Under review

I have blogged on the PM's post-18 education review for the Sutton Trust and Public Finance.

It was 16 months before the 1997 election and Conservative education secretary Gillian Shephard had a problem. It was a time of austerity. University intakes were growing rapidly. New ways had to be found to fund higher education that didn’t simply involve the taxpayer.

So she approached David Blunkett, her Labour shadow for whom I then worked to support her in setting up a review – with explicit backing from Don Foster for the Liberal Democrats – under the late Ron Dearing. The review would report after the general election and would be wide-ranging in its outlook. But it is remembered for one thing: it led to the introduction by the new Labour government of tuition fees paid by students (then opposed by the Conservatives and Liberal Democrats).

In 1998, the decision was also taken to convert all maintenance grants to loans (some had already been converted), but to means-test fees. Those who faced new fees also got higher interest-free loans repaid after graduation for those earning over £10,000 a year.

Since the Dearing review, we have had other big changes to the system. In 2006, fees were increased to a maximum of £3000 – after a big argument in the Labour Party against variable fees that led to the plans almost being defeated – and income contingent loans were explicitly available for fees. By then, Scotland had already abandoned fees. Means-tested maintenance grants were reintroduced and the repayment threshold was raised to £15,000.

Peter Mandelson set up the Browne Review in 2009, which reported to the coalition government after the 2010 election. It led to a £9000 fee maximum and no more variability in reality than the 2006 reforms despite the government saying it expected many students to pay just £6000. Repayments now started at £21,000 – a hugely expensive concession to the Liberal Democrats that ensured that many loans would never be repaid – and a real rate of interest was introduced that would only start to bite when inflation picked up more recently. Tinkering since then has seen maintenance grants scrapped and – at a cost of £3 billion a year – the barely noticed raising of the threshold to £25,000.

That’s the background to the latest review announced by Theresa May on Monday. But the background also includes rising student numbers – touching the 50% of young adults entering higher education by age 30 target set by Tony Blair in 1999 – and some narrowing of the access gap between disadvantaged and better off students. Perhaps more importantly, the political backdrop includes a popular pledge by Jeremy Corbyn to scrap fees that undoubtedly helped win seats like Canterbury and Reading East for Labour at last year’s election. So rather than seeking cross-party consensus, this review is more about neutralising a perceived party disadvantage.

But the confused history of fees is reflected in the confused nature of the review. A bizarre flurry of weekend briefing – propped up by the Secretary of State in his first TV interview on Marr – suggested that a key outcome of the review might be universities charging more for courses in expensive STEM subjects and less in humanities. Given the importance of STEM subjects to the economy this could perversely discourage students from doing those subjects and cold harm social mobility by encouraging poorer students to take cheaper courses. One can only assume its intention was to distract attention from reports that fees would fall to £6,000 a year, which ministers feared would raise expectations that might not be realised.

And the review has not exactly had an auspicious start. It is good that it is looking at the too often overlooked FE sector and at the paucity of apprenticeship options – barely 10,000 young people a year start higher or degree apprenticeships compared with 330,000 freshers at university – but it will be vital that the review panel feels able to take a hard look at the whole funding system and the interaction between different levers.

Modelling by London Economics for the Sutton Trust in November showed that it would cost about £1 billion to restore maintenance grants. It was a mistake to remove them, even if students got higher loans, and this should be the first priority for the panel. Then if the committee wants to look at fees and variability, they should be varied according to family income not the cost of the course. A model that would reduce average fees to £3,500 a year could – with restored maintenance grants – reduce debts for the 40% poorest students from over £50,000 to £12,700 and increase the proportion of loans repaid from 55% to 65%. The total cost of this would be up to £3 billion – about the same as the threshold change announced last October. Less radical means testing could cost less. There is also a need to get better value from the £800 million a year that universities spend on access and outreach in England, building a reliable evidence base on what works. But the priority should be leveraging this existing money to achieve better outcomes for young people from disadvantaged backgrounds, rather than to risk stalling progress with cuts.

And then the review should take a long hard look at what’s on offer for those who go don’t go to university. For all the words about apprenticeships, the brutal reality is that less than a third of those taking higher apprenticeships are aged under 25 (let along being 18 or 19). Most apprenticeships for young people are limited level 2 programmes with few career prospects and patchy progression to higher levels. If anything, the apprenticeships levy is reinforcing a bias towards adults doing higher apprenticeships as the levy lacks the levers to prevent it being used simply to upskill existing staff. Addressing that issue and the quality of technical and paraprofessional education in colleges is as important to social mobility as changing the funding of higher education.

