The parties can't ignore the looming student finance crisis

With further cuts to higher education and 40 per cent of student loans unlikely to be repaid, the parties need to agree on a sustainable funding system.

George Osborne announced this morning that seven government departments have already agreed to further spending cuts in 2015-16. The business department was not among these ‘early settlers’, although most in the higher education sector expect major cuts to be coming their way.

In the last Spending Review, universities were spared significant reductions because their burden of deficit reduction was met by much higher tuition fees for future graduates. Having taken this controversial decision, the government has relatively little room for further large cuts in higher education spending, without potentially damaging a sector that is critical to our future prosperity.

Against this background, IPPR’s Commission on the Future of Higher Education (which reports on 10 June) will recommend a number of short term measures to help universities get through the next Spending Review while ensuring that they remain well placed to support Britain’s economic and social renewal as we enter the 2020s.

The government should start by protecting the cash ring-fence around the science and research budget, which implies real term reductions, but on a manageable scale. It should also protect funding for widening participation, which goes to universities to recruit and support students from disadvantaged backgrounds. To find the resources for these measures, the government should hold steady the proportion of 18-21 year olds going to university on full cost courses, releasing between £1.5bn and £3bn over the next seven years because of a natural decline in the numbers of 18-year-olds in the population.

Universities should also take some of the cost cutting strain by freezing the ‘teaching grant’ in cash terms, alongside a freeze in the maximum tuition fee at £9,000, until at least 2017-18. Conversely, to enable institutions to raise more fee income, international students should be removed from the government’s net migration target.

In order to continue to expand higher education opportunities during this period of fiscal restraint, the Commission will argue that the government should create a new £5,000 ‘fee-only degree’ for students who live at home and/or work part-time. Students would not be eligible for maintenance grants or loans but would pay a lower tuition fee. This would allow an expansion of student places because of the very low up front cost.

The package of savings identified by the Commission could help the sector get through the Spending Review but there is still a long-term funding challenge facing universities. The government underestimated the amount of money that will repaid in loans by future graduates. It first predicted that 30 per cent of the total loans advanced would not be repaid but our Commission estimates the figure is more likely to be 40 per cent, eventually producing a black hole that could be as big as £1bn.

This means that all parties will need to propose ways of reforming the student funding system in their manifestos that will be sustainable in the long-term. The IPPR Commission has modeled a number of options for reform. One option is to try to recoup more money through the existing system, such as by increasing the rate of interest paid by the highest earning graduates. Another option proposed by the Labour Party and others is bringing the fee cap down to £6,000. This cuts long term costs but produces a short term funding gap (we estimate £1.67 bn) which Labour has pledged to fill in part from an increase in corporation tax.

Another widely canvassed option is to introduce a graduate tax. A tax of 2p in the pound paid by graduates through the tax system once they have left university is economically feasible but it bumps straight up against government accounting rules (set by the ONS and not by politicians). These currently score all fee loans as cash transactions that are ‘off balance sheet’ in the public accounts. When the loan becomes a tax, the fee outlay has to appear ‘on balance sheet’ as government spending. This means that, unless accounting rules could be changed (which most experts agree is unlikely), introducing a graduate tax would technically add around £7bn to the deficit.

Politicians might have thought that student funding had been put to bed as a difficult issue in the run-up to the next general election. They need to think again. With the likelihood of another hung parliament the parties will need to agree on a sustainable long term funding system for our universities.

Rick Muir is Associate Director for Public Service Reform at IPPR. The final report of IPPR’s Commission on the Future of Higher Education will be published on Monday 10 June.

Demonstrators chant slogans during a student rally against rises in tuition fees. Photograph: Getty Images.

Rick Muir is director of the Police Foundation

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Celebrate Labour's electoral success - but don't forget the working class

The shutting down of genuine, constructive debate on the left is the great danger we face. 

In the moment when the exit poll was released on 8 June, after seven weeks of slogging up and down the streets of Britain, dealing with scepticism, doubt and sometimes downright hostility, we felt a combination of relief, optimism, even euphoria.
 
This election broke wide open some assumptions that have constrained us on the left for too long; that the young won’t vote, that any one individual or political party is “unelectable”, that perceptions of both individuals, parties and even policies cannot change suddenly and dramatically. It reminded us that courage, ambition and hope are what’s needed and what have been missing from our politics, too often, for too long.
 
We have learnt to tread carefully and wear our values lightly. But in recent weeks we have remembered that our convictions can, as Jonathan Freedland once wrote, “bring hope flickering back to life” and meet the growing appetite for a politics that doesn’t simply rail against what is but aspires to build a world that is better.
 
In this election at least, it seems the final, anticipated fracture of Labour from its working-class base after Brexit did not materialise. Shortly before the snap election was called I wrote that while Brexit appeared to be Labour’s greatest weakness, it could just be our biggest strength, because: “consider what remain voting Tottenham and leave voting Wigan have in common: Labour… We will succeed if we seek the common ground shared by the decent, sensible majority, and more importantly, so will Britain.”
 
But consider this too. The Tories ran a terrible campaign. It was, without any doubt,the most inept, counter-productive campaign I’ve ever seen in British politics. The day their manifesto hit the headlines, even in our toughest neighbourhoods, we could feel change in the air. Arrogance is never rewarded by the British people and Theresa May has paid a price for it. Yet, despite a Tory manifesto that was a full, square attack on older people, the majority of over 65s still came out for the Tories.
 
