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25 March 2014

Universities need to look beyond higher tuition fees

Vice chancellors should join the discussion about alternatives to the current model.

By John Denham

Ed Miliband’s promise of “radical” policies for higher education funding is welcome. It reflects the reality of an unsustainable system that will have to be changed whatever happens. As Labour develops its new approach, are England’s universities are up to the challenge they face?

Last week the rate of debt cancellation reached 45 per cent. Of every £1,000 lent to students for fees and maintenance, £450 will never be repaid. The bill for this write off falls on the taxpayer. In round terms, each year the government will borrow £14.8bn, knowing it will never see £6.6bn again.

Many in the university sector don’t seem to see a problem with this level of waste. High fees have done them well for three years, letting higher education escape the worst of the pressures felt by the NHS or local government. That boost is slowly petering out as research funding falls and the fee is eroded by inflation. But many vice chancellors seem quietly confident that, sooner or later, government will crack and let fees go up again. David Willetts has certainly not ruled it out.

As loan write-offs hit 45 per cent, that confidence is surely misplaced. Even if politicians had the stomach for higher fees in what is already the world’s most expensive public HE system, the maths is against them. If fees rise further, even fewer graduates will pay back in full and the cancellation rate will rise steadily until it is over 50 per cent. What responsible government is really going to fund universities through a route that wastes one pound in two?

More trouble is looming from George Osborne’s decision to fund further expansion from the sale of the student loan book. As the Public Accounts Committee has warned, selling the loan book may only be possible at a huge loss to the taxpayer. Selling an underperforming capital asset to pay your running costs is never a good idea, and no one knows what happens when the money runs out.

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After three good years, the financial underpinning of universities is looking increasingly shaky. Vice chancellors who told themselves that high fees would bring independence are now more exposed to government decisions on public funding than for a long time. Something has got to give. Maybe, if the coalition won again, a few universities would be allowed to break ranks (giving us Ivy League fees but none of the Ivy League’s social responsibility) while the rest would have funding remorsely screwed down or undercut by private institutions.

The alternative is to recognise that higher education will always have to be a public and private partnership, and this partnership should be as clear and transparent as possible. Scrap the ideology of high fees and put every penny of public funding you can into teaching. Fees will fall, public debt will fall, the cost of debt cancellation will fall, and more graduates will actually repay what they borrow.

We could take the opportunity to bring about much-needed change, giving employers financial support to co-sponsor degrees and promoting more routes for older and part-time students. Do this and, according to Commons Library modelling, we could see fees at around £3,500 a year for a three year degree and give universities an additional £1bn of usable finance every year.

The vice chancellors’ confidence in further fee hikes looks misplaced. It will be interesting to see when they join the discussion about alternatives.

John Denham is Labour MP for Southampton Itchen and former universities secretary

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