This week’s review may have had a pretty inauspicious start. But as the panel deliberates over the next year they have the chance to make a real difference to social mobility – if they get their priorities right.

Evidence of intent

My latest Sutton Trust blog on the evidence behind the parties’ election proposals for education

While much of the policy noise of the election campaign has focused on social care and the winter heating allowance, there is quite a lot of educational policy in the parties’ statements of intent. Polling over the weekend showed it particularly important with parents and young voters.

Despite the narrowing of the polls as Thursday’s ballot approaches, the likelihood is still that a Conservative government will be re-elected. So, it is worth examining what they say – and do not say – in some detail. A lot of the attention has focused on two policies – grammar schools and free school meals – but there were also other important proposals there too.

Free school meals have become a surprising issue. Just as Theresa May has been keen to show she’s been making tough choices with pensioners’ spending, she is also planning to remove the relatively recent universal nature of free school meals for infants and return to linking them to poverty. Instead, less costly breakfasts will be provided to all.

When free school meals were made universal, much was made of the impact on educational standards. At the time, I looked at the detailed NatCen evaluation and argued that universal school meals may make some impact on attainment, but seem likely to do a lot more for diet and socialisation in school. Delivering 1-2 months’ progress, it had less impact than other less costly options.

The EEF’s evaluation of Magic Breakfast suggested a two month gain over a year. The results suggest that for pupils in relatively disadvantaged schools it is attending the breakfast club, not just eating breakfast, which leads to academic improvements. This could be due to the nutritional benefits of the breakfast itself, or the social or educational benefits of the breakfast club environment.

So, shifting to breakfasts on the face of it looks like a less costly way of delivering results – even allowing for the forensic work on costs by Becky Allen and Datalab. However, neither study focused as much on the nutritional benefits which is what has exercised Jamie Oliver and other celebrity chefs most. There’s also the very real issue of cost for those parents whose incomes are just above the FSM eligibility threshold and who will lose most in this change. By contrast Labour and the Liberal Democrats want to extend free meals throughout primary school, though this feels like a costly commitment when school budgets face so many other pressures.

Labour has made its most expensive and eye-catching promise in higher education, promising to axe tuition fees and restore maintenance grants. In doing so, it has cited the £44,000 average debt figure first calculated for the Sutton Trust by the Institute for Fiscal Studies. Sutton Trust research has also shown student debts in England are the highest in the English-speaking world.

However, it is questionable that the answer is ending all tuition fees. University students are far more likely to come from better off backgrounds – so there is a massive deadweight costs if this is intended to improve access – and the evidence suggests that participation among poorer students has continued to rise since tuition fees increased. Nevertheless, there are still substantial gaps – the latest UCAS research using a multiple equality measure across demographic quintiles suggests that 13.6% of young people from backgrounds with the lowest rate of entry to enter higher education went to university in 2016, compared with 52.1% from the highest entry or richest areas, almost a four-fold gap, and this gap rises to ten times in the top universities. There has also been a substantial reduction in part-time students, which seems to have accelerated since the £9000 fees were introduced, despite the introduction of loans for part-timers.

A more cost-effective and targeted approach would have restored maintenance grants for poorer students – which the Liberal Democrats also propose – but also means-tested tuition fees so poorer students borrowed less, though proponents of fees would point out that repayments are equitable given that they are linked to earnings. The problem has been that size of borrowing, and the high interest rates now charged, means that barely a quarter of graduates are likely to repay their loans in full.

In other policies, the Conservatives have maintained their commitment to lifting the ban preventing new grammar schools, justifying the policy by referring to its new calculation of ‘ordinary working families’ – roughly the middle third of families based on income – though all the evidence, including that published by the Sutton Trust, shows that poorer students and those just above FSM eligibility are much less likely to get admitted. The manifesto does not detail what measures are proposed to address this gap or the income-related gradient in who gets in.

