Concern over abolishing the student numbers cap

The British government’s announcement on 5 December that the cap on student numbers in higher education would be abolished, has had a lukewarm response from the influential Higher Education Policy Institute, or HEPI.

The institute said last week that although the abolition would extend opportunities for more people to benefit from higher education, it was concerned about “cost implications that cannot be sustained in anything other than the short-term; and so any benefits may be short-lived”.

From 2015-16, the cap on student numbers at publicly funded institutions will be removed completely, allowing at least 60,000 entrants per year to be recruited – the number the state estimates will cater for the unmet demand. By the same deadline, private institutions will be similarly freed up.

Last Thursday, HEPI released an update on its 2012 report, which analysed the costs of the government’s reform on higher education financing.

It argued that the move did, in fact, represent an implicit cap – present numbers plus an additional 60,000 additional annual entrants – and that the announcement was silent about what would happen if universities wanted to recruit more than this number.

The government was also silent about what would happen if it were unable to sell the student loan book at a price representing good value.

Not sustainable

The institute’s main concern was that the proposals did not appear to be sustainable in the medium term, leading to even greater uncertainty as to what students and higher education providers could expect in the near future.

In its update summary, HEPI said the cost of the proposed expansion of student and teaching grants was estimated to be £720 million (US$1.2 billion) per annum by 2018-19.

The loan subsidy would apparently increase by £700 million per annum in the medium term, so if expansion reached 60,000 entrants per year, and these were full-time students averaging three years of study, this equated to £7,900 per student year – showing an intention to expand without reducing the unit of resource.

There was no indication from the government on how these additional spending commitments would be met. The increase in student loans, and student and teaching grants would increase spending by about £1.42 billion a year, so unless savings were made elsewhere, the state would need to increase the higher education budget.

As yet there has been no commitment to this, said HEPI, adding that higher student numbers would not affect only departmental expenditure but also have an impact on the public debt. Before repayments on the extra loans were paid to any significant extent, the public sector net debt – PSND – would escalate by about £2 billion for each year.

The report quoted Carl Emmerson, deputy director of the Institute for Fiscal Studies, as saying that the idea that selling the old student loan book would finance new loans was “economically nonsense, as selling an asset for what it is worth does not strengthen the public finances”.

Restore controls?

Clearly, added HEPI, there had to be a ‘soft cap’, and a reserve option might be to restore controls for budgetary reasons.

As an alternative, Whitehall would become the sector’s admissions tutor by setting minimum entry requirements to higher education, with major implications for university autonomy as well as widening participation – given the high number of students admitted without officially recognised qualifications.

Neither of these hurdles stopped the government from removing the cap on recruitment of students with high grades, “with government rhetoric indicating that the soft cap might be the favoured route, with the expansion designed to provide young people who have the grades to enter higher education”.

But what qualifications, what grades and who decides?

HEPI said it was evident that the government was putting the sale of loans at the heart of its policy for funding higher education, and that “not since the early 1990s has the government given an open-ended commitment to provide funding for as many students as universities might recruit: the consequences for the future shape and costs of higher education are potentially as significant as all that we have seen from the 2012 changes so far”.

The report concluded by saying that at best, the current policy could only be a bridge for a few years, before an increased budget for higher education, or reduced student numbers, or a cheaper package.

“The elements of such a lower-cost package have been well rehearsed: maintenance grants turned into loans, less generous loan repayment terms, cuts in the teaching grant or cuts in other parts of the higher education budget.”