How major should the review really be?

Like Moby Dick, the now almost mythical “major review” mentioned by the prime minister in her last party conference speech, is finally surfacing – after hundreds of (speculative) pages and no-little (political) blood. But what should England’s “post-18 education and funding review” (as it’s now become) actually set out to do? And will it result in madness and destruction?

There are two main scenarios available to the government, but they aren’t either/or. If they are genuinely serious about improving the system, for the short- and long-term, then they should pursue both.

But first, it’s perhaps worth taking a second to remind ourselves that funding higher education properly, in a way that balances the rights and responsibilities of different groups of stakeholders (students, taxpayers, universities and employers – past, present and future), and which serves the full range of HE objectives (teaching, research, economic impact, social mobility etc.), is really, really hard. Anyone who tells you otherwise, or puts forward a silver-bullet solution, is either a policy Panglossian or a proper plonker. It’s tripped-up party after party, with such reviews often taking place just before a change in government. There’s simply no way of having all of your cake, eating all of it, and selling all of it on the bond markets. It’s basic cake-nomics.

Can’t take the heat?

After a below-par showing in the recent election, the pressure piled on the government from prospective and current students, anyone with student loan debt, as well as all of those peoples’ families. So probably at least two thirds of the country then. And, coincidentally, also those more likely to turn-out to vote. Across the land concerned students, parents and grandparents are directing stiffly-worded tweets and emails to their local MPs, who in turn are worrying about their seats and whispering to their whips. Headlines about vice chancellor pay and free speech won’t be enough to mask this fact. Again, it’s the cake-nomics, stupid.   

The current 6.1% interest rate kicks-in from day one of courses, meaning students are paying £5,800 in interest alone by the time they pose in a gown with their parents. That interest rate looks massively out of kilter with the current base rate of 0.5%. The average total debt, including interest, is now £46,000. What’s worse, lower-earning graduates end up paying more (£57,000 on average), and higher-earners pay less, with the very richest pay nothing at all.

Alongside the promised review, the Prime Minister also managed to use her platform in Manchester to make two other announcements. A fee freeze at £9,250, which saves graduates little money (£800), but wipes millions off university balance sheets. And a raised repayment threshold to £25,000, which saves graduates more money, but also raises the overall taxpayer subsidy to 45%. Debts to the taxpayer for student loans, via the Student Loans Company, continue to soar – from about £40 billion in 2012 to over £100bn this year. Now, 83% of student loan borrowers won’t be able to repay their debt within thirty years, at which point the loan is written-off, effectively making it a graduate tax (or ‘illiquid asset’). The whole point of introducing (then ratcheting-up) fees was to reduce the burden on taxpayers, yet it now looks more expensive than before the 2012 reforms.

On top of all this, the then business secretary Sajid Javid’s 2015 decision to change maintenance grants to loans, is piling on the financial burden for disadvantaged students, who pay compound interest on those loans as well as on their student loans.

When accompanied by insecure employment, stagnant wages, and unaffordable housing, it all starts to look rather intergenerationally unfair, especially when the average age of a conservative party member (72) or voter (56) is considered.

Have your quake

And what’s going on with young people anyway? One minute we’re told a “youthquake” towards Labour’s free-fees policy lost the Conservatives their majority, as signified by it becoming the Oxford Dictionary Word of the Year in 2017. Then earlier this month the British Election Study (BES) academics say that didn’t happen.

There’s a little confusion here between young people, students and the … under forties. Yes, young people are still less likely to vote than older people, but, students are as likely to vote as anybody, and they are now more likely to vote Labour, as are those of the age to have student loan debts, coincidentally.

As the sector’s new regulator emerges it will be interesting to see how it uses its new HERA-backed power to compel universities to get their students on the electoral register. The received Westminster-bubble wisdom, among politicians and the commentariat, seems to be that if students just got to hear their glorious message about [insert issue here], then they’d quickly come round to their way of thinking, and voting. I’m sceptical about that and suspect most students don’t agree with those messages, rather issues with the delivery channel. Perhaps a more compelling vision than austerity, Brexit and unfettered markets might be required.

However, the far more interesting question is how you engage the most disenfranchised group of all, the half of young people who don’t end up at a university. It will be a brave party that risks the wrath of those who benefit the most from the current system and are most likely to vote (pensioners), for the sake of those in the opposite corner (young people in work or further education). The government’s own fiscal rules, past election decisions, and Brexit brouhaha mean it has given itself very little financial or political capital to spend.

Here’s my two-step suggestion for what the review should set out to do.

