Fresh ideas on fees and funding anticipated in HE blueprint

With Britain’s new prime minister Sir Keir Starmer famously suggesting he probably couldn’t afford university were he to apply today, before dropping his pledge to scrap tuition fees under a Labour government, policy-makers will be waiting to see what fresh ideas emerge from a high-powered team of experts who have spent the last nine months on a blueprint for the future of higher education and research in the United Kingdom.

The blueprint will be released by Universities UK (UUK) in the run-up to the annual conference of the Labour Party being held in Liverpool from 22-25 September 2024 – the first gathering of the party faithful since the party won a landslide victory in the general election on 4 July 2024.

The UUK blueprint will, it is understood, be split into eight chapters and has been put together by a varied team of university leaders, experts on the economy and former cabinet ministers.

Most interest is on what the chapter with the working title, “Implications for the future shape of the higher education sector in England – funding and business models”, will propose on domestic tuition fees and maintenance support for students struggling with soaring rents and other rising costs while studying.

This section is being co-authored by Professor Shitij Kapur, the vice-chancellor of King’s College London, and John Rushforth, executive secretary of the Committee for University Chairs.

Strong hint on fees

Kapur gave a strong hint to the UUK’s annual conference last week that despite intense lobbying by some higher education stakeholders, including former ministers of higher education in the Conservative government, the blueprint is unlikely to ask the Labour government to make up the full fall in the value of home tuition fees since they were last raised to £9,250 (US$12,150) in 2017.

Kapur told the UUK’s annual conference on 5 September that while tuition fees in England would need to rise to £12,500 a year to make up for inflation after the seven-year freeze, higher education leaders would look “out of touch” if they asked for a 35% increase in undergraduate fees.

Starmer and his chancellor, Rachel Reeves, have made it abundantly clear that Labour’s priority since getting elected is fixing a £22 billion ‘black hole’ in the economy left by the last government. They have already upset millions of older voters by abandoning the winter fuel allowance for all but the poorest pensioners.

However, The Guardian reported another member of the blueprint team, Lord (David) Willetts, told the UUK conference that he believed the new government was prepared to agree a deal with universities in England for higher funding.

“There’s genuine anxiety in government about universities going bust. Nobody wishes to face that crisis,” he claimed.

Willetts was instrumental in helping the Conservative-Liberal Democrat coalition government treble domestic tuition fees in England, to £9,000 from 2012, when he was universities minister.

He is writing the chapter on “The UK's international competitiveness” for the UUK blueprint report which could be published as early as next week.

Political capital deficit

However, higher education experts approached by University World News were less certain that the new Labour government was ready to put up tuition fees.

Dr Diana Beech, chief executive officer of London Higher and a former government political adviser on higher education policy for the previous Conservative administration, said: “Given Labour has just lost a significant amount of political capital among older voters following its contentious decision to cease winter fuel payments, I doubt the government is looking to anger young people as well, bearing in mind that they are more likely to be natural Labour supporters.

“At a time when the government is looking to young people to power growth across the nation, it can ill afford to stoke a sense of ‘buyers regret’ among the young voter demographic.”

Beech suggested an alternative way to bring in more revenue from graduate repayments could be to lower the threshold back to £21,000 (from the current earnings threshold of £25,000 before student loan repayments are required).

The extra income could help generate more money for both universities in the financial crisis and increase student financial maintenance grants without raising the headline domestic fee level.

Jim Dickinson, associate editor (student unions) for the higher education policy think tank WONKHE, said in a blog post that putting up tuition even by £500 to £9,750 was only marginally less unpopular than the supervised tooth brushing for 3-to-5 year-olds, which the Labour leader proposed during the general election campaign, according to public polling.

Dickinson said Labour couldn’t use the new Labour government’s standard argument for everything costing money – as the Conservatives improved long-term loan recovery rates for government-backed students (which cover tuition fees and maintenance) by reducing the earnings payback threshold to £25,000 (from £27,295) for those starting university last year and added 10 years to the repayment period before any outstanding amount is written-off.

Interest rate adjustments

He suggested one way to boost income for universities, via government funding, without putting up tuition fees would be to re-introduce interest levels above the Retail Price Index (RPI) – but by less than the RPI+3% that proved too toxic for the Conservative government, particularly among richer graduates who actually pay off their loan because of higher earnings.

Dickinson suggested moving to RPI+1.5%, which he says would bring down the total long-run cost of subsidising student loans to government in real terms from £3.8bn to £1.4bn – “which in theory means there would be £2.4bn knocking about to spend on better maintenance support and direct grant funding to universities”.

He claimed that would generate enough “to give every undergrad a £500 cash grant” and to double the teaching grant to universities.

Beech said the idea is worth exploring, but there was no guarantee that any extra money generated would go towards improving maintenance for students or increase grant funding to universities as the new chancellor was intent on bolstering government coffers to minimise debt and had prioritised areas such as the National Health Service, schools and prisons.

Grants for poorest students

Johnny Rich, executive of outreach organisation Push and chief executive of the Engineering Professors’ Council, told University World News: “I don’t think the Labour government would sacrifice too much political capital if they went for a modest rise in advance of a more rigorous review of tertiary funding.

“By modest, I mean keeping the headline figure under £10,000 a year.”

To soften the political blow of any fee rise, he recommended reintroducing grants for the poorest students.

“As this group is less likely to repay their loans, at least in full, it could prove inexpensive for the Exchequer, but it would show that the Labour government means business in helping students as well as ensuring the universities can afford to continue to run high-quality courses.

In a paper for the Higher Education Policy Institute (HEPI) earlier this year, Rich also proposed a graduate employer levy and a National Access Fund, which would redistribute money in the higher education system towards universities exceeding targets for less advantaged students, and away from universities that fail to meet access targets.

Rich was against returning to a cap on student numbers as a mechanism to limit the costs to the Exchequer, which he describes as “a cap on access”.

“Labour could also make the student loan system more progressive by introducing different levels of repayment according to income, starting at 3% on earnings over £25,000, 6% over £35,000, 9% over £50,000. Similarly, the government could use higher levels of interest for graduates with higher salaries,” he said.

Rich also recommended that the Office for Students (OfS) regulator in England tells universities to hold agreed funds in reserve to be used in the event of a bailout, which would be matched by government.

“A bit like the system that was introduced for banks after the banking crisis in 2008. It would show support for higher education without seeming to encourage profligacy,” he said.

Case for a reset

Professor Sally Mapstone, president of Universities UK and vice-chancellor of the University of St Andrews, told the UUK annual conference on 5 September the blueprint about to be unveiled would “make the case for a reset” for universities and government on “how universities serve our society and country over the next decade”.

Mapstone said it will argue that investing in higher education and research “is a solid investment not a drain on public finances” while recognising that “universities cannot, and should not, lay the entirety of the university sector’s funding pressures at government’s door. We need to continue to operate more efficiently”.

However, after the fall in the relative value of tuition fees since they were set at £9,000 for 2012-13, their value had eroded to £5,924 for universities in England and “the Exchequer now only contributes to 16% of the cost of funding a student through higher education, with the rest, 84%, picked up by the graduate in England.

“This balance needs redressing through increased government investment,” she said.

Jacqui Smith, the new minister for skills, further and higher education, told the UUK conference the Labour government was very aware of the financial challenges facing universities – and students – but warned it would “take time to get it right”.

Nic Mitchell is a UK-based freelance journalist and PR consultant specialising in European and international higher education. He blogs at www.delacourcommunications.com