Higher Education funding at the expense of certainty

Posted by Tom Walker in ,

It has been almost two academic years since the UK coalition government introduced the controversial increase in the Higher Education tuition fee cap. The policy spurred intense debate around the source of Britain's university funding, but has the implementation of the £9,000 p.a. fee achieved its intended objectives of finding a sustainable finance alternative to the tax-payer?

According to new research released by the Institute for Fiscal Studies think-tank, for every £1 loaned to students to cover fees and maintenance in 2012, 43.3p will ultimately be written-off by the UK government. On an individual student level, a typical £40,286 loan (in 2014 prices) will cost the government £17,443. When translated into aggregate terms, the study calculated that on the basis of a typical intake of 300,000 full-time English-domiciled students, the total annual equivalent cost would amount to £5.2 billion.

Universities the real winners

When other government subsidises to higher education are also factored in (such as teaching grants to universities and maintenance grants to low-income students), the total taxpayer contribution rises to an average £24,592 per student.

On applying this analysis in the absence of the tuition fee reform, in which universities were permitted to triple the cost of courses to £9,000, it became apparent that the reforms only result in a 5% cost saving (£1,254 per student) to the government. However, the main beneficiary of the policy seemed to be universities, who have seen their financial resources increase from £22,143 per student under the previous regime to £28,250 per student under the new system. This increase is the result of increased tuition fees more than compensating for reduced direct government funding via teaching grants. Further to this, it is ultimately the chancellor, not the universities, who bears the risk that students do not pay back the tuition fee loans.

Funding at the expense of certainty

According to the IFS report, the policy of increased tuition fees has resulted in 'considerably greater uncertainty over the total public cost of funding higher education, with the certain cost of teaching grants replaced by the uncertain costs of issuing larger student loans.' This is despite the Universities Minister David Willetts justifying the policy as '[putting] universities' finance on a sustainable footing with extra freedoms and less bureaucracy'.

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