The totem of the perfect grant is the enemy of the loan good

The headline purpose will be to fund the return of maintenance grants of an unknown value, for some students, on some courses, by the end of the Parliament. And maybe to fund some other things in the skills system.

That the Department for Education (DfE) is scrabbling around for disposable income is hardly a surprise.

You only have to look at the ongoing, and pretty savage cuts to what we used to call “T” (now “strategic priorities”) funding to see the way in which wider pressures on the Education budget have been biting.

The only way, for example, that DfE has been able to maintain the top-up for disadvantage is to choke off the entitlement for those enrolled onto franchised courses.

Had the core FT premium for those at risk risen by CPI inflation since 2018, it would now be worth £207, not £157. And the disabled student top up would be worth £230, not £129.

Setting aside the specialist and FE work in that basket, the only losers will be students themselves – the pile-it-high, sell-it-on-Tik Tok brigade will still be trousering their sky high profits.

Naturally, much of the emphasis in the public debate in the run up to the budget has been on the potential impact of the international levy on university finances.

It’s largely been along the lines of “the return of grants would be great, but this isn’t the way to fund them”.

But would the return of grants be so great?

Since 2016, the value of the maximum maintenance loan in real terms has fallen by just under £2k, and the percentage of students gettign the max has fallen from two thirds to about 1 in 5.

Let’s imagine that a grant of £2k is established, with an entitlement taper set in the same way that maintenance loans are now. The IFS loans calculator has the cost of that to the taxpayer at £1.3bn.

Given estimates are that the levy will raise half of that, and DfE ministers keep hinting that it has wider purposes than just the maintenance grant, we can see how expensive a meaningful grant would be.

Now, instead, let’s do two things. Let’s move the parental income threshold (over which a parental contribution is expected) from £25,000 to £35,000. And let’s increase the maximum loan by £2,000.

That would be a long-run cost per cohort of £0.4bn. And if we put 0.5% on top of RPI on the interest on student loans, the taxpayer would actually be £0.3bn per cohort better off.

The cut of student loan interest from RPI+3% to RPI in 2022, coupled with the extension of the loan term from 30 to 40 years and the holding down of the repayment threshold, has turned out to be both regressive and expensive.

It has also left us with a system for uprating maintenance loans – set to continue for the rest of the Parliament – that has delivered a food bank on every campus and a doubling of students in part-time work.

When Starmer announced the grant at Labour Conference, I was sat in the Cafe Bar of the Holiday Inn Express just across from a retired couple of party members.

Their glee at the return of the grant said it all – the policy is a totem, which at best is the re-establishment of a principle to be built on at a later date.

If you’re hungry, can’t put the heating on or can’t afford to come to campus, you are unlikely to be impressed by vague allusions of Labour Party lore.

In the context we’re in, even modest maintenance grants would be a huge waste of money. Substantial increases to maintenance loans – paid for by those who benefit the most from university participation – should be the priority now.