Why political calculations make £1.8bn plan to cut tuition fees to £7,500 unlikely to happen

Theresa May promoted her review of tuition fees during a visit to Leeds in February 2018. Pic: Simon Hulme
Theresa May promoted her review of tuition fees during a visit to Leeds in February 2018. Pic: Simon Hulme
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Proposals to cut university tuition fees to £7,500 driven by Theresa May appear increasingly unlikely to ever become reality as criticism of the £1.8bn idea mounts. Chris Burn reports.

When Theresa May toured the country in February 2018, including paying a visit to The Yorkshire Post in Leeds, to announce a review of university tuition fees and further education funding, she hoped to start delivering on her pledge to tackle the “burning injustices” facing ordinary families in Britain and show there was more to her Government than the bureaucratic tangle of Brexit.

Among the critics of the Augar review is Boris Johnson's brother Jo, who has recently been given a ministerial post. Picture: Chris Radburn/PA Wire

Among the critics of the Augar review is Boris Johnson's brother Jo, who has recently been given a ministerial post. Picture: Chris Radburn/PA Wire

One of her aims was to tackle “one of the most expensive systems of university tuition in the world” where the level of fees “do not relate to the quality or cost of the course”.

But by the time former banker Philip Augar delivered his recommendations earlier this year - including a recommendation to reduce annual tuition fees from their current maximum of £9,250 to £7,500 - May had been forced the week before to announce her intention to resign as Prime Minister after her repeated failure to get her Brexit deal through Parliament.

While Augar’s review emphasised the importance of improving post-18 education options for those who do not go to university and called for £1bn investment in further education, its most headline-grabbing policy proposal was the call to introduce a lower cap on tuition fees, which provide almost half of the annual income for the higher education sector, from 2021. He said the loss in funding for universities should be replaced by an equivalent increase in average per-student grant funding from government and claimed the move would lower one deterrent stopping people applying for university by reducing student debt.

Currently, students who began their courses after 2012 currently only start making repayments on their student loans once they are earning over £25,700 per year, with nine per cent of their salary above the threshold while interest is also added to the amount owed.

Tuition fees have been a source of political controversy - but appear likely to stay under Boris Johnson's Government. Picture: Dominic Lipinski/PA Wire

Tuition fees have been a source of political controversy - but appear likely to stay under Boris Johnson's Government. Picture: Dominic Lipinski/PA Wire

Augar said: “Although commentators stress that the level of debt is irrelevant given the income-contingent character of the loan system, perception is reality for many prospective students, particularly those from a disadvantaged background with larger maintenance loans who are currently likely to graduate with debt of over £60,000 once in-study interest is factored in.”

While May, who was in the Cabinet when the Coalition Government controversially decided to treble tuition fees in 2012 to replace cuts in state funding, knew her time as Prime Minister was ending when the findings were published, she gave a speech urging her successor to seriously consider the report’s proposals to “put right the errors of the past” by cutting tuition fees to a “fairer price”, as well as reintroducing higher education maintenance grants.

She said the hope in 2012 that the maximum amount would only be charged “for the highest quality and most prestigious and potentially lucrative degrees” had not come to pass, with the vast majority of courses set at the top price.

Tuition fees in England are among the highest in the world, around treble what is charged in New Zealand and Canada, nearly double Australian costs and more than the average charge of about £6,000 at public colleges in the US - although private higher education establishments in America cost around £20,000 per year on average. In Scotland, Germany and Norway, no tuition fees are charged.

However, with tens of thousands more students now starting university each year than when the first fees were introduced in 1998 - and increases in those from the most disadvantaged backgrounds attending - those in favour say such wider access is unsustainable without student contributions.

Nick Hillman, director of the Higher Education Policy Institute think-tank and a past adviser to former Universities Minister David Willetts who was in post when tuition fees trebled in 2012, says it is “unlikely” the Treasury would agree to meet the shortfall if fees are cut.

He says the reliance from universities on tuition fees for their finances is down to a simple reason - austerity.

“We have got to the position we are really because of austerity. Back at the 2010 General Election, every political party was expecting to cut the budget of the business department which the universities were under in those days.”

He adds other countries show it is possible to run universities with less funding - but with consequences.

“In Scotland, the Government doesn’t give the equivalent of £9,250 per student, it funds at a lower level and it is the same in other European countries. In the 1980s and 1990s, the size of our university system doubled but the amount of money spent didn’t go up in real terms. Effectively the money per student halved so you got less good facilities, a higher staff-student ratio and probably less contact hours. Policymakers are now very keen for universities to do things they didn’t do in the past, like mental health support. It is those sorts of things that probably wouldn’t be affordable if the money wasn’t replaced.”

Among the biggest critics of Augar’s recommendations when they were published in May was former Universities Minister Jo Johnson, who claimed the proposals would destabilise university finances, put many courses at risk and fail to widen access. “Bad policy, bad politics,” was his damning summary.

Shadow Education Secretary Angela Rayner, whose Labour party had pledged to scrap university tuition fees entirely in its 2017 General Election manifesto, told Parliament the proposed fee cut was “the worst of both worlds, as institutions will have their hands tied on funding while students will still be graduating with tens of thousands of pounds of debt”.

Now following Boris Johnson’s arrival as May’s replacement as Prime Minister last month, momentum appears to be growing even further against the Augar recommendations, or certainly at least the tuition fees element of it. The current official position of the Government is that it will be “considering Philip Augar’s recommendations carefully”, but in what appears to be a symbol of the way the wind is blowing, Jo Johnson has been brought back as a minister at the Department for Education and Department of Business, Energy and Industrial Strategy by his brother.

