University Fees: Reality Knocks

Reality is busy knocking at the door of another government policy, namely the folly of allowing universities to triple their fees to £9,000 with the taxpayer picking up the tab.  How has this come about?

This is a prime result of “government by yearning” – in this case a lethal combination of yearning by the Conservative part of the Coalition for painless budget cuts and the LibDems’ yearning for no university fees at all.

The upfront cost of their scheme is alarming the Treasury, despite its claims that the payments to universities for student fees are really loans to the students who will pay them back.  This is despite the fact that the Deputy Prime Minister LibDem Nick Clegg has been going round the country telling bunches of students that 60% of them won’t have to pay them back.

What are the taxpayer sums involved?  In true British government fashion, nobody knows because no enforceable budgets have been set.  The teaching grants to universities are being reduced in 2011/12 by about £460 million.  This is the first instalment of a total cut of about £3.7 billion per annum (from £7.9 billion p.a. in 2010/11) by 2014/15.  In return for this eventual cut, the government will be paying out fees of £8-10 billion p.a. year after year, depending on what 160 odd universities and colleges care to charge.  In most people’s reckoning, including foreign lenders like the Kuwaitis and Qataris who are being called on to supply the money, this represents an increase in government spending of around £35-40 billion over the 5-year deficit reduction period, before a trickle of loan repayments start to reduce it over the following 30 years.  Nonetheless in true PFI, Enron and Halifax Bank fashion, this huge sum is being transferred in the Treasury books to the “asset” side of the balance sheet.  One other branch of the Treasury has a group, UK Investments, whose job it is to see that the nationalised and semi-nationalised banks don’t do this ever again!

“Needs” and “Cuts”

In all this, one may ask why universities suddenly “need” all this extra fees cash when the armed forces and local authorities, for instance, are suffering real cuts.  The reality is of course, that any organisation in receipt of public monies will seek to maximise them and find “needs” to match.  The £6,000 per annum maximum permitted increase in fees which Oxford and Cambridge have announced they intend to apply, amounts to around £120 million per annum for these two universities alone.  This may be offset by their, as yet to be determined, share of the teaching grant cut of £463 million in 2011/12 ramping up to £3.7 billion in 2014/15.

Pro rata by undergraduates this would amount to an Oxbridge cuts share of about £10 million in 2011/12, rising to around £75 million in 2014/15.  Since the government has announced that science, engineering, and medicine related courses would be “protected”, it is likely that net cuts to these and the other elite Russell Group universities will be lower than pro rata data would suggest.

The Voucher Principle as an alternative to Clegg-Cable

Instead of providing every young person at 18 with a voucher entitling him or her to three years of higher or further education, encashable at any time of life, independent of family circumstances, of a value dependent on the type of course the student is admitted to, but with an average cash value equal to what the Treasury can clearly see and afford in its debt reduction plan (around £5,000 per annum) – as advocated by Stephen Bush in his 2004 Campaign for Real Education booklet “University Admissions and Fees” – the government, essentially the LibDems Nick Clegg and Vince Cable (the Business secretary in charge of universities), has made a complete, unnecessary, and expensive Horlicks of the whole issue.

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