A £7,500 fee cap? How a headline changed everything

It’s becoming increasingly clear that £9,250 is going to be the highest that fees will ever get as a vote in parliament last week shows there’s no majority to raise the cap further to the expected £9,500, and now The Sunday Times report that the Treasury is considering forcing fees down to £7,500 next year. The paper, which splashed the news on its front page yesterday, has sent hares running in policy circles: it was widely assumed that the November budget would tackle HE finance in some way, but the proposal being floated is far more dramatic than expected, and would have wide consequences for every university and the system as a whole.

Sunday Times, 17/9/2017

The £7,500 question

Details of the policy are sketchy, and we hear from numerous sources that the details may be garbled – but we can surmise from the story that the following proposals are being seriously looked at with a view to announcing in November’s Budget:

  • £7,500 will be the new top level for student fees across the board – this could come in as early as next year.
  • For STEM and other high-cost subjects, the government would provide a top-up payment to institutions of up to £1,500 – in the same way that fees for clinical and pre-clinical courses are already topped up by HEFCE.
  • For some courses – specifically where there is not a link to a salary premium on graduation – the maximum permitted fee loan may be lower than £7,500. These decisions would draw on (we assume) Graduate Outcomes and LEO data, and it is fair to assume that government skills priorities may also play a role here.
  • Some changes may be made to repayment including interest rates and the earnings threshold.

Why?

Philip Hammond is keen to do something around student finance. He’s reacting to the ‘national conversation’ about fees over summer, the misguided idea that the “Corbyn surge” amongst young people was down to the Labour student fee policy, and the dawning realisation that parliament is not behind the current model. The Chancellor needs a decisive move that can heal the running backbench sore and bring the young flocking to the blue side.

Parallel high-profile issues around high pay in institutions have contributed to the perception that universities have done particularly well during a period of austerity. Despite vice chancellor pay remaining a drop in the ocean when compared to sector finance overall, it is clear that few will march in favour of higher pay for VCs; and if the link can be made in the public imagination that a fee cut will serve merely to lower £400,000+ packages to a more Prime Ministerial level, then this works as a populist move.

Last week’s Opposition Day vote painfully demonstrated that there’s no parliamentary majority to support raising fees and that the current arrangements are not universally popular in government. An announcement of a further rise was expected this autumn – this now seems very unlikely – and rises in subsequent years would need a vote in both houses to pass. The government simply don’t need the parliamentary aggravation, and especially not for an unpopular policy.

The way that universities have conducted themselves during this period of pressure has also played a part. Playing up to the ivory tower stereotype, institutions have been arguably out of touch with the public mood since the Brexit vote – the uncertain and unconvincing way they have defended high pay did nothing to mollify this impression. Universities are not currently popular, and it’s becoming clear that this will have direct and painful consequences.

Those who hoped for Prime Minister Miliband back in 2015 may chuckle ruefully at this point – after all it’s another key Ed policy reused by Theresa May. But the £6k policy was far from successful; it was roundly criticised by specialist and mainstream commentators – who can simply reuse the same arguments (regressive, bad for HE, ill-considered populism) this time round, albeit in a very different political context.

Finally, this new proposed policy, far from saving money for the government, might actually add to the deficit. Borrowing linked to an income stream (fee repayments) doesn’t count for the purposes of deficit calculation – borrowing to cover payments made directly to universities for STEM or other subjects very much does.

What next?

The speedy way in which this change is expected to be delivered – a year or less, according to the Sunday Times – has huge implications for short and long-term financial planning that has been predicated on fees of £9,250 and above, which would cause issues for everything from planned campus improvements, to staff recruitment through to bond repayment schedules. And – lest we forget – institutions have always been encouraged to run a surplus as a part of HEFCE’s regular financial health checks. To castigate them for following good governance practice seems harsh.

This would be a substantial real terms cut in university funding which will seriously affect many institutions, particularly those which are in poor financial condition. There are implications for all subjects of study – institutions routinely cross-subsidise between subjects, and there are no overall fee rises for STEM to counter the loss of this ability if non-STEM fees are lowered.

A drop in fees is – as has been pointed out many times by Jo Johnson, the IFS and others – is a regressive change. Only the very richest graduates would benefit, by ending their repayments early. The evidence for fee debt putting off students from disadvantaged backgrounds is inconclusive, but variable loan availability would have the effect of pushing applicants without private resource into a smaller range of subjects – with everything from philosophy to performance art the preserve of the upper-middle classes.

And spare a thought for sector regulation – these changes undermine the basis of the Higher Education and Research Act, now less a generational settlement than a high-water mark. Everything from the role of the OfS (now a funding council again?) to sector entry (how many private institutions would be interested in the new system?) to TEF (how will a variable fee cap based on award level work?) are once again up for grabs. Jo Johnson himself, who has been manfully defending the HERA settlement all summer, now looks either to have u-turned or been undermined.

