Undergraduate tuition fees, then, are to rise with inflation – according to Steve Swinford and Nicola Woolcock in The Times.
We are looking, apparently, at a 13.5 per cent rise over the next five years: at which point the fee for a full time undergraduate year will stand at £10,500. This is a live conversation, with a decision likely to dovetail with Treasury thinking ahead of April’s spending review.
To be clear this is all based on your traditional “Whitehall source” – who also hints at the return of some form of maintenance grants to help students who can least afford the practical day-to-day costs of studying.
A policy change?
Back in June Kate Ogden and Ben Waltmann spelled out some of the options available to an incoming government on higher education finance. The report makes it very clear that a fee cap of £10,500 by 2029-30 was, in fact, existing government policy. After a fashion.
The Conservative administration froze the fee cap through to 2024-25, and as we went into the election we had no idea what arrangements would look like for 2025-26. We still don’t.
Despite being expected by absolutely nobody, the default was a return to what is set out in the Higher Education and Research Act, Schedule 2. By default, the Secretary of State has the ability to increase the “higher amount” (what is, in the most part, the default level of tuition fees in the popular imagination) in order to maintain its value in real terms – going above that we need an affirmative statutory instrument (secondary legislation approved by both House of Parliament).
The IFS default projection was that this would happen (and that RPIX would be 2.1 per cent), taking the fee cap to £9,450 for 2025-26 and onwards to £10,500 by 2029-30. In messy reality, and as is well known in the sector, the fee cap has risen with inflation a grand total of once (to £9,250 in 2017-18) under these powers – reinstating the increase that was the original intention of HERA would honestly feel like a policy change.
The politics and economics of tuition fees
The language of “tuition fees” suggests that these are an individual fee charged in order to pay for university tuition. It’s a simple concept, but one that almost entirely fails to capture the complexities of the funding system. Fees are charged by the government, not universities. Fees are payable via an income-contingent loan capped in terms of total amount, and beyond the term of the loan the cost is forgiven. And tuition fees do not, in the majority of mainstream universities, cover the cost of tuition.
However the headline fee cap, sometimes described as the “sticker price”, has a great deal more salience among the public than the terms of the loan – which have recently been altered to the severe detriment of all but the richest graduates, cutting the cost of the system to government dramatically, all while using language that suggested that the changes would benefit struggling students.
So this return to a pattern set out in legislation back in 2017 will be perceived as an attack on young people, and cited as evidence that students are being asked to carry the can for whatever you happen to enjoy believing the reason the government doesn’t have any money and universities are struggling is.
In reality, repayments for graduates earning over the threshold remain at 9 per cent of salary, interest continues to accrue based on RPIX, and the remainder left unpaid after 40 years is written off. Only the best paid graduates will end up paying more if fees rise.
Moral hazard
You’ll have heard it said that 40 per cent of universities are facing a deficit this coming financial year. Broadly speaking, this is due to the costs of doing business rising with or above inflation: against income either failing to rise with inflation (home fees), set at levels that do not cover costs (home fees, much research income), curtailed by government policy interventions (international fee income), or subject to the same uncertainty and precarity as the rest of the economy (other commercial income).
Sixty per cent of universities, however, are not facing a deficit. Some are doing very well indeed. These tend to be providers with historic financial strength (including, in some cases, bequests and land ownership going back to the middle ages), large enough (and with the ability to grow as required) to access economies of scale, and prestigious enough to charge higher fees to postgraduate and international students – or to reclaim more of the full economic costs of research.
The majority of state funding currently goes to these universities. The majority of additional government spending in the form of these potential home undergraduate fee increases will go to these universities. Indeed, these universities have spent the majority of the 2024 UCAS cycle hoovering up all the home students they are able to, much to the detriment of other providers elsewhere.
