Students protest the rise in tuition fees. Labour is expected to pledge a reduction from £6k to £9k
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Student politics: The future of tuition fees and higher education debt

Dismissing Labour's tuition fees policy as mere populism is a mistake -  there is a serious debate to be had about tuition fees

There is a serious debate to be had about the sustainability of a student finance system that significantly increases public debts and shunts extensive repayment risks and loan subsidy costs into the future.

Higher education policy has been unusually controversial and contested in the last two decades. The old model of setting up a royal commission and then implementing its recommendations over a generation – the prime example of which was the Robbins report in the 1960s – has given way to the choppier, more fraught politics of recent tuition fee reforms. The Dearing review in the mid-1990s was the last attempt to get establishment agreement to an enduring package of policies, and it was hardly implemented at all in its original form. The expansion of higher education, and its centrality to the life chances of the broad mass of the middle class, has brought university policymaking into the mainstream of politics, with all the messiness that democratic politics entails.

So complaining that Labour has chosen a tuition fee policy that is designed to appeal to young voters is a bit beside the point. Cutting tuition fees may not be a good policy – if I had upwards of £2bn to spend on any policy, I would direct it into early-years education and childcare, not a reduction in tuition fees – but Labour can hardly be blamed for acting politically (though the handling of it is another matter entirely).

Yet simply regarding Labour’s policy as short-term populism would also be a mistake. There is a serious debate to be had about the sustainability of a student finance system that significantly increases public debts and shunts extensive repayment risks and loan subsidy costs into the future. The Coalition’s reforms have been very successful at increasing funding for universities, protecting fair access and upholding student numbers (with the significant exception of part-time students, whose numbers have fallen dramatically), while at the same time cutting public spending. But these goals have been achieved in part because the government treats loans to students as cash transactions that do not appear in departmental spending totals, while the bulk of the write-down in subsidised and unpaid loans (the so-called RAB charge) only starts to make a big dent in future years, when cohorts of graduates enter repayment status.

Therefore, if you want to cut tuition fees in the next few years without reducing universities’ resources, you need to increase public spending on teaching grants, shifting back from a cash loan to departmental spending (and raise taxes or cut spending elsewhere to do it). Yet, simultaneously, if you cut fees then you also reduce government borrowing and its debt liabilities, and increase the loan repayment rate, reducing the RAB charge. As the government’s debts, rather than the deficit, become more politically important in the second half of the next parliament, so too will these policy considerations. In other words, the sustainability of the existing student finance system will become a more pressing concern.

A quick way of reducing the RAB charge would be simply to lower the repayment threshold. But that will appear distributionally regressive, since it will take more repayments from lower-earning graduates, which is why no party can propose it. In fact, as modeling undertaken for IPPR’s Commission on the Future of Higher Education showed a couple of years ago, under the existing system, the bottom four deciles of male graduate earners never repay their full loans, and only the top two deciles of female graduates actually do so. In other words, the current system is deliberately generous to graduates.

The ‘free market redux’ response to these concerns – articulated by Allister Heath and others – is to argue for a fully privatised student loan system, shifting the responsibility for issuing loans onto the universities themselves, so that they have a ‘stake’ in the earnings of their graduates. This at least has the merit of honesty: higher education would be finally reduced to nothing more than a market transaction. But it is a fiscal and political non-starter. Only a handful of universities would be able to start covering loans to their students, and risk-pooling across the whole student cohort would be lost, so borrowing costs would rise most steeply for those least able to finance their studies. The political prospect of swathes of local universities going to the wall would be enough to kill the idea, even if the middle classes hadn’t seen it off already.

It also betrays a parochialism about contemporary higher education policy debates. In the United States – usually considered the best higher university system in the world – the long-term rise in college fees and the steady buildup of student loan debt has sparked major public concern. The average cost of tuition at a public four-year college has increased by more than 250 percent over the past three decades, while incomes for typical families have grown by only 16 per cent, according to College Board and Census data. Declining state funding has required students to shoulder a bigger proportion of college costs: tuition has almost doubled as a share of public college revenues over the past 25 years from 25 per cent to 47 per cent.

The consequence is that student debts, and loan default rates, have exploded. According to a recent paper by the Federal Reserve Bank of New York: ‘Until 2009, student loans had been the smallest form of household debt. During the Great Recession, Americans reduced their other debts but continued to borrow for education, making student debt the largest category of household debt outside of mortgages since 2010. Since 2004, student loan balances have more than tripled, at an average annualized growth rate of about 13 percent per year, to nearly $1.2tn, in 2014.’

Default rates are now rising, and the federal government is being urged to step in to protect students who have been stranded with debts from for-profit college providers who have gone bust. One of these – Corinthian Colleges – was once one of the world’s largest profit-making college providers. It has now all but disappeared and a group of its former students has gone on debt strike. Meanwhile, the New York Fed study showed that the rise in student debts has started to reduce household formation rates and home ownership among the young and early middle-aged.

(All this looks remarkably like what Wolfgang Streeck, the German political economist, calls the shift from welfare capitalism to the debt state. The failure of liberal market economies to generate sustained increases in living standards, coupled with constraints on public finances and the financialisation of the economy, leads to governments and families ‘buying time’, as the title of his recent book calls it.)

