Looks like help for plan 2 graduates is not at the top of the cabinet’s in-tray, whatever Lucy Powell says
For an economic decision that wasn’t even mentioned in the budget speech, the Rachel Reeves era decision to freeze graduate loan repayments has come to dominate higher education policy debates. The decision unlocked around seven billion pounds of additional funding for use elsewhere in government, but was based on increases to loan repayments that affect young graduates earning just £29,385 a year: not much more than the national living wage, and far less than the national median wage.
Not only unfair but actively regressive, the impact of the freeze is far more insidious than the application of “real” (RPI+3 per cent, currently capped at 6 percent) that at least have the side effect of ensuring that better-off graduates pay a little more. It is a policy that is visibly inequitable, punishing precisely the young people (who have sacrificed future income to gain valuable higher level skills and have opted for a lower-paid public service career) who you might argue have done the responsible thing.
It is fair to say there have been mixed messages from the government about this issue: ministers (including the prime minister) have been quick to note the issue: Healey noted how bad people feel about the graduate repayment regime, while Burnham is on the record as saying it was “one to come back to”.
However, reporting in The Times suggests that there is no sense of urgency about the issue in the Treasury. In Ben Riley-Smiths article about preparations for the governments “ten year plan” – expected before the end of the year – he recounts that Secretary of State Lucy Powell (who told parliament the issue was at the top of her in-tray) has been memorably unsuccessful in securing any remedy in the long-term policy position. As he tells it:
Lucy Powell has named helping the 5.5 million graduates paying off their student loans on the “egregious” terms of the so-called Plan 2 deal as a priority since taking up her post in July. It can be revealed that the new education secretary acted, writing a letter to the chancellor in September calling for help.
She suggested unfreezing the threshold, or even raising it in future years to lift less-well-off graduate out of repayments in the important early stages of their career and adult life. Both suggestions would have been well evidenced in briefings prepared by DfE civil servants and others: it would have been fair to argue, for example, that reducing early career repayments would help young people become more mobile in searching for and moving between jobs around the country, or in contributing to the local and national economy. The decision would also have been, to use this terms buzzword, “preventative”: a higher threshold would have lifted many working graduates out of a reliance on social security. But the Treasury does not appear to have been interested.
Healey not only rejected the plea for action; he did even not write back. Emma Reynolds, the chief secretary to the Treasury, was left to deliver the no.
It is possible to read a lot into the lack of response from the chancellor, but it is generally the chief secretary that deals with spending requests (the role involves, for example, managing spending review submissions), and hearing from Emma Reynolds in response to a request for funding would not have come as a surprise to the department. Neither would the rejection have been a surprise: there are limited fundraising levers available to the Treasury, and the manifesto constrains the use of most of the main ones in the tax system (it is worth considering whether reclassifying the loan system as a tax, which it pretty much is given the way plan 5 works, would make detrimental changes less politically attractive). There is no world in which the Treasury would be able to find more £7bn from other sources to make the plan revenue neutral.
All of which leaves us only with the hope (that word again!) of a proper review of higher education finance. It is quite the failure state: a system that is struggling to support universities and soaking early career graduates at the same time. Perhaps it is time for decisions made in one set of economic conditions to be revisited now circumstances have changes.