Labour’s growing enemy of opportunity

…to support students from the most disadvantaged backgrounds, we are future-proofing our maintenance loan offer, with loans for living costs increasing in line with forecast inflation every academic year.

It’s meant to sound like the offer is protected against whatever’s coming – locked in, safe, good for the future.

But there’s a problem. When you look at the DfE loan forecasts, the OBR’s inflation tables, ONS earnings data and a decade of Student Loans Company financial memoranda, it’s the reverse of the truth on three counts.

Two of them are about the loan. The third – the one that does the most damage – is about a number ministers never mention.

Let’s take them in order of how much they matter, which is roughly the reverse of how often they get talked about.

£25,000

The maximum maintenance loan is means-tested. You get the full amount if your household income is £25,000 or below, and it tapers away above that – by £1 for every £6.64 of income, as it happens, until it bottoms out at a minimum around £62,000. So the £25,000 is the whole ballgame.

It’s the line that decides who counts as poor enough for maximum support, and it has sat, frozen in cash, at exactly £25,000 since 2008.

A frozen cash threshold in a world of rising wages does something nasty and relentless. Average weekly earnings have gone from £420 a week in 2007 to £746 now – up 78 per cent. The threshold hasn’t budged.

So the same £25,000 catches a different family every year, and you only see it if you drag the two numbers into the same room.

Take three families, all on £25,000, but in different years.

A family with £25,000 residual household income in 2007 was earning 114 per cent of the average wage – comfortably above average, and firmly the sort of household maximum support was built for.

• A: A family on £25,000 in 2016 was almost exactly on the average wage.
• B: And a family on £25,000 today is on 64 per cent of average earnings – properly low income.
• C: Turn it around and £25,000 today is worth about £14,000 in 2007 earnings terms.

That means the £25,000, had it simply tracked earnings since 2008, would stand at around £43,000 today. Frozen where it is, it’s been cut by roughly 44 per cent in earnings terms – a large, deliberate-by-inaction tightening of who gets maximum support, with no announcement, no vote and no line in any ministerial statement.

The Treasury banks the money, the minister gets to talk about future-proofing, students suffer.

I’m into all these bands

You can see all of this in the DfE’s own household income data, which is revealing because it shows two opposite things happening at the same frozen threshold.

At the very bottom, the number of students recorded at exactly £0 has rocketed – from 154,000 in 2018/19 to 255,000 in 2023/24. Over that period total borrowers grew by about 120,000, and this one band accounts for 101,000 of it, so almost all the growth in who’s borrowing is students assessed at nil household income.

It can’t be organic low income, because average wages and the minimum wage were rising hard over exactly those years, which should have thinned the bottom of the distribution, not swollen it.

Some of it is independent students, whose own part-time earnings are excluded from the assessment, so a working student with no other income lands at precisely £0. Some is households on benefits. And a large and growing chunk is the thing I’ve written about before – the explosion in for-profit franchised provision, recruiting mature, disadvantaged students onto generalist business degrees where a £0 assessment and a maximum maintenance loan, paid straight to the student, is effectively the product being sold.

In the middle, the opposite is happening. Strip the £0 spike out and the declared-income population is basically flat in size, but its centre of gravity slides up the scale every year – the number getting maximum means-tested support falls from 275,000 in 2023/24 to a projected 215,000 by 2030/31, while the £65,000-plus band swells. Nobody in that middle got richer. They kept pace with the economy, which is now enough to lose you your support.

So the frozen £25,000 does two things at once. It pulls maximum support down to a floor increasingly filled by supply-driven recruitment, and it strips it away from the middle, where the students it was actually designed for used to sit.

A family on £25,000 in 2007 didn’t stay on £25,000 – if their pay merely tracked the average wage, they’re on about £44,000 now. Run that through today’s means test and their child gets £7,622, not the maximum £10,544 – nearly £3,000 a year short.

Same family, no richer in real terms than the one that collected the maximum in 2007, but £3,000 worse off because the gate moved beneath them. Their 2016 equivalent comes out £1,920 short. Only a family that had to be proper poor today – on £25,000 in today’s money – still reaches the maximum.

