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Tuition Fees and the Fight for Higher Education in 2015

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Tuition Fees and the Fight for Higher Education in 2015

David Ridley

After three years of £9000 tuition fees and income-contingent loans, the evidence is now showing that the Coalition’s neo-liberal experiment has failed: the cuts and subsequent attempts to bring market efficiency into higher education in England will cost the government more then the system it sought to replace. On top of this, the evidence concerning for-profit providers in the US points to inefficiencies, declining quality and huge student dropout rates.

Furthermore, the ideology of ‘no alternatives’ will not stand: in Germany strong student, union and political collaboration has overturned similar attempts to turn higher education into a market, and now all federal states have abolished tuition fees and re-established higher education as a public good, free for all (including international students).

 

The Failure of the ‘Great University Gamble

The issue of the cost of loans that will be written off will become central to the debate in 2015 – the ‘gamble‘ of the reforms was that even after an estimated 30% of all loans are written off (after 30 years), the government would save £1billion for the reduction of the deficit. However, recent estimations, 3 years on, have revised this figure to 45%, ‘all but nullifying any savings to the public purse’. London Economics have predicted that if the write-off exceeds 48.6% then the cost of the reforms will exceed the cost of the system it replaced.

The government has already successfully sold off the pre-1998 mortgage style loans, accepting a loss of £140 million overall through subsidies paid to third parties (subsidiaries and consortiums of NatWest, Nationwide Building Society and Deutsche Bank AG). These subsidies were necessary in order to make the loans attractive to private interests – the whole problem centres on the management of risk. The government are prepared to lose money in order to get rid of the risk posed by loans.

However the government has so far failed to ‘sell’ the risk of the post-1998 income-contingent loans, despite many attempts to do so. According to Andrew McGettigan, there may be a fundamental flaw in the plans to sell off the ICR loans: a lack of history and datasets mean that investors are unable to price them with any confidence; any discount or subsidy to make the loan book attractive to investors would be so large (the loan book is growing by £10 billion a year) that it would no longer represent ‘value for money’ for the tax payer. Plus any attempt to sell just the low-risk loans (doctors or Oxbridge graduates perhaps) would leave the government with the majority of non-repayment risk, thus defeating the object of the sale.

This is why the recent suggestion by David Willetts, now ex-Universities Minister, that universities should be able to underwrite, or effectively buy, their own students’ loans is not a serious solution to the growing problem of un-paid loans for the economy. It would only be the richest universities that could afford the risk, and this would still leave the risk generated by the majority of loans from students attending other universities.

Breaking the Apathy: New Reasons for Anger and Hope

The success of the German Free Education Movement suggests the overall strategy for opposition to the reforms: a successful public movement must involve all parties working together: academics, higher education workers, unions and politicians. According to Howard Hotson, it was democracy that defeated tuition fees in Germany: ‘In Hesse, students protested en masse, a citizens’ initiative collected 70,000 signatures, and the ruling Christian Democratic Union party, fighting for re-election in 2008, reversed course in order to retain power’. An Alliance Against Tuition Fees was formed from 200 organisations, including students’ unions, trade unions and political parties, who pushed for a referendum and got a petition signed by 1.35 million voters.

We need a strong public movement to push Labour into promising more than merely a reduction in fees. Reducing them to £6000 pounds does nothing to solve the problem, it only exacerbates the situation (immediately undermining the ability of non-elite universities to compete now they have committed to £9000 fees). The £3000 difference is almost all loss for the government anyway, and yes this would reduce the burden on students, but Labour have no intention of reversing marketisation – Labour were the ones who introduced top-up fees in the first place – and they would still go ahead with the sale of the loan book. In the German case, due to growing public support for the protest movement, the Christian Democratic Party reversed course completely on the issue of tuition fees in order to get re-elected in 2008.

In the short term, the government might change the interest rates of the loans without consultation, increasing them to ‘market rates’. In addition, the income threshold for repayments can also be changed for existing loans, below the current level of £21,000, as has been proposed by a number of Think Tanks, such as Demos. They can do this because of a clause that appears in the Student Loans: A Guide to Terms and Conditions, which states that ‘you must agree to repay your loan in line with the regulations that apply at the time the repayments are due and as they are amended. The regulations may be replaced by later regulations’ (my emphasis). This would immediately generate more income from repayments, but the government shouldn’t be able to do this.

Current and ex-students need to be made aware that the government has the power to change the interest rates on existing loans without consultation. As McGettigan rightly says, ‘Borrowers should not face such a potential liability.  Especially when we recall that student loans can be sold to third parties without consultation and without consent.’ This is one specific and controversial issue that academics, for example, can focus consciousness-raising and critique around, thus showing solidarity with students.

