Why tuition fees will cost six times more than they save

The coalition promised to reduce the cost to the taxpayer. But reduced university participation and higher inflation mean we'll end up paying more.

In his first Spending Review as Chancellor, George Osborne announced that the government had rejected a graduate tax but would reform higher education funding in England, requiring better-off graduates to pay more. The aim was to "reduce considerably the contribution that general taxpayers make to higher education". The switch from the direct funding of universities to indirect funding via student loans also helped Osborne to reduce the structural deficit which he said would be eliminated by 2015.

Ministers wasted no time. By December, the direct funding of universities was cut by 40 per cent over three years. Conservative and Liberal Democrat MPs voted through a three-fold increase in the maximum annual tuition fee that a university in England could charge, increasing the latter to £9,000. As a result, full-time students entering university for the first time in 2012 have been charged an average fee of £8,340 with a matching state-backed loan. Maintenance grants have increased marginally. For the first-time, part-time students can access fee (but not maintenance) loans although their course grants have been cut. All student loans will increase by RPI plus 3 per cent.

Unsurprisingly, the number of students entering university fell by at least 30,000 in 2012 with a further, dramatic decline in part-time participation. Applications for 2013 offer a glimmer of hope that there may be a recovery. Even if student interest increases (not forgetting that the coalition has cut the total number of funded places by 25,000 but has yet to put any ceiling on private provider numbers) does Osborne’s assertion that this is a good deal for taxpayers still stand up?

In the second of a series of pamphlets on higher education funding, the university think-tank million+ and London Economics set out to examine the case. Are the changes to higher education funding in England cost-effective uses the latest information from the Labour Force Survey, the Funding Council, the Office of Fair Access, the Higher Education Statistics Agency and BIS, the department responsible for universities, to model the 2012 changes.

All in all, the Treasury can claim to have saved £1.666bn per student cohort. This is largely the result of the reduction in direct grant to universities but takes into account the eye-watering increase in the Resource and Accounting Budget charge (a calculation of the proportion of the loan value that is not expected to be repaid). The Office for Budget Responsibility has already estimated that the loan book will almost double to £9bn. We estimate that over a 30-year repayment period the taxpayer will write-off almost 40 per cent of the loans that students take out.

Once the loss to the Treasury of reduced participation (which in turn leads to reduced tax receipts) and the inflationary impact of higher tuition fees are taken into account, the short-term savings will be outweighed almost six and a half times by the long-term costs of the new system. 

Although the inflationary shock seems to have surprised the outgoing governor of the Bank of England, Mervyn King, both the Consumer Price Index and the Retail Price Index will increase in the first three years of the introduction of higher fees. Not the most popular policy at the best of times, the government’s higher education reforms may lose their sheen even more if consumers work out that regulated rail fares, water bills and postage stamps will increase in part as a result of higher  fees. 

In spite of the cap on working-age benefits from April 2013, the Treasury will make additional payments of £42m and £163m on public sector and state pensions. The Treasury will also pick up the tab because a proportion of its own borrowing is linked to RPI. The government has issued £294bn in index-linked gilts. In 2012 alone it is estimated that the Treasury will pay an additional £655m in interest repayment arising from the tuition fee hike.

Ministers claim that the new funding regime has helped to avoid a further cut in funded student numbers and maintained university funding. In fact, institutional 'gains' will not be evenly distributed and stand to be wiped out completely if 42,000 fewer students are deterred from studying for a degree. There is also the real risk that the unit of resource will be reduced in universities which have done the most to open higher education to new generations of students.

The 2012 changes to university funding undoubtedly have the effect of reducing departmental expenditure. On paper, the reforms also reduce the structural deficit but mask the fact that the government will borrow more.

When all is done and dusted, the changes to university funding in England are an accountancy measure. In economic terms, it’s much harder to see how Osborne’s higher education promise to taxpayers will stack up in the long-term.

 

Pam Tatlow is chief executive of the university think-tank million+. The research was undertaken by Dr Gavan Conlon, an expert in HE finance and partner at London Economics

Demonstrators hold placards as they gather before the start of a student rally in central London on November 21, 2012 against an increase in university tuition fees. Photograph: Getty Images.
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The struggles of Huma Abedin

On the behind-the-scenes story of Hillary Clinton’s closest aide.

