The headlines for higher education coming out of the Spring Statement are not among the key announcements, or in the letter of Rishi Sunak’s speech.
Current students will not benefit from many of the main measures announced to address the cost of living crisis. But they will pay for them as graduates.
The documents underpinning the statement make it clear that a quarter of Sunak’s much flaunted “fiscal headroom” comes from the changes made to student loan repayments recently by DfE – £5bn. The fact that these reduce the RAB charge (the cost of the portion of student loans that are written off) rather than provide more money to spend or less debt to service is immaterial.
This is the money that covers, for instance, most of the year long 5p decrease in fuel duty. Great news for drivers (and many students are drivers) – less so for graduates. It covers the changes to National Insurance (NI) thresholds – it is good that those who do not pay income tax are also taken out of NI, but very few students will have part-time work that brings in more than the current primary threshold of £9,880.
It more than covers the £500m of new discretionary funding for local authorities – funds for which students would compete with others impacted by the rise in fuel prices, food prices, and inflation. As the government sees fee loans as public sector income in understanding household financial pressures, this could be a difficult argument to make.
You are the magic money tree
Usefully for the government, because of the unique way student loans are treated in the national accounts the majority of the impact of these changes – primarily the longer repayment time, the drop in the threshold, and the fee cap freeze – is felt in the next financial year. The impact of the loan eligibility changes are harder to map, but there would be a small (short term) saving as less loans are paid out, and a longer term rise in income as more repayments (we know that graduates with better level 3 qualifications tend to earn more than their peers) come in.
For all those who praise a higher education finance system that takes higher education funding out of politics, it would be difficult not to see this turn of events as the discovery of a new magic money tree. The Treasury has discovered that short term measures to partially address the cost of living are more popular than long term detriments to graduate income are unpopular – what is to stop the same thing happening again?
And for historians of sector funding, a delightful aside from the OBR:
The accounting for student loans in the public finances is complex. In effect, the reforms amount to the equivalent of an income tax rise for most existing and new students over their working lives.
Skills and research measures
We can perhaps look to enhanced research or training spending from industry to help providers cover the gaps left by a real-terms drop in the unit of resource for teaching.
There will be changes to research and development tax relief that make it easier for companies to claim when they spend on the IT resources needed to do research from 2023 , though the promised refocusing on activity within the UK is watered down a little. Research that cannot be carried out in the UK – either because material factors (geography, environment, population) are not available here or because legal requirements need it to be overseas (some clinical trials, for example) will still qualify for relief. Pure mathematics will become a qualifying cost.
There are hints of a further look at private sector spending on training, including a more flexible approach to apprenticeships (something that has come up many times in the debates around the Skills and Post-16 Education Bill). There are already incentives in this space, but the perception is that they are not working well enough.
There’ll be 1,000 new PhD opportunities in artificial intelligence. The government will invest £117m through Centres for Doctoral Training, in the expectation that this will generate additional university and industry funding to go alongside it.
Every budget has a section on public sector efficiency savings – from a higher education perspective the promise of a new series of Arm’s Length Body reviews, aiming to examine the work of “particular” ALBs to deliver departmental budget savings of 5 per cent. A “particular” ALB may, for example, be the Office for Students – already due a tailored review of regulatory activity and already promising to provide efficiency savings to cut subscriptions. OfS still gets (and distributes) a fair amount of funding from DfE.
Those with long memories may recall the “Red Tape Challenge” spearheaded by Nick Clegg as a way to get the public and public sector to identify inefficiencies and savings. In a very 2010 moment it suggested that Wikileaks might be a good place for civil servants to put ideas – all this activity resulted mainly in the demise of National Insurance number cards. Well, we’re trying it again (after a fashion in 2022) so look out if you have any ideas as to how sector regulatory requirements could be more effective.