In the long-term, the government might attempt to abolish the write-offs of unpaid loans altogether, on the basis that it is ‘unfortunately’ unsustainable. As McGettigan warns, the real plan all along could have been to ‘sell a generous loan scheme to the public, Coalition partners and Parliament, only to make it far less generous when its lack of viability becomes apparent. In this way a scheme that would not have got approval in one go is achieved in two bounds’. This last point is correct and should give us hope (that there is a limit) – there is no way that the Coalition would have got a tuition fee system based on uncapped maximums and private loans, basically the US system, through parliament back in 2011.

The Long Revolution: Higher Education as a Market or a Public Good?

In 2012 Senator Tom Harkin released a report on an in-depth two-year investigation into 30 for-profit US universities (institutions that have shareholders who are able to extract profits from the institution, as opposed to private charitable institutions that cannot distribute profits in this way), which found that large numbers of students fail to gain any credentials, there is a 64% average drop-out rate at such institutions and there is often a relatively little amount of money spent on instruction – 22.4% on marketing and advertising, 19.4% on profit distributions and only 17.7% on instruction.

Furthermore, when we critically examine the statistics that go into the world rankings of university systems, the US higher education system was worse value for money in 2011 (just before the Coalition reforms) than the UK grant-funded system. According to Howard Hotson, the fact that the US regularly has more universities in the top world rankings is misleading – the US is much larger than the UK, and proportionally the UK universities in the top rankings are larger than their US counterparts. If we divide the number of top universities for each country by its population, the US drops to 14th place. If we then divide the number of universities by each country’s GDP (Gross Domestic Product), the US stays at 14th. Worse than that, if we divide the number of universities by total spending on higher education for each country, the US drops to 16th out of 20. Using the same calculations, UK higher education rises to 3rd place overall. Even better, when we look at the value for public spending, the UK offers 50% better value than its nearest competitor.

Even though immediate action must centre around tuition fees, if we want free, public higher education in the UK, we must keep our eyes on both the government’s deeper marketisation agenda (which both the Coalition and Labour agree on) and work towards a economically viable and popular alternative. The evidence from the US (that the market doesn’t work) and Germany (that reforms can be over-turned) are powerful case studies in the ideological battle, a battle which academics need to get stuck into.

As McGettigan points out ‘the complexity of the schemes…is notorious: many politicians and commentators do not understand the system [let alone] academics, students and parents’.There are many critics who decry the loss of higher education as a public good, but I don’t think we have ever achieved this lofty ambition. Higher education in the UK has largely remained a positional good, which are ‘goods which act as a status symbols, signalling their owners’ high relative standing within society’. If we want higher education to be a public good, publicly funded and accessible to all, we need to make it that way.

 

 

  1. Democracy is the key word. Students protesting against cuts to grants and the transition to fees were met by the cavalry in London. Go forward a couple of decades and we have tear gas & physical assault at Warwick. I see little chance of a German style movement gaining traction. You can beat up voters in the UK and still get elected.

    • Peter Watkins says:

      Except that in the UK there’s the ‘exception’ of Scotland, demonstrating clearly that it is possible to fund and sustain public education through normal state taxes. Not enough is made of the Scottish model in the rest of the UK, perhaps because it came from the SNP and residual attachment to Labour amongst many in the left in England (in particular) makes them uncomfortable with this fact. Ironically, one of the best hopes for a more progressive government in Westminster would be an increased representation of SNP, PC and Greens holding sway on a minority Labour government.

      • David Ridley says:

        Yeah, agree we need to make more of the example of Scotland – the Germany example is more ideological in that it shows it is possible to reverse the reforms, and that this requires public protest and a real sense of being able to change things. I think we really need to start putting forward an alternative mass model of HE for the UK

      • Donald Clark says:

        Misses the point that part of the solution is to stop the madness of sending as many people as possible through a system that refuses to look at cost reduction. Start cost reduction through multiple intakes per year, summer terms, stop building low-occupancy buildings, do more online etc etc.

  2. Catherine Rowett says:

    It should be noted that there is a UK political party that agrees with all the points made in this article, and it has an agenda to abolish University tuition fees (an agenda that is fully costed, and part of a holistic and viable economic policy for the UK to restore prosperity and fairness). That is the Green Party (or rather two parties, one in Scotland and one in England and Wales). These parties are currently increasing in popularity with great rapidity. The possibility of electing enough Green Party MPs to make a real difference in the next Parliament is becoming a serious possibility, and I would ask people to vote for the policies that are worth voting for and not assume that we have to have one of the marketisation parties. So let’s do the democratic thing both at party politics level and in mobilising democratic protests. We need to do everything we can to get the true message across about the economics of this, because the main parties are not prepared to listen until they see their votes threatened (and perhaps not even then).

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