The future of tuition fees

Coverage of today's report from the CBI on higher education illustrates the gulf that exists between the general public and the university sector on the future of tuition fees. The idea that the maximum fee might rise to £5000 a year is at the lower end of vice-chancellors' hopes and expectations, and is the likely post-election conclusion of a review on fees due to be established soon by Lord Mandelson.

There has also been a long-standing argument for an end to the subsidised loan. But for this to gain acceptance there would need to be better understanding of how graduates currently repay the costs of their fees and maintenance post-graduation. They only do so on income above £1250 a month or £15000 a year, at a rate of 9% on that extra income. Unlike credit card debts or bank loans, they don't pay anything where their income falls below the threshold. So a graduate earning £25,000 a year would pay £900 back that year. If a real rate of interest were charged on loans, much more money would be raised for universities, and graduates might have to make repayments for longer, but the impact on their deductions would be unchanged.

None of this is ever properly explained. Instead we are left with figures of 'student debt' which lump credit card bills and student loans together. Yet remarkably, the National Union of Students has now embraced a graduate tax, which would be an even greater and longer burden on higher earning graduates.

But if the CBI's key proposals are to be adopted - I'm not convinced about the need to stop striving for greater participation, given recent OECD data, though the 50% target will obviously not be met in 2010 - two conditions should be met by business and universities.

The first is that instead of vague promises that employers should contribute to university courses, there is a proper signed commitment brokered by the CBI to make this real. Larger businesses should agree to sponsor a minimum number of students each year, depending on their firm's size. These would be on courses agreed with the universities. I would argue for a levy, except that they were largely useless in the seventies.

The second is that universities do far more to provide a better quality teaching experience for students, with proper teaching throughout the year, and improved facilities. Those courses that don't do so should become clear in the National Student Survey, and could in somew circumstances be required to refund a portion of the fees.

If this happens, there should be no argument about the idea of higher fees and a reduced subsidy on loans. But those that want to see the change do also need to make a much better job of explaining student finance and why they need the money.

UPDATE: I've also blogged at Public Finance here on how education is no longer sacrosanct in the public spending cuts debate.