Local risks
One of the most compelling arguments for the government to intervene in university finances is the potential local impact of a provider becoming insolvent. There are many parts of the UK where the local university is a major local employer, a major source of skills and cultural capital for local residents, and a key component of future (devolved) skills planning.
Longer term, providers like this see more of the tuition fee loans offered to their students written off by the government. In the main, this is because graduates live and work local to the university, often in very deprived areas where salaries tend to be low. So a rise in fees would be progressive in the long term, but regressive in the short term, if we are thinking about government investment in providers.
Let’s be clear. Parts of the sector are struggling existentially, any injection of funding can only be good for the nation (if you happen to think having a world class skills and innovation infrastructure is good for the nation). And sometimes pragmatism and speed win out.
But the contours of a fee rise under HERA powers, and the impact this will have, are a glimpse of a wider debate about the purpose and funding of higher education that we probably need to have long before fees reach £10,500 in 2024.
“…the Secretary of State has the ability to increase the “higher amount” (what is, in the most part, the default level of tuition fees in the popular imagination) in order to maintain its value in real terms – going above that we need an affirmative statutory instrument (secondary legislation approved by both House of Parliament).”
ANY change in fees now needs an affirmative statutory instrument due to an amendment to HERA 2017 secured by Labour in the wash-up period before the 2017 snap election. Indeed you wrote about it yourself:
https://wonkhe.com/blogs/fun-with-statutory-instruments-the-process-of-inflationary-fee-rises
I was under the impression the Lifelong learning (Higher Education Fees) Act had changed the position since then.
Hi David, lawyer and one time WonkHE writer here.
I don’t think anything in the 2023 Act you mention changes the position – the only reference to schedule 2 of HERA (which requires affirmative resolution for any fee increase) is a minor amendment as to date of increase.
“However the headline fee cap, sometimes described as the “sticker price”, has a great deal more salience among the public than the terms of the loan – which have recently been altered to the severe detriment of all but the richest graduates, cutting the cost of the system to government dramatically, all while using language that suggested that the changes would benefit struggling students.”
The Scottish, Cymraeg-Welsh and N. Irish public within the UK have NO IDEA that the recent fee changes and “cutting the cost of the system” in England also directly CUTS the Block Grant to their elected devolved governments!
In the case of Scotland this means that changes to a fee policy in England, that has been rejected many times electorally in Scotland and that no major party advocates (including the so-called “Scottish Conservative & Unionist Party” and the so-called “Scottish Labour Party”) means a direct attack on their ability to fund their own democratically endorsed fee policy.
This is because the Barnett formula directly links 100% of expenditure by the Department for Education in England to the Block Grant to the devolved governments pro rata only population numbers. The UK government is “cutting the cost of the system to government” because less annual recurrent expenditure is required to cover defaults on tuition fee loans from those resident in England before the start of their undergrad studies, it is also cutting the grants to elected governments that have not voted for England’s fee loan system and have no say in it.
While there are MPs from the devolved areas sitting at Westminster they have neither a free vote on any changes to fee regulations (this being done through delegated legislation passed by Orders of the Privy Council, not primary legislation) nor a say on the policy of their devolved government in relation to fee policy for the voters they represent.
The UK government get away with this ‘smoke-and-mirrors’ approach to funding HE across the UK state because a largely London based media consider it is “too complicated” to explain how Barnett works and far easier to present anything that applies to England as if it affects the whole UK, with barely a mention of devolution.
Even experts fail to use the E-word and mention that policies they are analysing in depth only apply to students in England before their course starts, but DO have a direct effect on the funding for devolved governments (nota bene!).
The UK state is becoming a basket case of fiscal confusion and anti-democratic obfuscation particularly in relation to HE tuition fees. It’s not a unitary state despite the tendency to pretend it is, nor one with the slightest nod to federal solutions such as in the USA where HE funding is entirely at state level and what one state decides does not change the funding another state has.
Either the UK government sorts it out now, or when the people wake up and realise what is going on the pressure will grow ever stronger for separation.