And earlier this month, a report by the House of Lords Science and Technology Committee warned that reducing tuition fees would have serious consequences for the ability of universities to pay for high-quality scientific research funding. It said the only way the tuition fees cut should be introduced is through an equivalent increase in the teaching grant to cover the loss - a figure universities put at £1.8bn.

The report pointed out that the stakes are even higher because of the uncertainty surrounding the future of billions of pounds worth of EU funding after Brexit.

Lord Patel, chair of the committee, said: “The Augar Review has completely missed the mark by not considering research funding in its review. By ignoring research and cross-subsidies, it has made recommendations which, if implemented, could prove harmful to the already challenging ecosystem of university funding.

“We heard evidence that a university’s core operational activities of teaching and research are both loss-making activities already and any shortfall in funding would become unmanageable. The immediate casualties will likely be widening-participation programmes, student experience, infrastructure maintenance and repair, and the hands-on elements of courses.

“Without adequate research funding, the consequences for the UK will be devastating and the UK risks falling behind other countries. The Government intends to spend 2.4 per cent GDP on research and development by 2027, but we conclude that it will be extremely difficult to meet this target unless funding for research in universities is secured and the UK can attract researchers from overseas.”

Similar concerns are shared by many at Yorkshire universities.

David Thompson, senior policy analyst at the Russell Group of universities, which include Sheffield, Leeds and York, says: “The threat posed to UK science, research and industry by Theresa May’s review has been wholly under-estimated, but this report makes it clear that cutting tuition fees without fully making up the funding shortfall would be a serious mistake from any Government.”

A Universities UK spokesperson says: “The UK’s universities are internationally respected for excellence in innovation and research and it is important this activity grows to keep pace with our competitors. Proposals to reduce tuition fees, if not matched by replacement government funding, would destabilise universities and therefore reduce their capacity to undertake research.”

Andrew McConnell, director of finance at the University of Huddersfield, wrote a joint response to Augar with Lancaster University’s vice-chancellor Mark E. Smith and finance director Sarah Randall-Paley, highlighting a KPMG study prepared for the review that indicated “even the cheapest classroom-based courses currently cost £8,800 to deliver”.

They claimed the Augar review had “profoundly misunderstood” the requirement for a 10 per cent margin for sustainability and investment [MSI] included in the £8,800 figure which was then removed in setting the “base cost” for degrees.

“[The margin] is not merely a “nice to have”: its removal would have profound implications for the sector’s long-term sustainability,” their response warned. “The greatest worry is that if Augar’s understanding of the MSI is so far off the mark, how much of the rest of the report is based on such misunderstandings?”

Hillman says there is little political incentive to introduce a cut in tuition fees which is relatively minor for individual students but would be hugely costly to replace.

“I don’t there are a lot of votes in cutting it from £9,250 to £7,500 when Labour are saying they will get rid of them altogether. My concern would be is the Treasury might make up the gap in the short-term but what worries me is the long-term.”

He says with a record percentage of 18-year-olds, including those from disadvantaged backgrounds, going to university he is unconvinced young people are being put off by tuition fees.

Hillman says that one area where improvements could be made is in the interest rates charged on tuition fees, citing the example of New Zealand where it was scrapped in 2005 in a politically-popular move. One of the recommendations of the Augar review is to cut the amount of interest levied while students are still in higher education.

Hillman says: “When people get their first student loan statement after graduating, they are shocked by the amount of interest on it.

“It starts hitting you in the pocket in the repayment phase and if you are trying to get on the housing ladder, paying nine per cent of your salary over a certain point when it feels like the repayments will be going on forever is hard. There are more people in the repayment phase than at university at any point.”

Hillman says the examples of other countries show it is possible to scrap tuition fees entirely but it will mean less well-resourced institutions.

“I think the tuition fees system works. My view is there are other problems in the education system that are in much more urgent need of being tackled. On almost any measure you choose to pick, our universities are among the best in the world, including places in Yorkshire like Leeds and Sheffield. One of the reasons is because they are relatively well-financed even in austere years.”

When Theresa May spoke to The Yorkshire Post back in February 2018 about the ordering of the review, she defended the 2012 decision she had been part of to treble tuition fees by saying it had allowed more people from disadvantaged backgrounds to go to university - while admitting “the concerns that students themselves but also their parents and their grandparents have about levels of debt” meant changes may be needed.

But it now seems that the Augar review is unlikely to be the way any change to tuition fees will come about.

Brief history of tuition fees

Tuition fees were first introduced in 1998 by the new Labour Government in response to a report ordered in 1996 by Conservative Prime Minister John Major which had recommended students pay around one-quarter of the costs of their course.

With Labour looking to increase the numbers going to university, a £1,000 annual fee was initially set with means-testing seeing around one-third of students not paying. Scotland removed the fees for its students after devolution in 1999. In 2006 universities were allowed to start charging up to £3,000 per year.

They were upped to a maximum of £9,000 in 2012 by the Coalition Government and went up to their current level - £9,250 per year - in 2017.

What the Government says about the Augar review

A Department for Education spokesperson said: “As part of our ongoing review of Post-18 Education and Funding we will be considering Philip Augar’s recommendations carefully.

“We have committed an additional £7 billion for Research and Development by 2022, the largest increase since records began.”