But a note of caution in all this. A very senior sector source told us last night that “The Sunday Times has a track record of sensationalist headlines with inaccurate accompanying details.” But the figure admitted that the proposals, if accurate, would be highly problematic for universities, saying “There are more effective, cheaper and more popular ways to improve the system for students. Any formal Treasury proposals are likely to be a more coherent package than this”. There are two months until Budget day, expect the sector’s lobbying apparatus to crank up substantially in that period.

14 thoughts on “A £7,500 fee cap? How a headline changed everything”

  1. Richard Kamm says:

    “For STEM and other high-cost subjects, the government would provide a top-up payment to institutions of up to £1,500”

    That doesn’t sound like a change. Don’t price group B subjects already attract a payment from HEFCE of £1500 per student on top of the tuition fee? Or am I missing something?

  2. Tom F says:

    On top of that, it is assumed…

  3. Brian says:

    Do you have a source other than the Times?

  4. Alex Thomson says:

    Has any connected this to funding levels per student in Scotland? £7000 – 7500 seems to be about what an HEI receives for a Scottish/EU student from the SFC. Some institutions may be struggling, but no-one has gone bust yet. So that might set a precedent for a ‘lower price’ system. Of course that’s operating with a quota system for funded places; what happens with lower fees and uncapped recruitment is probably another story.

  5. Brian says:

    If they did inflationary rises under HEA 2004 then they could still quash an attempt to annul the regulations under “English votes for English laws” as they have a majority of English MPs and the policy only applies to England.

    The regulations under HEA 2004 would be under the negative procedure so the Government could allow Labour a vote on the regulations after they are made law and within the 40 day praying time and a majority of both the whole House of ommons and a majority of English MPs would be needed for the motion to annul the regulations to pass as it would be certified by the Speaker as applying to England only.

  6. Nathan says:

    There is no other source. It’s a Sunday Times scoop.

  7. Yoda says:

    And yet the bursary for Nursing has been scrapped completely… at a time when there is a real shortage of nurses in the NHS. Left hand and right hand not quite working together again.

  8. Dan says:

    This really isn’t the time for “knee jerk” policy reactions. You can’t have a loan system that is constantly being tinkered with and endless ad hoc changes. There needs to be an in-depth review with consultation over the next year or two and then the Government need to respond with their conclusions and then implement any changes as a coherent package over the final years of the parliament going into the election.

  9. David Kernohan says:

    @Brian – there has been some doubt as to whether a majority of Conservative backbench MPs would vote to raise fees, given the obvious cachet of being able to tell constituents that they “voted against higher fees” in the next election. The atmosphere has simply become too toxic to countenance a further rise.

  10. Brian says:

    But is it tuition fees Con MPs have a problem with? Or the level of interest… I have heard plenty say interest is too high but none from the Government side particularly focus on tuition fees.

    Given the vulnerability of the Government I doubt any Tories would rebel over supporting a Labour motion to annul regulations as it could bring the entire Government down and result in Corbyn as PM! Given their resistance to leadership challenges I think they’d be very reluctant to break with the party whip.

    Winning such a vote (even if under English votes) could actually stabilise the policy position.

    That said, I think you’re right and the Government is looking like it’ll cave in to the pressure. Wrong move IMO. I support Jo Johnson’s view.

  11. Katy says:

    The government can sidestep a parliamentary vote completely and use on para 5 (2) (b) of Schedule 2 to HERA to agree an increase in fees in line with inflation. Any idea of the appetite to do so? This article suggests that a vote in both houses would be required for ANY increase in future – which isn’t quite right…

  12. Brian says:

    http://wonkhe.com/blogs/fun-with-statutory-instruments-the-process-of-inflationary-fee-rises

    The fee provisions in HERA 2017 have not been brought into force. Section 26 of HEA 2004 are still in force. Under HERA 2017 votes in both Houses would be needed for ANY changes in fee levels by affirmative procedure (i.e. the fee levels don’t become law without a vote to approve them), including increases by inflation. This was a late concession conceded by the Government in the wash up period before the disaster that was the General Election.

    Under HEA 2004, inflationary increases are subject to negative procedure which means fee increases by inflation become law without a vote unless a vote is held within 40 days that annuls the increase. The HEA 2004 only allows the Government to set a “higher amount” and a “basic amount” whereas the HERA 2017 allows “sub-level amounts” and “floor amounts” to be set as well, giving more flexibility to differentiate fees. It’s not clear how much differentiation in fees by TEF outcome could be achieved under HEA 2004.

  13. alex says:

    With costs rising at inflation plus, and with no increase between 2012 and 2016, there is already a squeeze and this is with modest pay growth. The £9,000 is also £9,250 now.

    The likelihood is that, without income inflation increases from somewhere, higher cost courses will become more difficult to deliver. We won’t have enough medics and engineers, but would be even better provided with lawyers – not sure that HMG nor society necessarily want this.

Leave a Reply

Comments 14 See all

  1. alex View
  2. Brian View
  3. Katy View
  4. Brian View