As importantly, perhaps, the party has also proposed a review of school admissions more generally, though pointedly ruling out ‘mandatory’ lotteries. That doesn’t mean there could not be more encouragement of both random allocation and banding, both of which could provide a proportion of places in popular urban schools, and are the only realistic way to end the ‘selection by postcode’ criticised by Theresa May early in her premiership. The plan for more accountability at Key Stage 3 could fill a gap that has been there since those tests were scrapped in the late noughties.

Labour, meanwhile, has pledged to outlaw unpaid internships, something that is gaining traction as an issue across the political spectrum. Since our 2014 research estimating that an unpaid intern in London would need to £926 a month to make ends meet, there has been a growing clamour for change matched by a growing number of companies changing practice. It requires proper enforcement of minimum wage legislation matched by open and fair recruitment practices.

In Scotland, the Global Gaps report that we published in February has been much quoted over concerns about the income-related attainment and university access gaps in Scottish schools. The SNP manifesto was less focused on education issues that are a matter for Holyrood but there they have been strengthening their work on attainment gaps and accountability amidst opposition criticism of a dip in standards over recent years.

But for all the education policy promises, the biggest challenge facing a new government will be in school budgets and teacher recruitment. The Conservatives, mindful of a backbench revolt, have promised that no school will lose in cash terms from its new funding formula. Labour and the Liberal Democrats are promising to restore budget cuts in real terms too. But whoever gets elected on June 8, the likelihood is that schools will still face challenges getting the teachers they need in a world of rising pupil numbers.

University funding challenge

I've written this feature on university funding for the Jan/Feb 2015 edition of Public Finance.

As the general election looms, Nick Clegg’s decision to back a trebling of tuition fees could come back to haunt him. A study by the Higher Education Policy Institute think-tank in Oxford suggests 10 Liberal Democrat university seats could be vulnerable to student anger, after the party’s decision to support higher fees despite its manifesto pledge to phase them out.

here are also doubts that the expected financial savings will be made. There is growing evidence that graduates will face debts into their 50s, while the Exchequer may see little real benefit because nearly half of the loans will have to be written off.

To understand why, look again at the 2012 student funding package and how it differs from what went before. When Labour introduced income-related ­tuition fees of up to £1,000 in 1999, it also replaced the remaining maintenance grants with loans to be repaid at a rate of 9% of graduate income above £10,000 a year. In 2006, fees rose to £3,000, although universities were permitted to charge less. Fees were no longer income-related, though some maintenance grants were restored. Tuition fee loans were introduced and the graduate repayment threshold was raised to £15,000.

The coalition government trebled fees to a new maximum of £9,000, extending the income contingent loans accordingly. But two crucial additional changes were made. First, the repayment threshold was increased to £21,000. Conservative ministers wanted it to be £18,000, but the LibDems insisted on the higher level. The second was the addition of a real rate of interest. Previously debt rose with the retail price index (RPI).

Under the new system, undergraduates are charged RPI+3% while studying and then pay interest of up to RPI+3% on a sliding scale once they graduate. The result is that from this year, graduates will pay off their loans – now much larger after the fees hike – much more slowly than under the old system.

Read the full article here.

Payback time for graduates and government

 In my latest Sutton Trust blog, I explain why I think the Government needs to think again on tuition fees, student debt and teaching grants.

When the coalition trebled university tuition fees to a maximum of £9,000 a year, it said it was making hard choices. Students would have to repay higher fees as graduates because the Government could no longer afford to subsidise their teaching grant, the argument went.

To some extent, I bought that argument at the time because the evidence of previous fee rises had been that they didn’t deter disadvantaged students, though I argued then that universities should cover loans above £6,000 and that there should be a better balance between teaching grants and fees than the Government planned. I also noted the problems in raising the repayment threshold.

But even I didn’t foresee quite how the new system would work in practice. Last month, the Government admitted that 45 per cent of debts under the new system are unlikely to be repaid, close to the level where the Exchequer would find itself worse off than before the fees increase.

Now, our new research by the Institute for Fiscal Studies reveals the true impact of the new loan system on middle income graduates like teachers,  as they continue paying off their student loans into their fifties. It highlights the ripple effect of the changes to the loan system and some unintended consequences.

Under the old system, a typical teacher would  have paid off their loans before their 40^th birthday. Under the new system, they will still be making payments of over £2,000 a year throughout their forties and into their early fifties - the equivalent of an extra sixpence on their income tax. This is at a time when most will have children at school, and family and mortgage costs are at their most pressing.

