Grants: all just a little bit of history repeating

Karl Marx made the famous observation that, “all great world-historic facts and personages appear, so to speak, twice… the first time as tragedy, the second time as farce.”

It might be overstating the case to suggest that the abolition of student maintenance grants counts as a ‘great world-historic fact’ but, if according to the BBC, it is nevertheless possible that history is about to repeat itself and grants, previously scrapped in 1998 only to be reintroduced in 2004, are once again under threat.

BIS have dismissed the BBC’s claims as speculation, saying only that all areas of expenditure are being examined. Taken at face value, that’s no surprise: BIS was allocated a budget of £13.8bn in 14/15, from which a further £450m of savings are now expected to be found this year, with plenty more likely to follow next year. A maintenance grant budget of almost £1.6bn therefore accounts for around 12% of what remains.

Because of the way it is accounted for, cutting grants will not contribute to the in-year savings of £450m that need to be found this year as we’re midway through the application cycle and BIS have ruled out changes to student support in-year so any savings on grants won’t kick in until 16/17. As many have pointed out, it is therefore improbable that expenditure in this area would be seen as exempt from scrutiny in the context of whatever further savings the Treasury expects BIS to find in the spending review, particularly given the removal of 

Even so, scrapping grants altogether would still be a fairly shocking move, especially given the evidence that they have a positive impact on access. It would evidently risk reinforcing popular perceptions of the Conservatives as more concerned with deficit reduction that supporting the poorest in society.

Given their manifesto commitment was to increase maintenance grants, it can be assumed any such announcement would be opposed by Labour. Almost as certainly, the Conservatives will be keen to remind the public that it was Labour who first abolished grants, back in 1997 when they responded to the Dearing Review, and despite Dearing’s recommendation that they be retained. In that instance, the then Secretary of State responsible, David Blunkett, appeared to believe that providing means-tested grants for fees (again contra-Dearing) was preferable to those for living costs. Whatever the motivation, Labour will at least be able to respond that they soon recognised this to be a mistake (indeed when he was HE minister Bill Rammell toured the country saying so), not only reintroducing them in 2004 but substantially increasing them in 2006 and then expanding entitlement in 2008.

Whether history repeats itself remains to be seen. Given the political risks, and the reported qualms about cutting grants held by the new HE minister, Jo Johnson, it is perhaps more likely that the grant budget will be reduced in some way rather than scrapping it altogether.

There are a few ways this could be achieved: clearly, cutting the headline rate of grant would achieve a budget saving, but has some of the worst presentational disadvantages. A more subtle approach would be cutting entitlement: the maximum grant is paid to students with household incomes of up to £25,000 per annum, and a partial grant up to incomes of around £42,000pa. This is in contrast to the rest of the UK, where maximum support is paid where the household incomes are less than around £19,000pa – and until 15/16, it was only £17,000pa in Scotland.

Reducing grant payment thresholds would reduce the cost whilst allowing the government to claim it was still protecting the very poorest. That would, however, mean reducing or eliminating entitlement for those families who believe they are in the ‘squeezed middle’, and many of the blue-collar voters the Conservatives are keen to attract, so this too carries some risks. A third option is to freeze the grant rate and the payment thresholds and allow ‘fiscal drag’ to reduce the overall cost – indeed, the thresholds haven’t risen since 2008/09 for this exact reason. The question here is whether the savings realised from that approach would be high enough to satisfy the Treasury.

The precise effect of any cut will depend on its nature, but given that NUS and students have been arguing for some years and with not an insubstantial amount of evidence that living costs are increasing faster than student support, a reduction of any sort will be wildly unpopular. The evidence referenced above suggests access to HE could be affected, or it could be that existing inequalities could be exacerbated as students make different choices about subjects or institutions – either to avoid longer courses, or so they can stay at home during study.

Of course, any cuts in the grant could be offset by an increase in the maintenance loan – making the historical precedent closer to the policy of the last majority Conservative government. In 1989 the then Secretary of State for Education and Science, John MacGregor, announced the introduction of student loans for living costs from 1990, whilst the existing maintenance grant would be frozen and ultimately reduced, with the student loan increased to compensate.

It could be that the present administration draws inspiration from their predecessors in this respect, though here again there are problems. Most pressing for the government will be the cost of the loan book: all else being equal, a rise in loans likely means an increase in the cost of providing them, especially if this is targeted at the poorest students, and making loan repayment conditions less generous would scarcely be more popular than cutting grants.

By coincidence Universities UK launch the report of their Student Funding Panel today, which makes a cogent case for greater investment in student maintenance support. That said, it pointedly refrains from suggesting higher grants as the mechanism, and suggests support should be ‘targeted’ more effectively, if not quite elaborating on what that might mean. Nevertheless it underlines the argument that reducing the support available would be to make existing problems worse and will hopefully strengthen Johnson’s hand in his negotiations. However, it would be naïve to think that the grant is safe.

The minister studied Modern History at Oxford, and though he is probably not a devotee of Marx, he will not want his time in office to be considered either tragedy or farce. The debate over the maintenance grant will be but one of many considerations, but it has the potential to constitute either – or both.

2 responses to “Grants: all just a little bit of history repeating

  1. Good piece. Possibly the “coincidence” you mention isn’t so coincidental. The Student Funding Panel is recommending increasing grants. So, BIS can say “well we were thinking of abolishing them, but we won’t now – aren’t we considerate?”.

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