The forecast’s out again

Now the loan itself, and the minister’s actual mechanism – “increasing in line with forecast inflation every academic year.” The operative word is forecast.

The maximum loan is uprated each year by the forecast RPIX for the relevant quarter, fixed well in advance. When the forecast is roughly right, no harm done.

When it isn’t, the miss is locked in for good, because maintenance compounds off the previous year. And in 2022/23 it wasn’t right by a distance that should have been a huge embarrassment. The uprating applied that year was 2.3 per cent. Actual RPIX for the first quarter of 2023 was 12.7 per cent.

I’ve rebuilt the loan two ways from the same £8,200 baseline in 2016/17 – as it was actually uprated, and as it would have run if each year’s real RPIX (and, for the years still ahead, the OBR’s March 2026 forecast RPIX) had applied.

By 2030/31 the maximum loan on current policy reaches £11,985. Uprated by actual RPIX it would be £13,945 – £1,960, or 16 per cent, higher, and almost the whole gap was dug in that one 2022/23 year. “In line with forecast inflation” is the mechanism by which the offer lost a sixth of its value and never got it back.

And even if the forecast were perfect every year, matching inflation only keeps the loan standing still. Uprating by inflation holds purchasing power at best – it never adds to it. Calling a treadmill “future-proofing” is a choice.

Back to the floor

If you want to see how far the offer has actually fallen, just stop deflating it by prices and measure it against the policy the government is proudest of – the minimum wage.

The National Living Wage has risen from £7.20 an hour in 2016 to £12.71 from this April, deliberately, towards two-thirds of median pay. So let’s express each year’s loan as the hours of minimum-wage work it equals.

The maximum loan bought 1,139 hours of minimum-wage work in 2016/17. By 2030/31 it’s 822 hours – down 28 per cent.

For Family A the loan has gone from 1,067 hours to 540 – it has almost exactly halved in minimum-wage terms. The government’s flagship low-pay policy turns out to be the clearest available ruler for its student-support policy, and by that ruler the loan is falling off a cliff.

Now put it per week, and against the workload the government itself defines. A full-time year is 120 credits, and 120 credits is 1,200 notional hours of study – over a 30-week year, that’s a 40-hour study week. The loan is supposed to let a student live while doing a 40-hour week of study.

In 2016/17 the maximum loan was worth 38 hours a week of minimum-wage pay – within two hours of a full study week, so a student on maximum support could very nearly live without a job. By 2030/31 it’s 27.4 hours – a 12.6-hour weekly gap to fill with paid work, taken straight out of the 40 hours they’re meant to be studying.

For Family A it’s 18 hours a week – to stand where a maximum-support student stood in 2016, their child would need to work 22 paid hours on top of 40 hours of study. A 62-hour week, and then the reading.

None of this is hidden, exactly – it’s spread across a DfE spreadsheet, an OBR table, a Commons Library note and ten years of SLC memoranda, in the confident expectation that nobody will lay them side by side.

I’ve argued before that nobody in government can see around the corner on student finance – the less comfortable possibility is that they can see it perfectly well, and “future-proofing” is what you call the corner once you’ve decided to take it.

We can make adjustments – for London, for living at home. There should still be support for the students who can’t work, and for those with dependants. We can even means-test it, as long as we actually bother to establish means.

But the bottom line is this. We now expect a full-time student to study for 40 hours a week – not as a figure of speech, but in the legislation that defines a full-time year – and those are 40 hours they can’t spend in the labour market.

The very least we should do is lend them that money in minimum-wage terms. At the rate that applies from this April, 40 hours a week across a 30-week year is £15,252 – not the current maximum of £10,830.

That £4,422 gap, between what a student’s study time is worth at the wage floor the government sets itself and what the state will actually lend them to live on, will be £5,176 by 2029. For Family B, it’ll be £7,804. And for Family A – the average family imagined back in 2007 – the gap will be £9,005 a year.

That gap is Labour’s growing enemy of opportunity.