Keir Starmer has recently indicated that the Labour Party is no longer aiming to abolish university tuition fees, even though the commitment formed part of his campaign for the leadership of the party and has been established party policy for some years.
For many, this will echo how the Liberal Democrats abandoned an election manifesto commitment once they entered the 2010 coalition government. While the U-Turn has likely annoyed many of those who supported Starmer in the party leadership election, at least he has avoided the wider accusations of betrayal aimed at Nick Clegg.
The student loans most university students also take out also cover living expenses (the maintenance element), but this money does not find its way to universities other than through rent for on-site accommodation (mostly for first-year undergraduates). For university funding the tuition fee element is the most important, as it is key to the economic sustainability of the university system.
The big issue is why does the funding of higher education continue to be subject to tinkering and uncertainty?
Running universities is expensive. To benefit from research-informed, or research-led teaching, the sector has to support a range of research across the subject areas as part of its overall activity. This is on top of paying for the teaching itself.
So, what is at stake in the politics of student finance?
Three models of funding
There are three positions one might take on paying for university tuition, and the provision of maintenance for students whose families are unable to afford to support them for three years study.
If one believes that society generally gains most if not all the benefits of having a university educated group in each age cohort, then it makes sense to make such provision free to the student. Certainly, establish entry criteria to ensure that only those best able to respond to the intellectual challenges of university are admitted. However, once they have graduated, this perspective says that they offer such value to society generally (through their widened knowledge and enhanced skills) that the taxpayer should cover the cost. Society captures most, if not all, of the benefit of a highly educated segment of the workforce.
Conversely, if one’s view is that the individual student receives most of the benefits from a university education, students should pay the full cost of their time, including their living expenses, at university because they are the ones profiting from attendance. They gain raised earning opportunities and potential improvements in general wellbeing, as well as other social and cultural advantages, so it makes sense that they should meet the cost of their university education. Society may gain some benefit from university educated workers, but this is dwarfed by what they themselves gain.
Between these two positions lies the argument that the benefits are likely to be shared. In this case, some level of tuition fees might be justified, but would not reach or even approach the level that full cost recovery would require. Although there are currently some means-tested maintenance grants available, the eligibility for these might be relaxed to allow more students to receive help with their living costs. There would also be a further debate about the balance of benefits, which might differ from subject to subject. Courses which offered little social benefit might be more expensive while those which society valued (say health workers, for instance) could be heavily subsidised.
This latter position (variable fees by subject) offers something like market signals to students, in the same way post-graduate earnings might do. Where subjects were socially useful but offered lower salaries, courses could be cheaper, but where salaries were potentially higher (whatever the social utility of the work; lawyers or accountants, perhaps) fees would not be subsidised so much by the state.
The UK has tried all three
Before 1962, when fees were levied on students, they were balanced by a range of grants from central government direct to the universities (with relatively wide discretion about their use). There were also bursaries and other forms of maintenance support that enabled the brightest of those unable to afford the fees to attend university. This broad system had been in place since the 19th Century, leaving universities largely autonomous over admissions.
Like a number of other European countries, successive British governments had recognised that there were clear economic benefits from having a university-educated elite available to the country’s employers and civil service. While details varied over time, this arrangement represented the intermediate position on tuition fees, that society and the individual both derived significant benefits from higher education.
For most of the 20th Century, less than 5% of any age cohort attended university, and although expansion got under way in the 1960s, by 1970 it still remained under 10%. It therefore remained a relatively inexpensive policy. However in the next 20 years, driven by universities’ own expansion strategies and the growing normalisation of university education in the middle class, admissions doubled, reaching nearly 20% participation in 1990. As more people attended university, the financial requirements of the sector grew, leading to a reassessment of how university study was funded.
In 1992, the Conservative government at a stroke expanded the numbers at university by abolishing the divide in tertiary education between polytechnics and universities, allowing the former to now award their own degrees. The unified university sector was now much too large for the previous model of funding to continue without scrutiny.
Ron Dearing’s (in)famous study from this period laid the groundwork for a range of developments in the university sector, including the introduction of tuition fees and the abolition of maintenance grants for all but the very poorest students. Although initially tuition fees were capped at £3,000 (again situating the policy back in the intermediate funding position), no universities sought to try and compete (as Dearing expected) by offering a lower fee. Although a couple of universities have subsequently done so, the fee ceiling has become the effective fee level at the vast majority of institutions.
Since then, moves to raise fees have appealed to a range of arguments and justifications but in the end it always comes down, in England, to who any particular Secretary of State for Education (or equivalent) thinks is capturing most of the benefits of a university education, and to how the devolved governments now understand this issue in their countries.
The problem of financing higher education
There is a reasonable argument that whatever the social benefits, before 1998 poorer taxpayers were subsidising the university studies of those who would then go on to earn more than the normal taxpayer could. This inter-class subsidy is easily seen as unjust, given the benefits middle class students capture in terms of life-time earnings and their conditions of employment. This has been explicitly or implicitly mobilised as the rhetoric behind each rise in tuition fees as well as the shift away from maintenance grants to loans for living expenses.
But as fees have risen alongside living costs, the issue of accessibility has become much more problematic. The costs of attending university are now covered by a loan system, that is effectively a graduate tax, which in its most recent iteration has become quite regressive.
Under the new arrangements, a reduced threshold for payments has been frozen while the period before any residual loan is written off has been extended to 40 years. London Economics calculate that because higher earners will pay off the loan more quickly, and lower earners will no longer gain as much from the time-limited payment period (having been extended by a decade). As they will accrue more interest payments over the life of the loan, lower paid graduates will now pay more for their degree than higher earners.
As Gavan Conlon, from London Economics told The Guardian, “This is effectively a massive subsidy to predominantly white, predominantly male graduates. It’s deeply regressive”.
This brings us back to where we were in the 1960s, although now the subsidy is from within the university educated cohort. The social utility of many graduates who remain on lower wages (particularly nurses and teachers) seems clear, but conversely the system now seems based on the conclusion that university education offers little material benefit to society. It drives policies that seek the full reimbursement of the costs of teaching from all students passing through the university system.
If this approach seems unjust, then only when we can be clear that a university educated workforce is actually of clear benefit to the whole of society, even if some graduates disproportionately capture the cash benefits, will we develop a politics of tuition fees and student maintenance fit for the future.
Whether Keir Starmer’s Labour Party can develop and promote such a renewed understanding of the issue remains to be seen.
