Everyone is talking about student debt, about what it means to young peoples’ lives and to the UK’s economy.
After the general election surge for Labour and the role of young voters, the subject is also back near the top of the political agenda. Some, of course, are saying that promising to end tuition fees was a campaign stunt, a blatant bribe to the nation’s youth. Just another piece of unprincipled Loony Left, magic money tree, stuff and nonsense. These voices are not so flippant now. Imagine 20 years hence, when half of all taxpayers are on the loan book, how politically toxic the policy will be.
With total debt forecast to hit £200 billion in six years and to pass £1 trillion by 2045, it will dwarf credit card debt, and even the right-wing press is waking up and smelling the coffee. The Department for Education speaks of mass access to university, but even the Daily Mail and The Daily Telegraph are hinting that Labour leader Jeremy Corbyn may have a point, noting that much of the debt will end up being paid by the taxpayer anyway because student debts are income contingent and are written off after 30 years. More than three-quarters of graduates are predicted to have some debt write-off. That the public will fund middle- or low-earning graduates regardless is raising doubts about the system as a whole.
You know the figures. Average student debt in the UK upon graduation is £32,000 and rising, exceeding even the £27,000 debt that we once considered astronomical in the US. Now that inflation can be applied, student fees will quickly pass £10,000. Interest at 6.1 per cent also begins to accrue immediately, with those earning more than £21,000 paying 9 per cent of income above that threshold.
Those who go back a while will remember then universities minister Lord Willetts asserting that fees were necessary to incentivise private providers to enter the higher education “market”. So students and graduates pay for the loan book “asset” and for a view of higher education that makes it increasingly difficult for them to consider postgraduate study or ever to buy a house.
Was this what we thought would happen as universities were promised an end to erratic government funding and more reliable student fees? I don’t think so.
Some of us felt from the beginning that it must be a mistake, but then we knew that there was no such thing as “free education”, any more than there are “free hospitals” or “free public services”. Somebody had to pay – but who, and how and for what? So, eager or downhearted, we entered a new world.
But could freeing our children from this crushing burden of debt ever make hard-edged economic sense? Impossible, too far down the line? Simply the price we have to pay for widening access?
We are not the only country in the world to teach students at universities. Other countries with powerful economies such as Germany have free education, and the State of New York has introduced it for publicly funded colleges. Across Europe, costs to students are much lower and even international students are incentivised to study at subsidised rates in the sure knowledge that their talent will later swell taxes and boost the economy.
So what should we do? Do we think it is only right to make students bear the full weight of their personal “investment” for their private benefit? Is anything else simply redistributing public funds to the middle classes? If you think it is fair, then you had better get ready for the politically energised tide of youth that is now “aux armes”, if not “en marche”, coming our way.
The upfront cash outlay by the government if it removed tuition fees and student loans would be small because the government pays the fee now. The university gets the cash either way. The difference is whether it is a grant to the university or a loan attached to the individual student. According to the Institute for Fiscal Studies, abolishing fees and loans would increase the upfront government contribution to higher education by £1 billion compared with the current system simply because some students currently self-finance.
The difference is the long-run difference, as a student debt has to be repaid. The IFS estimates that the present value (to the government) of long-run student repayments is only £6.5 billion, given the number who will never repay. It’s put at £11.2 billion in Labour’s own costing document.
But would having free tertiary, including university, education be good for our country? We know that it would be great for individual students. But why might we wish to have it; and, more to the point, can we afford it?
Now don’t try to hit me with some free marketeer libertarian bludgeon of an argument. Go back and read your John Stuart Mill, Adam Smith, Friedrich Hayek or Milton Friedman. They will tell you in no uncertain terms that there are no absolutes in this matter; you must always look at the costs and benefits of any state action. So let’s do that.
Let’s start with the benefits.
Any case for the public value of education must acknowledge that education funded directly through central taxation or sponsored by the industries that rely on graduates would make it much easier to ensure that UK plc has the fully skilled workforce needed to compete “out in the world”.
We know that our biggest challenge in earning our way as a country is our low productivity relative to other nations, and our biggest tools in tackling this gap are education and research – in other words, universities and colleges.
Free tertiary education, not university education on its own, would remove one of the potential problems of access for those who need the skills for them and us. If we ask our kids to pay, we have to admit that we are taking serious risks in making sure that some of the poorest, and yet most talented, have the chance to contribute to the economy in the way that they should.
And now let’s be honest about the brutal impact that student debt is having on many young people.
Free education would mean that our young people’s lives aren’t hobbled by debt that can stop them buying a home; it would also keep up the demand for goods and services in the economy at large.
