Diamond’s a distant memory as Wales plays inflation games with fees and maintenance

In a written statement to the Senedd, Wales’ Minister for Further and Higher Education Vikki Howells has announced inflationary increases to both maintenance support and maximum tuition fee loans.

Following the Westminster Skills White Paper announcement that maximum tuition fees will rise by forecast inflation for the next few years, the first announcement is that Wales will match that. For 2026/27, that will almost certainly use the Office for Budget Responsibility’s projection for RPIX in Q1 of 2027. That will be published alongside the Budget at the end of the month.

Meanwhile for maintenance, both the headline maximum package and the non-repayable grant component of it will also rise by inflation. But this time, Welsh Government is using the Consumer Prices Index (CPI), and it’s using the OBR’s projection for Q1 2027 that was published in March – 2.0 per cent. CPI is currently up at 3.8 per cent.

This time last year, when WG first started using the measure, it said that CPI is a fairer, more accurate and consistent measure of inflation that reflects the real cost of living for students. Back then it used the March 2024 OBR projection of CPI in Q1 2026 of 1.6 per cent. It seems unlikely that inflation will collapse from 3.8 per cent to 1.6 per cent by the first quarter of 2026, and so “fairer, more accurate and consistent” feels like a stretch at this point.

PGT and doctoral loans will also be raised by that 2.0 per cent.

The switch to projected CPI is a move away from the previous Diamond Review position, which anchored the maintenance package in Wales to the minimum wage. Even if it went with last April’s increase (to the 21 and over rate) rather than the Low Pay Commission’s estimate for April 2026, that would have meant max maintenance of £13,736 (away from home, outside London).

Instead, it will be £12,592 – some £1,144 short of where it was supposed to be. Put another way, students will now only be able to access 27.5 weeks’ worth of funding when they were promised 30.

There’s no means testing over the “pound in pocket” max in Wales, but the grant/loan mix works as a means-tested taper, with only household incomes of £18,370 or less getting the maximum £6,885 (or £7,022 next year). As the minimum wage and wages in general rise, there’s almost certainly a cancelling-out effect there – these are very much debt-increasing measures for students.

There will also be an increase to the maximum part-time tuition fee loan of £250 for the 2026/27 academic year, and a note that an additional £38.5 million in grants went to Medr in 2024/25, which does suggest that no such increase will be sustained in the Welsh budget later in the week.

Why the shenanigans over inflation? Statisticians UK-wide have long been adamant that CPI is the appropriate measure for all sorts of things, which is why RPI is being phased out. Whether using the OBR’s year-on-year forecasts is the right approach is another question – but ultimately, the constraint on Welsh policy is English policy.

Last year’s explanatory memorandum to the Education (Student Finance) (Amounts) (Miscellaneous Amendments) (Wales) Regulations 2025 explains that the choices are driven by “pressures on AME”.

Annually managed expenditure (AME) is UK public spending that is volatile or demand-led – like welfare, debt interest and student loans – it’s financed by the Treasury outside fixed departmental budgets and revised at each fiscal event using updated forecasts.

The deal for devolved nations is that if an AME programme is run on “broadly similar terms” to the UK scheme, HMT will fund it – but if it makes the programme more generous, it has to cover the extra cost itself.

Part of the problem is that while that sounds clear in principle, it’s less clear in practice – so much so that back in March, Howells announced that she was seeking “more clarity” on how HMT’s rules work.

Some clarity has now come in an updated Statement of Funding Policy published in June. The mechanics are simpler than they might first appear, though HMT doesn’t actually do any modelling themselves – they expect Wales to do it and then decide whether they like it or not.

Basically, Wales models its own projected loan outlay, then models “what if the English system applied in Wales”, checking whether the actual cash loaned would be equal or less. The good news is that higher participation doesn’t get punished, because the modelled English amount would also increase with higher projected numbers.

Repayments are then treated completely separately – the RAB (resource accounting and budgeting) cost (ie the subsidy) as a pound amount has to be within a Barnett share of England’s RAB. The real constraint is that the amount Wales is loaning per head can no longer grow at a rate higher than England’s.

That’s where the problem bites. If we look at the published data on average amounts loaned to students by nation, Wales has shot up since Diamond and has now run out of that headroom.

On this basis, Wales can’t afford to keep the promise made in the Diamond review. If the average loan per head tried to grow faster than England’s rate, some aspect of the Welsh system would have to give. And with a shorter repayment period and a higher repayment threshold than England, the only way to match England’s fees rise is to choke back the generosity of maintenance.

Unlike in England, Wales doesn’t publish its detailed loan forecasts – though Welsh Government has indicated it hopes to publish material explaining the constraints properly in the coming months, given that this is now a real constraint on future policy.

With Plaid riding high in the polls and exploring ways to make staying in Wales more generous than studying outside of it, this should all very much be read as a holding position. For now, the complexity of the whole thing will likely save Welsh Labour from being accused of betraying students by abandoning the minimum wage as the basis for uprating maintenance.