And despite the growing relevance of freedom, internationalism and tolerance in an era characterised by Donald Trump and Vladimir Putin, the Liberal Democrats managed to become bystanders in the political debate. They stood on a platform that aimed to capture the support of those remain voters for whom Brexit is the major question, but neglected the rest. And they quite spectacularly failed to foresee that those who were intensely angered by May’s conversion to a little England, hard Brexit stance would vote tactically against the Tories. Over those seven weeks, they all but disappeared as a political force.
 
As Bob Dylan once said, "the times, they are a-changin" – and they will change again. The recent past has moved at extraordinary speed. The Brexit Referendum, the rise and retreat of nationalism, the election of Trump and his crushing unpopularity just a few months later, the reversal in fortunes for May and Jeremy Corbyn, the astonishing phenomenon of Emmanuel Macron and pro-European centrism, and the dramatic rise and sudden collapse of Ukip. Politics, as John Harris wrote last week, is now more fluid than ever. So now is the time, for hope yes, and for conviction too, but not for jubilation. We need some serious thinking. 
 
We should be cautious to rush to judgment. It is only two weeks since the exit poll sent shockwaves across the country. There is no comprehensive explanation for the multitude of motivations that delivered this election result and will not be for some time. But there are some early indictors that must make us think. 
 
After seven years of austerity, as John Curtice observes, the Tories made some of their biggest gains in some of the poorest areas of Britain. It is something I felt in all of the eight constituencies I campaigned in during the election. While the Labour vote rose significantly in towns like Wigan, so too did the Tory vote, despite little or no campaigning activity on the ground. As Rob Ford puts it, “Labour, founded as the party of the working class, and focused on redistributing resources from the rich to the poor, gained the most ground in 2017 in seats with the largest concentrations of middle-class professionals and the rich. The Conservatives, long the party of capital and the middle class, made their largest gains in the poorest seats of England and Wales… Britain’s class politics has been turned completely upside down in 2017”.
 
To acknowledge the growing, longstanding scepticism of many working-class men, and women, towards Labour in towns across England is not to take away from the hard work and drive of the activists, advisers and politicians that helped to fuel such a dramatic turnaround for Labour during the short campaign. To have won considerable gains in wealthier suburbs is no small achievement. 
 
But if the future of Labour lies in a coalition between middle-class young professionals and the working class, what is the glue that binds? While there is shared agreement about investment in public services, how are those interests to be squared on areas like national security and immigration? I believe it can and must be done, but – as I said to conference when I was first elected seven years ago - it will demand that we begin with the difficult questions, not the easy ones.  
 
Just a few days before the election, statistics were released that pointed to a collapse in trade union membership. What does the decline of an organised Labour movement mean for who we are and what we can achieve? These are not new questions. They were posed by Eric Hobsbawm in his brilliant lecture, "The Forward March of Labour Halted" in 1979 - a challenge laid down in the year I was born. Now, 37 years on, we are no further down the road to answering it. 
 
The most dramatic finding from this election was the support Corbyn’s Labour party appears to have won from middle-class, young professionals. They said he couldn’t do it and quite stunningly it seems they were wrong. But a ComRes poll last week caught my eye – by a large margin those 30-44 year olds would favour a new centre-ground political party over the current political settlement. In an election where we returned strongly to two-party politics, it appears they moved to us. But what would a dynamic and renewed Liberal Democrat Party, or a British En Marche do to our support base?
 
After a hellish two years we have learnt in Labour, I hope, that unity matters. The public and private anger directed towards each other, whether the Labour leadership, the parliamentary Labour party or elected councillors, is desperately damaging and its (relative) absence in the campaign was important.
 
But unity is not the same as uniformity, and while two weeks ago I felt there was a real danger of historic fracture, now I believe the shutting down of genuine, constructive debate on the left is the great danger we face, and must avoid. No one person, faction or party has ever had the monopoly on wisdom. The breadth of the Labour movement was and remains our greatest strength. 
 
Consider the Labour manifesto, which drew on every tradition across our movement and demanded that every part of the party had to compromise. Those broad traditions still matter and are still relevant because they hear and are attuned to different parts of Britain. Our country is changing and politics must catch up. The future will be negotiated, not imposed.
 
As we witness the age of "strong man" politics across the world, here in Britain our political culture has become angrier and more illiberal than at any time I can remember. The Brexit debate was characterised by rage, misinformation and a macho political culture that demanded that we abandon nuance and complexity, an understanding of one another and tolerance of different points of view.
 
But this is not where the future of Britain lies: it lies in pluralism. It lies in a politics that is nimbler, more fleet of foot, less constrained; a return to the great tradition of debate, evidence, experience and argument as a way to build broad coalitions and convince people; not shouting one another down, nor believing any of us are always right; an arena in which we listen as much as we speak; a political culture in which we are capable of forming alliances within and across party lines to achieve real, lasting change.
 
And ultimately that’s the prize: not just seek power but, to paraphrase a philosopher whose work inspired millions, in the end “the point is to change it”. We could sit tight in Labour and hope to see the current government fall apart. We might even inherit power, we could temporarily reverse some of the worst of the last seven years, but what then? If we have learnt anything from 13 years of Labour government it should be this: that to build lasting change is the hardest political task of all, and it requires now that we do not turn to the political culture, the tools or even the ideas of the past, but that we think hard about where the future of our movement and our country really lies. Now is not the time to sit back and celebrate. Now is the time to think.

 

Lisa Nandy is the MP for Wigan. She was formerly Shadow Secretary of State for Energy and Climate Change.

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