This has prompted President Obama to come forward with new public subsidies for college costs, and extra help for graduates at risk of loan default. (Student loans cannot be wiped out by bankruptcy in the US, and default can have major implications for access to credit.) He has also proposed much wider dissemination of lower-cost MOOC and other digitally enabled courses, to begin to drive down college costs. This agenda is almost entirely absent from UK public discourse.

Unless you are a dyed-in-the-wool Hayekian, these developments in the US should give pause for thought. We need to find ways of making the existing student loan system more sustainable, not privatising it, and of protecting flows of resources into universities, while simultaneously finding ways of opening up lower-cost provision to expand access. The needs of part-time students – passed over in most of the commentary – should be a priority. And we shouldn’t expect politics to take a back seat while we figure it all out.

Nick Pearce is head of the IPPR, where this piece originally appeared.

Nick Pearce is Professor of Public Policy & Director of the Institute for Policy Research, University of Bath.

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Air pollution: 5 steps to vanquishing an invisible killer

A new report looks at the economics of air pollution. 

110, 150, 520... These chilling statistics are the number of deaths attributable to particulate air pollution for the cities of Southampton, Nottingham and Birmingham in 2010 respectively. Or how about 40,000 - that is the total number of UK deaths per year that are attributable the combined effects of particulate matter (PM2.5) and Nitrogen Oxides (NOx).

This situation sucks, to say the very least. But while there are no dramatic images to stir up action, these deaths are preventable and we know their cause. Road traffic is the worst culprit. Traffic is responsible for 80 per cent of NOx on high pollution roads, with diesel engines contributing the bulk of the problem.

Now a new report by ResPublica has compiled a list of ways that city councils around the UK can help. The report argues that: “The onus is on cities to create plans that can meet the health and economic challenge within a short time-frame, and identify what they need from national government to do so.”

This is a diplomatic way of saying that current government action on the subject does not go far enough – and that cities must help prod them into gear. That includes poking holes in the government’s proposed plans for new “Clean Air Zones”.

Here are just five of the ways the report suggests letting the light in and the pollution out:

1. Clean up the draft Clean Air Zones framework

Last October, the government set out its draft plans for new Clean Air Zones in the UK’s five most polluted cities, Birmingham, Derby, Leeds, Nottingham and Southampton (excluding London - where other plans are afoot). These zones will charge “polluting” vehicles to enter and can be implemented with varying levels of intensity, with three options that include cars and one that does not.

But the report argues that there is still too much potential for polluters to play dirty with the rules. Car-charging zones must be mandatory for all cities that breach the current EU standards, the report argues (not just the suggested five). Otherwise national operators who own fleets of vehicles could simply relocate outdated buses or taxis to places where they don’t have to pay.  

Different vehicles should fall under the same rules, the report added. Otherwise, taking your car rather than the bus could suddenly seem like the cost-saving option.

2. Vouchers to vouch-safe the project’s success

The government is exploring a scrappage scheme for diesel cars, to help get the worst and oldest polluting vehicles off the road. But as the report points out, blanket scrappage could simply put a whole load of new fossil-fuel cars on the road.

Instead, ResPublica suggests using the revenue from the Clean Air Zone charges, plus hiked vehicle registration fees, to create “Pollution Reduction Vouchers”.

Low-income households with older cars, that would be liable to charging, could then use the vouchers to help secure alternative transport, buy a new and compliant car, or retrofit their existing vehicle with new technology.

3. Extend Vehicle Excise Duty

Vehicle Excise Duty is currently only tiered by how much CO2 pollution a car creates for the first year. After that it becomes a flat rate for all cars under £40,000. The report suggests changing this so that the most polluting vehicles for CO2, NOx and PM2.5 continue to pay higher rates throughout their life span.

For ClientEarth CEO James Thornton, changes to vehicle excise duty are key to moving people onto cleaner modes of transport: “We need a network of clean air zones to keep the most polluting diesel vehicles from the most polluted parts of our towns and cities and incentives such as a targeted scrappage scheme and changes to vehicle excise duty to move people onto cleaner modes of transport.”

4. Repurposed car parks

You would think city bosses would want less cars in the centre of town. But while less cars is good news for oxygen-breathers, it is bad news for city budgets reliant on parking charges. But using car parks to tap into new revenue from property development and joint ventures could help cities reverse this thinking.

5. Prioritise public awareness

Charge zones can be understandably unpopular. In 2008, a referendum in Manchester defeated the idea of congestion charging. So a big effort is needed to raise public awareness of the health crisis our roads have caused. Metro mayors should outline pollution plans in their manifestos, the report suggests. And cities can take advantage of their existing assets. For example in London there are plans to use electronics in the Underground to update travellers on the air pollution levels.

***

Change is already in the air. Southampton has used money from the Local Sustainable Travel Fund to run a successful messaging campaign. And in 2011 Nottingham City Council became the first city to implement a Workplace Parking levy – a scheme which has raised £35.3m to help extend its tram system, upgrade the station and purchase electric buses.

But many more “air necessities” are needed before we can forget about pollution’s worry and its strife.  

 

India Bourke is an environment writer and editorial assistant at the New Statesman.