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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Four times Owen Smith has made sexist comments

The Labour MP for Pontypridd and Jeremy Corbyn’s Labour leadership rival has been accused of misogynist remarks. Again.

2016

Wanting to “smash” Theresa May “back on her heels”

During a speech at a campaign event, Owen Smith blithely deployed some aggressive imagery about attacking the new Prime Minister. In doing so, he included the tired sexist trope beloved of the right wing press about Theresa May’s shoes – her “kitten heels” have long been a fascination of certain tabloids:

“I’ll be honest with you, it pained me that we didn’t have the strength and the power and the vitality to smash her back on her heels and argue that these our values, these are our people, this is our language that they are seeking to steal.”

When called out on his comments by Sky’s Sophy Ridge, Smith doubled down:

“They love a bit of rhetoric, don’t they? We need a bit more robust rhetoric in our politics, I’m very much in favour of that. You’ll be getting that from me, and I absolutely stand by those comments. It’s rhetoric, of course. I don’t literally want to smash Theresa May back, just to be clear. I’m not advocating violence in any way, shape or form.”

Your mole dug around to see whether this is a common phrase, but all it could find was “set back on one’s heels”, which simply means to be shocked by something. Nothing to do with “smashing”, and anyway, Smith, or somebody on his team, should be aware that invoking May’s “heels” is lazy sexism at best, and calling on your party to “smash” a woman (particularly when you’ve been in trouble for comments about violence against women before – see below) is more than casual misogyny.

Arguing that misogyny in Labour didn’t exist before Jeremy Corbyn

Smith recently told BBC News that the party’s nastier side only appeared nine months ago:

“I think Jeremy should take a little more responsibility for what’s going on in the Labour party. After all, we didn’t have this sort of abuse and intolerance, misogyny, antisemitism in the Labour party before Jeremy Corbyn became the leader.”

Luckily for Smith, he had never experienced misogyny in his party until the moment it became politically useful to him… Or perhaps, not being the prime target, he simply wasn’t paying enough attention before then?

2015

Telling Leanne Wood she was only invited on TV because of her “gender”

Before a general election TV debate for ITV Wales last year, Smith was caught on camera telling the Plaid Cymru leader that she only appeared on Question Time because she is a woman:

Wood: “Have you ever done Question Time, Owen?”

Smith: “Nope, they keep putting you on instead.”

Wood: “I think with party balance there’d be other people they’d be putting on instead of you, wouldn’t they, rather than me?”

Smith: “I think it helps. I think your gender helps as well.”

Wood: “Yeah.”

2010

Comparing the Lib Dems’ experience of coalition to domestic violence

In a tasteless analogy, Smith wrote this for WalesHome in the first year of the Tory/Lib Dem coalition:

“The Lib Dem dowry of a maybe-referendum on AV [the alternative vote system] will seem neither adequate reward nor sufficient defence when the Tories confess their taste for domestic violence on our schools, hospitals and welfare provision.

“Surely, the Liberals will file for divorce as soon as the bruises start to show through the make-up?”

But never fear! He did eventually issue a non-apology for his offensive comments, with the classic use of “if”:

“I apologise if anyone has been offended by the metaphorical reference in this article, which I will now be editing. The reference was in a phrase describing today's Tory and Liberal cuts to domestic spending on schools and welfare as metaphorical ‘domestic violence’.”

***

A one-off sexist gaffe is bad enough in a wannabe future Labour leader. But your mole sniffs a worrying pattern in this list that suggests Smith doesn’t have a huge amount of respect for women, when it comes to political rhetoric at least. And it won’t do him any electoral favours either – it makes his condemnation of Corbynite nastiness ring rather hollow.

I'm a mole, innit.