Option one – not so major

First, some quick political whitewashing is needed, and universities look ripe for a squeeze. Maintaining the fee freeze for another few years should do nicely (costing the sector millions more incidentally). It’s totally fine because the new super-regulator will be able to intervene more, and to pick-up the pieces once, as expected, some institutions fall off a cliff. Right? Ok, maybe that does sound a little risky, but who knows in this environment, with Labour’s manifesto promise to abolish fees, there’s little room to manoeuvre.

Painful as it may be for providers given fragile enrollments at some, and rising inflation for all (currently 2.7% CPIH), a fee freeze would be preferable to the other idea being bandied around of a fee cut, with rumours ranging from £6,000 to £7,500. This then, would require a focus on (the dreaded) value for money and efficiency savings, no small order in any large organisation, but possibly “do-able”, as the current DfE Permanent Secretary Jonathan Slater (in)famously said of school budgets. However, one outcome of the current “market” has been to create bigger gaps in the fortunes between sector winners and losers, putting at risk some institutions exactly where they are needed most. Hopefully, OfS will be a positive influence on all of this. Hopefully.

And on the subject of interest rates, the government should heed the advice of the Governor of the Bank of England and the Office for National Statistics, by bringing all of its transactions in line. Instead of the discredited and artificially-inflated Retail Prices Index (RPI), it should use the less snappy but more accurate and (importantly) lower, Consumer Prices Index (CPI).

As for switching maintenance grants to loans, it’s widely accepted that this was a mistake and would be well worth the c. £2bn required to help out the most disadvantaged students with realistic living cost support. It’s an unconvincing and muddled message to tell poorer students that they should get in to even more debt, so that the country doesn’t have to.

And last, by taking the +3% down to say +1%, the government could quickly demonstrate that it’s listening when it’s told that the current system is unaffordable for many students. Though that would take a while to make a difference to graduates’ pockets…

Option two – actually major

With the above quickly out the way, the government could create some time and political breathing space for an actual major review.

To be remotely credible it should be genuinely independent, cross-party and expert, as well as led by the right chairperson (at this point the first two look unlikely). Sufficient resources (say £5m) and timescales (say a year) would allow it to thoroughly explore the issues holistically, receiving submissions, examining all available evidence, and even commissioning new research. Wales’ Diamond review is a good example of a comprehensive and thorough approach, now starting to pay dividends.

The scope should be broad, as befits the full review of tertiary education promised in the 2017 Conservative Party Manifesto. It should include different levels, routes and geographies – reflecting the realities of learners not the silos of Whitehall.

It should also consider new investment, rather than just reorganising the deckchairs of already-raided budgets. Innovative employer contributions should be explored, with most of the apprenticeship levy pot currently sat unspent.

It should also look at living costs and maintenance, with more appealing offers now available over the border in Scotland and Wales. Hints are coming from Sam Gymiah that it will include everything, including printing, photocopying and textbooks (there are potential answers emerging on the latter by the way).

Given the increasingly competitive global economy and the evidence of individual and societal benefits from education, number caps should not be on the table. Social mobility is making some progress, but already middle-class retrenchment can be seen at most high-tariff institutions, despite poorer students performing better. Policy brainwaves such as two-year degrees, sandwich courses, commuter courses, and degree apprenticeships should all be looked at realistically, in a way that accounts for actual demand (from students and employers), and which passes (panel member?) Alison Wolf’s “other people’s children test”.

A proper review will also be a chance to address current discrepancies, with richer students paying less overall, and the very richest paying nothing at all. Part-time and mature learners should get the attention they deserve finally because guess what, they’re only going to be more important in future. There should also be proper modelling of different fee levels and mechanisms over time, with everything from £6,000 to totally uncapped fees under scrutiny, again if only to kick them down the road towards the 22nd Century.

It should also look at differential fees according to institutions, course studied, course cost, earnings, or employer need – if only to put all those hare-brained schemes to bed for a generation or two. In my view, they are all a highly risky waste of time, leading to bizarre situations where we incentivise poorer students away from the arts (even further), further reward those students and institutions with pre-existing advantages, and focus on producing more bankers than teachers. So sure, let’s look at all the options properly, then maybe advocates of such approaches will pipe down, at least for a bit. 

Have some cake now, while we spend a year recipe-testing

And here’s the thing, it would be entirely possible to do both scenarios, in two stages. The government could address the immediate concerns of those about to have, or already with, student loan debts right now. This would not only come across well to those younger voters, but also their parents, and grandparents. It’s those first two groups where the government has some work to do.

Finally, regardless of what the government does or doesn’t do, and there really is no telling in this environment, the fate of the sector still rests – to a large extent – in its own hands. Even after the Office for Students springs forth on 1st April, the sector remains relatively independent, expert, well-resourced and… invaluable.

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