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26 July 2012

Even more universities join the £9,000 club

Remember when ministers promised £9,000 fees would be "exceptional"?

By George Eaton

However much they may now deny it, Tory and Lib Dem ministers said that universities would only charge tuition fees of £9,000 in “exceptional circumstances”. Here’s the relevant quote from Vince Cable, who has curiously escaped blame for the debacle, despite being the minister responsible.

For the funding of universities, Lord Browne recommended- in a report that the then Labour Government endorsed, I think, in their manifesto- that there should be no cap on university fees and a specific proposal for a clawback mechanism that gave universities an incentive to introduce fees of up to a level of £15,000 a year. That was the report given to the Government. We have rejected those recommendations and proposed instead that we proceed as the statutory instrument describes. That involves the introduction of a fee cap of £6,000, rising to £9,000 in exceptional circumstances.

Vince Cable, House of Commons, 9 December 2010

We learn today that three-quarters of English universities will charge £9,000 for at least some courses next year, with a third charging the maximum fee for all. The average annual tuition fee for students will rise to £8,615, up from £8,527 in 2012-13. Ministers, who naïvely claimed that the new regime would put institutions under “competitive pressure” to cut fees, promised an average charge of £7,500. But the tripling of  the cap (in breach of that famous Lib Dem election pledge) actually had the predictable effect of encouraging universities to charge more in order to appear “reassuringly expensive“.

But it isn’t just the politics of this that are bad for ministers, the finances aren’t good either. Nick Clegg may have claimed that the rise in fees was a necessary part of the coalition’s deficit reduction strategy, but the truth is that the reforms will cost the government more, not less. The new fees come 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.

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Had universities only charged £9,000 in “exceptional circumstances”, that wouldn’t have been a problem. But since so many plan to charge full whack, the coalition’s reforms face a £1bn black hole. Figures from the House of Commons Library showed that if the average fee is £8,600 (it is now £8,615), the state will need have to spend £960m more over the next four years. That could mean even bigger cuts to the teaching budget (already experiencing an 80 per cent cut) and/or fewer university places.

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There’s a strong chance that the funding gap will be even larger than I’ve suggested. The Treasury is already resigned to losing £1bn of the £3bn it pays out in student loans due to graduates moving abroad or earning wages under the new repayment threshold of £21,000 a year. But should graduate earnings increase by 3.75 per cent a year instead of 4.47 per cent  (and they’re falling at the moment), the government’s assumed savings will be wiped out completely. Tuition fees, as ministers will discover, are neither socially just nor fiscally responsible.