What’s in the Autumn Statement for higher education?

Michael Barber gets another delivery job, and the LLE numbers still don't add up. David Kernohan finds out what might be in store for the sector from the Autumn Statement

David Kernohan is Acting Editor of Wonkhe

We weren’t expecting much from the Chancellor’s Autumn Statement for higher education.

Indeed, we weren’t expecting much for anyone, such has been the tenor of what Liz Truss will perhaps ruefully reflect was the way the ground has been prepared.

Other coverage will tell you how bleak things look for the UK – this year set to be the worst on record for household disposable income. I don’t think anyone was expecting any further support for students – indeed, the publication of the household income analysis confirms that the perverse means by which the principal amount of fee loans are counted towards household income for students will continue – artificially making student households look better off than they are.

The retooling of investment zones to become what amounts to funded research consortia – involving universities alongside industry in deprived areas – is to be welcomed. Universities have an important role to play as anchor employers and engines of growth. In such a climate we can feel grateful that research and development spending has been protected for 2024-25 – even though international development funding (and thus ODA research) will not return to 0.7 per cent of GDP for a few years yet.

Guess who’s back

But the big news of the day, for me, was around skills policy.

Michael Barber – former chair of the Office for Students, and delivery expert for Tony Blair – has been brought in to oversee the implementation of the whole suite of post-2015 skills interventions – T Levels, Higher Technical Qualifications (HTQs), Skills Bootcamps, and the Lifelong Loan Entitlement (LLE).

He’ll be reporting directly to Jeremy Hunt and Gillian Keegan – with a remit to maximise the impact of all these reforms.

One of the striking notes of the Chancellor’s statement was the clear signal of his personal interest in skills, which accounts for why Barber will also report to him and the Treasury – not just DfE. For fans of the agenda, this is provisionally good news as much of it will need HMT and No.10 to really push forward if it is to happen at all, let alone be successful. Although the Treasury does have a chequered past when it comes to education policy, so its involvement here is likely to be scrutinised heavily.

As we’ve been over on Wonkhe before, Barber inherits a whole list of implementation issues for the LLE:

  • Very weak evidence of learner demand for short course loans under the existing student finance regime. Just twelve learners(!) took out loans to join one of 104 pilot courses by September 2022.
  • A data nightmare around identification and eligibility, powered by the post-compulsory sector’s numerous overlapping data collection regimes and the lack of a standard student identifier.
  • The lack of a single subject area identifier, should an interest be taken in what kinds of skills people want to gain and where
  • Security and anti-fraud measures – bearing in mind the similarities to the turn of the century “individual learning accounts” of legend
  • Further, highly technical, primary legislation needed to make the LLE plans workable
  • A general election in 2024, meaning that plans could alter at a very late stage if a change in government happens.

The LLE already has a civil service senior responsible owner in the competent and capable form of Anne Spinali, who will already be devoting a substantial part of her time to delivering the LLE business case by April 2023, and would most likely play a major part in taking it on to implementation. Perhaps Barber will also report to Spinali as her programme manager? We can but hope.

Chasing AME

The big education funding news in the Autumn Statement was the extra £2.3bn a year for schools. The good news is that this is additional money in the Department for Education “resource DEL” (see Monday’s article for an explanation of these terms), so does not constitute a squeeze on other parts of DfE spending.

However, by staying within the spending review envelope for the next two years (though this is an “at least” figure) the rest of DfE DEL spending is facing a real terms cut by ignoring the impact of inflation on spending power. This will have an impact on stuff like the OfS allocation of funds to distribute to the sector, including the “ring fenced” elements of special project allocations.

But the majority of DfE spending on higher education is capital AME – specifically the outlay of the student finance system. To that end, we can be fairly sure that in an environment where HE enrolment stays at current levels (given demographics we know this is a very conservative estimate, but bear with me) then adding the LLE in on top of that should produce a rise in capital AME. More people accessing loans equals more spending, right?

Wrong. As per Table 2.3, Capital AME is projected to drop sharply, from £21.6bn in 2023-24, to £17.5bn in 2024-25, to £16.5bn in 2025-26. The first lump of this sharp drop can be attributed to changes to repayment terms starting in 2023 – students will repay more of the principle (which is shown as a capital AME credit in national accounts) albeit less on interest (shown as a resource AME credit).

But the second part – another billion pounds off loan outlay, happens at precisely the moment where the LLE will come on stream.

There are two possibilities here: either the government is assuming (based on I do not know what evidence) that some LLE uptake will happen instead of traditional higher education enrolment (18 year olds deciding to do two 30 credit modules rather than three years leading to a degree). Or we are looking at cuts to eligibility for traditional student loans (as trailed in the consultation earlier this year).

Either way – student loans are a huge commitment of capital AME, and one way or another these numbers are going to have to add up.

5 responses to “What’s in the Autumn Statement for higher education?

  1. Agree on the LLE challenges

    There are some slightly different capital spending numbers in Table A8 (page 60) of the OBR forecast. Also shows a declining trend for student loan AME spending, possibly because of repayments.

    Here are some suggested answers to the question whether DFE needs savings to compensate for new LLE costs resulting from flexibilities:

    1. No. The tougher, lower post 2023 repayment thresholds mean there’s a lower long term cost to government. FE loan repayment rates are quite good (though reduced by the access course write off). It will be easier for an adult already in work to pay off a smaller loan associated with a shorter course.

    2. No. England student loan outlays will rise £10 billion in 10 years to £24 billion (by 2024) so any LLE effect will be marginal particularly if DfE take it slowly.

    3. No. DfE introduced postgraduate loans without any saving requirement and these now account for £1 billion a year in spending.

    4. No. Treasury forecast FE loan outlay would rise to £450 mil once fully operational but this never happened (its around £130 mil/year) because of debt aversion, lack of maintenance loans, fee caps linked to miserly FE rates, continued operation of student number controls by ESFA and course level inflation (to foundation year and postgraduate levels). If all that LLE does, is restore some activity and spending to the missing middle, it will have made a difference.

  2. I don’t think that is correct for student loan outlays.

    Table 3.12 of the OBR forecast projects student loan outlays as follows: 22/23 £19.4bn 23/24: £12.2bn 2024/25: £13.8bn 2025/26: £15.3bn 2026/27: £16bn.

    Student loan repayments are projected as: 2022/23: £4.1bn 2023/24: £4.5bn 2024/25: £4.7bn 2025/26: £5.1bn 2026/27: £5.9bn.

    OBR will be publishing its student number projection (Table 3.8 of the forecast) on 24 November which will hopefully clear things up.

  3. I’ll try again – I forgot to add in the capital AME bit!

    Student loans outlays are split into two parts in the public accounts: the portion that is written-off (which appears as Capital AME in Total Managed Expenditure in the year in which the loan is advanced) and the portion that is expected to be repaid (which appears as a financial transaction in Public Sector Net Debt).

    The Capital AME bit appears in Table A.8 in the main OBR tables. The PSND bit appears in Table 3.12 of the supplementary fiscal tables.

    Adding the two together gives total outlays of 22/23: £21.9bn 23/24: £22.8bn 24/25: £23.2bn 25/26: £23.5bn 26/27: £24.3bn 27/28: £25.4bn

  4. What about FE colleges? FE delivers T Levels, as well as many other courses besides, incl HE courses e.g. ESOL, vocational BTECs, professional courses like AAT, etc., etc. Where is the funding pot for FE?

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