The Great Tuition Fees Escape (Part 1)

Peter Ainsworth writes for the Institute of Economic Affairs. Jeremy Corbyn’s success at converting young people to his cause, encouraged by the promise of the abolition of tuition fees and the implied partial write-off of existing debts, has the Conservatives running scared.

Theresa May’s pledge to freeze fees at £9,250 and raise the salary threshold for repayment to £25,000 is no more than a token gesture. Boasting about saving the average student £360 a year is an insult when measured against a debt that is typically £50,000. Labour’s idea is even worse. Scrapping tuition fees altogether – or even in part – might make the youngest a bit happier, but it will make those who are stuck with the £50,000 liability even angrier.

The fundamental problem is that the 2012 “reforms” are a trap. Now fees have been at a high level for a while, cutting them creates a large body of very alienated graduates. Compensating them is not only unaffordable – as even Corbyn appears to admit – but would make another group angry: those who have paid off all or part of their debts.

The Times recently reported that Philip Hammond suggested “that Universities may be forced to link tuition fees to the cost of courses or barred from charging the maximum if their graduates have difficulty finding work”. Here, Hammond has the germ of a good idea in his notion that tuition fees should be linked to costs and employment outcomes. Rather than reduce the headline fee of £9,250, more effort should go into justifying that amount and giving students what they really want – good, high-paying jobs.

Another perverse effect arises out of the new “Teaching Excellence Framework” (TEF) which scores institutions on “Contact hours”. But there is a big difference between an hour with an inspiring, challenging educator and the same length of time with a lecturer who simply reads from a PowerPoint presentation. As the first is likely to command a higher salary than the second, the TEF has the effect of rewarding the University for replacing the inspirational with the dispiriting. It is hardly surprising that a “Gold” award under the TEF is, in fact, a negative indicator for future earnings – i.e. the higher the award, the lower the expected earnings as based on recent history.

An alternative approach is to address what is really the injustice in the system – that in a tripartite system two parties – the student and the taxpayer – take all the risk while the third player – the Universities – take none of it.

Although the average student benefits from higher education, at least a third do not. Some earn less than non-graduates, and many earn little more. The taxpayer picks up the bill for these and is on the hook for possibly as much as 50% of the costs. And these taxpayers are not today’s wealthy but are those very same students who were made liable for their own fees. The losses will only crystallise in 30 years’ time. Just as today’s students are released from their own direct obligation the government of the day will be faced with a new addition to the national debt which will need to be paid for either by cutting their services or increasing their taxes.

Read more The Great Tuition Fees Escape (Part 1)

Please tell us your thoughts in comments or via Twitter ~ Tamsin

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