A small sigh of relief?

Following Ed Miliband’s speech today you could almost hear a small sigh of relief across university campuses. But could this be rather premature?

Today’s announcement shows that Labour has made efforts to listen to the legitimate and extensive (and vocal) concerns raised by universities. For universities the issue has always been primarily about funding level, rather than fees level.

Cutting the undergraduate fees cap from £9k to £6k creates at least a £10bn funding gap for English universities over the next parliament. Such a shortfall, if not made up by other sources of public funding, would have a damaging impact on universities. It would hamper their efforts to provide a high quality experience for students, limit their positive impact in driving local economies and lessen their important role in social mobility through widening access to a university education.

To be credible, any evolution of the current system in England should meet a number of tests. A successful student funding system needs to:

• ensure value for money for students;
• ensure that students from poorer backgrounds are not deterred from study;
• not have an artificial cap of the number of students than can benefit from a university education;
• provide stability in funding for universities;
• be financially sustainable for government.

Considering these five tests, there are some policies to commend in Labour’s announcement today. Students have been clear that they need further support with living costs. The proposed additional maintenance support for students is a very welcome development that will assist many students who are struggling to meet their living costs.

The announcement remains vague on the need for an important commitment not to place a cap on the number of students that can benefit from attending universities. A university experience enhances people’s lives and employment prospects. The economy needs more graduates and society benefits from the impact of graduates. They are our doctors, teachers, nurses, engineers, architects, cultural leaders and many other pillars of our society and communities.

Total graduate debt will be lower with £6k fees than £9k fees although there are real concerns that the policy is not socially progressive. Those who benefit from a reduction in fees are those graduates who will earn most, not those who will earn least, who are unaffected by a reduction in fee level. It favours high and middle-earning graduates, not poorer students or graduates. However, the increase in interest rates on loans of the richer graduates adds complexity to this equation. This needs careful analysis to assess the winners and losers.

The commitment to make up the c. £10bn funding gap in full from public funding sources will help to provide some welcome stability in funding, however serious inflationary pressures on universities remain and will increase further over the coming parliament.

There will continue to be a fierce debate as to whether the high RAB charge makes the current system unsustainable for government. A lower fees cap will reduce the RAB charge but the percentage drop arising from this policy is relatively small, and could be achieved in the current system by other, more progressive, means.

It will cost an additional c. £3bn a year of public investment to implement today’s package of policies. Serious questions remain about whether funding a reduction in loan repayments for middle and high earning graduates is the most sensible policy in terms of the most effective use of money in times of constrained public funding. An investment of £3bn a year on a combination of further enhancing support for students living costs, supporting innovation and university-business links, and increasing public funding for research (where we lag well behind our major competitors) would arguably have a greater positive impact.

Labour have devised a set of policies for higher education that avoid realising the very worst fears of universities, however significant questions over the long-term viability of these policies remain. A commitment to increased public funding for universities may be a promise that comes under intense pressure given all the other pressures on the public purse.

Some short term electoral gain may be storing up worrying longer-term public funding strain.