£1 Billion “Black hole” at centre of education policy

Jack Davidson

The British government is facing further allegations of incompetence against its higher education policy after it was revealed that there had been a £1 billion miscalculation in the estimation of reform costs.

As a result, the implementation of the new system of tuition may in fact cost more than its previous incarnation under Labour. This may result in universities such as Glasgow cutting student numbers or charging the maximum amount of fees for all courses from overseas students and those from the rest of the UK.

The report, conducted by the independent think-tank the Higher Education Policy Institute, outlines serious concerns on the affordability of the increase in fees and the effect it will have on student numbers. It also criticises ministers for overly optimistic predictions of such effects by underestimating the extent to which universities would increase fees in 2012 when the reforms became law. Students entering university in 2011 could be expected to pay a maximum fee of £3,375 compared to £9000 in 2012. The report cites the incorrect assumption on the part of ministers that the average fee charge would be around £7,500 when it is in fact closer to £8,300. This has lead to a corresponding rise in borrowing levels among students as they attempt to keep on top of mounting costs. This is one of the main factors in the £1 billion deficit at the heart of the government’s higher education reforms. The report also found that students who applied in 2011 could expect to make savings of at least £16,875 compared to the following year’s applicants, the rough equivalent of deferring entry and taking a gap year.

For Glasgow, the reforms have seen the institution charge undergraduate students from the rest of the UK around £6,750 for the start of the 2012-13 academic year. Certain programmes in areas such as dentistry, medicine, veterinary medicine and surgery are currently charged the maximum £9,000 figure. For overseas students, the situation is even bleaker: costs for arts and social science programmes, along with engineering and other courses range between £12-15,000. These increases come as the university implements major reductions in its spending in an attempt to make cuts of around £20 million. With the new system already facing a potential shortfall in income, the chances of a further hike in fees in the near future seems likely. The availability of bursaries, tuition discounts and scholarships will do little to assuage growing fears amongst students about the steep costs of pursuing higher education.

The Department for Business, Innovation and Skills estimated that the increase in loans would result in a recovery shortfall rate of around 32%, with other estimates placing it closer to 40%. This will also contribute to the additional £1 billion cost as it means that the government will be unable to recover a fairly sizeable percentage of debt. This may result in future taxpayers having to pay more as the costs of the new tuition system continue to spiral. Other potential solutions include another major cut in the education budget on top of the current 12% decrease in funding for Scottish universities and colleges, a reduction in future student numbers or an increase in the present amount repaid by former students.

Another key area of criticism in the report is the inflated expectations on the part of ministers of how much graduates will be earning in the future. An important assumption of the newly instituted system is that the average graduate will be earning around £75,000 a year in the next 30 years, the time by which loans have to be repaid. The report maintains that such a figure is very unlikely to be the norm even if the current economic climate improves. Additionally, it outlines that such salary increases will only prevail in sectors of the economy which are already high paying, not all, in keeping with general trends over the last three decades or so. Those graduates that start with modest salaries are therefore likely to see only incremental increases compared to their higher-earning counterparts.

Along with the hike in student loans and lack of debt recovery, the report cites one other important factor in the £1 billion balloon. The end result of these preceding issues is an additional 0.2 percentage point on the Consumer Price Index, which may lead to rises in state benefits and civil service pensions.  This is likely to pile more criticism on the government who argued that the previous regime of tuition under Labour was unsustainable due to its high cost and was in need of a major overhaul. The reforms have been criticised for a lack of coherency and consistency by Labour and the National Union of Students, with the latest findings likely to add to claims that they are ultimately counterproductive in the long run.

The findings will heap more pressure on those such as Nick Clegg who backed the proposals despite widespread opposition from both his own party and students who had supported his pledge of no fee increase. Those studying at institutions such as Glasgow will also continue to feel the double squeeze of paying more for less as the jump in fees continues in tandem with cuts in university spending. The prospect of even greater increases will only see such concerns grow more acute, illustrating that the precarious state currently endured by universities and their students will continue for the foreseeable future.