Should Labour drop free education?

In a story about Starmer’s “lack of vision” and “charisma as the leader”, apparently some of his colleagues fear his commitment to fiscal discipline will block the adoption of potentially popular big-ticket polices.

There are few policies that are more “big ticket” than free education, and the story says that Starmer’s desire to sound more fiscally responsible is likely to lead to Labour dropping one of its signature policies from the 2019 general election — the scrapping of tuition fees for undergraduate students — although the details are “not yet finalised”.

Labour’s manifesto from 2019 somehow managed to bring the cost of scrapping fees and bringing back grants at just £7.2bn a cohort. The problem is that that was based on 2017-18 student numbers and a freeze in the unit of resource - which allowed for an increase in participation, but by nowhere near enough.

So in today’s money things have got tougher - but there’s a bigger problem too. Because the party's high command has been prevaricating over what to do on the issue and has had its eye off the ball on the detail, they’ve allowed the Conservatives to do four things that make what was already a tricky puzzle to solve nigh on impossible.

First, through the government’s fiddles with the repayment term and threshold, Labour has allowed the system that they will be trying to reform to become spectacularly cheaper from 2023 - with a RAB charge (denoting the subsidy from government) on loans of just 16 per cent and a total long-run government cost of £4.5bn a cohort. Whether Labour is trying to be fiscally neutral on HE spending or, at the other extreme, even if it was allowing itself to double that spend, it’s now very hard to do anything that voters will notice within that envelope.

Second, in doing those terms fiddles, the Conservatives have been able to to test, shape and normalise the idea that the government will spend less on each student than ever, all while using a mantra of fairness (it’s right that students pay back their loan, etc). The interest rate thing last week is an example of the trap set on this - if Labour can’t make the case for interest plus a fixed term now (which is what delivers progressivity in the system), it’s got little hope of being able to do so in the future.

Third, the smart money would be on figures in the party being told to go off and examine a graduate tax without all this “debt”. But progress on the Lifelong Loan Entitlement and modularisation of funding by the government makes that hard too - because either you sell to someone paying a “full” graduate tax before you pass a single module, or you somehow slowly rack up extra tax deductions from your each time you pass a module or a year, which will hardly incentivise staying on course.

And fourth, by being basically nowhere on student cost of living, Labour has allowed the Conservatives to significantly under price how much it costs both working class families (let’s call this the heart part) and crucially lower middle class families (let’s call this the Labour right head bit) to go to university. Any credible Labour solution on this will need to discuss cost of living - but a “fiscally responsible” version of dealing with maintenance will rightly now be quite expensive.

Add it all up and the big problem is that if you were trying to be fiscally responsible from here it's hard to do anything to the parameters in the system that "looks good" and that are also actually helpful or progressive.

Are there alternatives? We know from the Milliband days that a few thousands off of headline fees won’t cut the mustard - and there are so many downsides to graduate tax that despite my instinctive loyalty to the idea, I’m now not sure it would fly.

What would I do? Well, for lots of good sound, ideological and practical reasons I'd like tuition fees to be free and that aspect of the market to be gone. We can have a different conversation about planning, place and number controls - but I do think Labour would be right to see off fees for tuition.

However. For some tactical, fiscal and pragmatic reasons, I could cope with a service fee to cover various aspects of the student experience - especially if the governance surrounding those services was more cooperative and cleaved off from the main university's governance. I’m sorry, I just don’t think VCs make brilliant caterers, counselling managers or accommodation directors, and it all feels like universities are getting too big for their boots.

So if I was Starmer, I'd explore free tuition - separate and possibly regional or city structures for student services and facilities funded by a loan for the fee - and I’d look at generous maintenance loans with terms that created a low RAB charge, even if they weren’t especially progressive - generating a bit (but not a lot) of an incentive to stay local rather than go boarding.

That feels like roughly the right mix of principle, pragmatism, communitarianism, localism, choice, graduate contribution and debt reduction to me - as long as the numbers can be made to work.