“Why are you saying this now?” you might ask. “Didn’t all vice-chancellors welcome the introduction of tuition fees?” Well, not all. On balance, I was against it then and I still am, but faced with a gun to the head, most vice-chancellors were simply desperate to be funded properly and free of the arbitrary decisions of a particular government.
I am old enough to remember the cuts brought in by Sir Keith Joseph and the fearful damage they did to our universities in the 1980s. Then, in the face of the financial crash, a coalition government, in the guise of the learned and level-headed Willetts, offered universities the prospect of less funding of the system until the Browne report hove into view. Clothed in that now-familiar language of student choice, we were told of tuition fees and loans – a lifeboat to transport universities to a golden future land of independence from the all-too-visible and interfering hand of government.
The now-famous report by Lord Browne that recommended the competitive pricing of university courses was New Labour’s gift, the natural conclusion to the £3,000 fees it had already introduced as the price for mass participation. Its central tenet of needs-blind admission through redistribution of tuition fees was damn attractive to someone thinking of the alternative of making swathes of staff redundant.
But if something sounds too good to be true, it just might be. The sage words of the Financial Times’ far from left-wing economist Martin Wolf come to mind. He explains why there can never be – for practical, economic and ethical reasons – a proper market for the provision of higher education.
But in any case, true market forces never got a look-in. The system that the politicians ended up with is a very poor substitute for either market forces or government funding, and the voice of national purpose is silent. What we have instead is the awful combination of price capping with a ton of extra, and growing, regulations mixed in, and young people left to pick up the tab for ideology.
And this isn’t just about the money, either. In my view, one of the most damaging consequences is the fundamental change in relationships between student and teacher, and the way that a student now sees himself or herself. Courses are now to be matched against Longitudinal Education Outcomes (LEO) data, with charts of graduates’ earnings attempting to quantify in advance the value in future earnings of teaching given today. Taken at face value, this would result in a never-ending supply of London-based economists and lawyers and a dearth of nurses or teachers.
The far greater cost to an individual has inevitably led to more consumer concerns and government action in response, to make it apparent that it cares about the quality of teaching. Having led the way with Ofwat and Ofcom, we now have the ironically named Office for Students – although students themselves are not asked to define their own interests. This is regulation by Ofstud.
We shall have to be patient and await the final measured assessment of posterity on the new Higher Education and Research Act; I think you already have my view. Even the teaching excellence framework is acknowledged to be a “non-Ronseal product” that does not measure teaching excellence but rather student outcomes that are not even directly related to the teaching received.
And now the negative effects on student lives become clearer by the day. Those paying 9 per cent have in effect become a higher rate taxpayer at a much lower income than they would have thought possible.
Still, we come back to hard choices. Why should taxes pay for higher education? Surely subsidising middle-class kids shouldn’t be at the top of our list of priorities.
That is indeed correct, and this is why I stop short of calling for an end to tuition fees without being willing to rethink our entire system, including further and vocational education.
We shouldn’t subsidise just one part of society, we need to make sure that all, and I mean all, our kids have the right sort of tertiary education, having been given a decent start at properly staffed schools.
Impossible dream? This is an English disease. If you want to see how it is done better, just have a look at Germany or, even better, Switzerland. Our Irish, Welsh and Scottish brethren are doing and debating it differently.
And this is the rub. If we ask society to pay for higher education, it is right that higher education meet society’s needs. It can’t be only what students today want that determines what our university should be in the future. A customer-driven university system will change in response to teenage customer demand, and that may be miles from real public need.
With students paying fees and shaping demand in a “market”, the government has limited levers with which to target funding or to protect strategically important, high-priority subjects that are not trendy.
And a teenage consumer is not a stakeholder. They don’t want to pay for research and innovation for the future of industry. Why should they? They are already paying for their own education.
But don’t we agree that we need a country with higher productivity? Yes we do, and that is why we need the sorts of scholars that we have in our universities. This is especially true for the brilliant engineers and scientists who are all, particularly at the moment, tempted to look abroad, where salaries are higher and the job is not so constrained by the regulations that the government has dumped on us as part of the fee settlement.
And the government is making this problem worse by pushing the idea that private providers can deliver cheaper, better courses. They can do it in some areas; they already deliver superb professional training courses in accounting and law, for example. But these are subjects that need no laboratories or expensive research in science, engineering or medicine. They will never want to pay the salaries of leading scholars.
It’s time for a rethink – in fact, one is long overdue. It is not good enough to remain silent about one evil because we are afraid of another, or to imply that we are too far in to admit our mistakes.
Sir Keith Burnett is the vice-chancellor of the University of Sheffield.