In a dreary campaign, it was a moment that shone: Hillary Clinton, on the road to the caucus in Iowa, stopping at a Mexican fast-food restaurant to eat and somehow passing unrecognised. Americans of all political persuasions gleefully speculated over what her order – a chicken burrito bowl with guacamole – revealed about her frame of mind, while supporters gloated that the grainy security-camera footage seemed to show Clinton with her wallet out, paying for her own lunch. Here was not the former first lady, senator and secretary of state, known to people all over the world. This was someone’s unassuming grandmother, getting some food with her colleagues.

It might be unheard of for Clinton to go unrecognised but, for the woman next to her at the till, blending into the background is part of the job. Huma Abedin, often referred to as Clinton’s “shadow” by the US media, is now the vice-chair of her presidential campaign. She was Clinton’s deputy chief of staff at the state department and has been a personal aide since the late 1990s.

Abedin first met Clinton in 1996 when she was 19 and an intern at the White House, assigned to the first lady’s office. She was born in Michigan in 1976 to an Indian father and a Pakistani mother. When Abedin was two, they moved from the US to Saudi Arabia. She returned when she was 18 to study at George Washington University in Washington, DC. Her father was an Islamic scholar who specialised in interfaith reconciliation – he died when she was 17 – and her mother is a professor of sociology.

While the role of “political body woman” may once have been a kind of modern maid, there to provide a close physical presence and to juggle the luggage and logistics, this is no longer the case. During almost 20 years at Clinton’s side, Abedin has advised her boss on everything from how to set up a fax machine – “Just pick up the phone and hang it up. And leave it hung up” – to policy on the Middle East. When thousands of Clinton’s emails were made public (because she had used a private, rather than a government, server for official communication), we glimpsed just how close they are. In an email from 2009, Clinton tells her aide: “Just knock on the door to the bedroom if it’s closed.”

Abedin shares something else with Clinton, outside of their professional ties. They are both political wives who have weathered their husbands’ scandals. In what felt like a Lewinsky affair for the digital age, in 2011, Abedin’s congressman husband, Anthony Weiner, resigned from office after it emerged that he had shared pictures of his genitals with strangers on social media. A second similar scandal then destroyed his attempt to be elected mayor of New York in 2013. In an ironic twist, it was Bill Clinton who officiated at Abedin’s and Weiner’s wedding in 2010. At the time, Hillary is reported to have said: “I have one daughter. But if I had a second daughter, it would [be] Huma.” Like her boss, Abedin stood by her husband and now Weiner is a house husband, caring for their four-year-old son, Jordan, while his wife is on the road.

Ellie Foreman-Peck

A documentary filmed during Weiner’s abortive mayoral campaign has just been released in the US. Weiner shows Abedin at her husband’s side, curtailing his more chaotic tendencies, always flawless with her red lipstick in place. Speaking to the New York Observer in 2007, three years before their marriage, Weiner said of his future wife: “This notion that Senator Clinton is a cool customer – I mean, I don’t dispute it, but the coolest customer in that whole operation is Huma . . . In fact, I think there’s some dispute as to whether Huma’s actually human.” In the film, watching her preternatural calm under extraordinary pressure, you can see what he means.

In recent months, Abedin’s role has changed. She is still to be found at Clinton’s side – as the burrito photo showed – but she is gradually taking a more visible role in the organisation overall, as they pivot away from the primaries to focus on the national race. She meets with potential donors and endorsers on Clinton’s behalf and sets strategy. When a running mate is chosen, you can be sure that Abedin will have had her say on who it is. There’s a grim symmetry to the way politics looks in the US now: on one side, the Republican candidate Donald Trump is calling for a ban on Muslims entering the country; on the other, the presumptive Democratic nominee Hillary Clinton relies ever more on her long-time Muslim-American staffer.

Years before Trump, notable Republicans were trying to make unpleasant capital out of Abedin’s background. In 2012, Tea Party supporters alleged that she was linked to the Muslim Brotherhood and its attempt to gain access “to top Obama officials”. In her rare interviews, Abedin has spoken of how hurtful these baseless statements were to her family – her mother still lives in Saudi Arabia. Later, the senator and former Republican presidential candidate John McCain spoke up for her, saying that Abedin represented “what is best about America”.

Whether senior figures in his party would do the same now remains to be seen.

Caroline Crampton is web editor of the New Statesman.

This article first appeared in the 26 May 2016 issue of the New Statesman, The Brexit odd squad