on to the railing.

There wasn’t a complete hush, which annoyed me. I looked down. It was raining very hard and I couldn’t see the bottom of the riverbed. “It looks really deep because of the rain,” someone said. I told myself it would just be like jumping into a swimming pool. It would be over in a few minutes, and then everyone would know I’d done it. No one could ever take it away from me. Also, somebody would probably buy me some Embassy Filter, and maybe a Chomp.

So, surprising even myself, I jumped.

I was about three seconds in the air. I kept my eyes wide open, and saw the blur of trees, the white sky and my dyed red hair. I landed with my left foot at a 90-degree angle to my left ankle, and all I could see was red. “I’ve gone blind!” I thought, then realised it was my hair, which was plastered on to my eyes with rain.

When I pushed it out of the way and looked around, there was no one to be seen. They must have started running as I jumped. Then I heard a voice from the riverbank – a girl called Erin Condron, who I didn’t know very well. She pushed me home on someone’s skateboard, because my ankle was broken.

When we got to my house, I waited for Mum to say, “Would you jump off another cliff if they told you to?” but she was ashen. I had to lie that Dave McDonald’s brother had pushed me in the duck pond. And that’s when my ankle started to throb. I never got the pound, but I will always be grateful to Erin Condron. 

This article first appeared in the 25 August 2016 issue of the New Statesman, Cameron: the legacy of a loser