As the lowest earners will repay less and high earners will be able to pay back their debts more quickly, avoiding many of the high interest charges introduced in the new system, it is those on middle incomes who will be most affected.

With this double debt trap of longer repayments for middle earning graduates and a potential loss for taxpayers, ministers should look again at the student loan system.

Students who graduate from 2015 will not have to start repaying their student loans until they are earning £21,000 a year (more than £5,000 higher than before). Payments are at nine per cent of income above that threshold. This means that while graduates in their twenties will tend to make slightly lower repayments, three quarters of graduates will continue paying back until their early fifties. At this point, most graduates will still owe tens of thousands of pounds, which the government will have to write off.

Typical graduates now have to repay £67,000 in cash terms (£35,000 in 2014 equivalent prices), twice what they paid under the old system. Since the loans now attract real interest rates from  before the student even graduates, nearly half will pay back more in real terms than they borrowed.

When the Government trebled fees, the Sutton Trust argued for a better balance: lower fees with a smaller cut to the university teaching grant. However, the increased repayment threshold and a strengthened access regulator were enough to win over most coalition backbenchers.

The argument is not about whether loans and fees should exist – I have always argued in favour of both since the mid-1990s - but what proportion of university funding should be paid by graduates rather than general taxation, and how much graduates should pay. I am now convinced that argument needs to be revisited in the light of the new data on defaults and repayment levels.

When the fees were introduced, we were told few universities would levy the maximum fee, and many would charge £6,000. In reality, most courses cost the maximum, another reason for the predicted default levels.

The Government already provides larger maintenance grants to lower income students. Indeed, when I worked with David Blunkett to introduce tuition fees of £1,000 a year in 1998, we means tested them then. Ministers should consider doing so again. Given that most graduates are having large amounts of debt written off, this could be done at relatively little cost to the Exchequer. That would allow lower fees for those in receipt of full maintenance grants, who come from low income households.

There is an important social mobility point here. It is true that the new system is ‘progressive’ in the sense that those graduates whose average income is just £24,000 or less gain significantly from the new system, and those below £28,000 gain marginally in real terms. But few jobs that require a degree pay so little across a lifetime. The argument made for an investment in higher education has been about earning more than non-graduates.

So it seems unfair to penalise most those strivers who have had to work hardest to improve their lot. With means-tested fees, they would be the real gainers.

It would also provide more impetus to deal with another issue that has seen little improvement in recent years. Although more disadvantaged young people are entering higher education, numbers from low and middle income backgrounds going our best universities have yet to see significant improvement.  Students from the most advantaged fifth of neighbourhoods are still seven times more likely to go to a Russell Group university than those from the poorest fifth.

Universities today use much of the money they are required to spend on access and outreach funding bursaries and fee subsidies to attract those students. Means-tested fees would allow them to focus those resources specific programmes to attract more of the thousands of young people who get the grades but don’t apply to the best universities.

As the experience of the Sutton Trust summer schools has shown, such interventions could make a real difference to those disparities in access.

The Government may have got its sums wrong on student debt, but it now has an opportunity to make the right calculations to improve social mobility.

I also had a column in The Times on the report and appeared on BBC TV News.

Are fees putting off working class boys?

In my latest Sutton Trust blog, I look at new evidence suggesting that working class boys may be being deterred more than girls by higher university tuition fees.

Students are well into the first year of higher tuition fees. While 54,000 fewer young people started university in 2012 than in 2011, the Government has been congratulating itself that the dip was not much greater.

And the water has been muddied by the changes in student controls that took effect just as the £9000 fee cap was introduced. Moreover, this year’s applications suggest that there is some improvement on last year’s dip.

So is all well in the world of higher fees?

The truth is it is too early to tell. And a new report this week from the Independent Commission on Fees highlights a number of areas where there is some cause for concern.

The first is what’s happening to boys, particularly working class boys. The Commission’s study of UCAS acceptance data has shown not only that the gender gap continues to widen, but that it appears even more pronounced in the lower participation neighbourhoods.

Women are now a third more likely to enter higher education than men, according to HEFCE, and the gender gap seems to have widened as a result of the new fees regime. Among UK residents, 143,600 women aged 19 and under were accepted to English universities in 2012 compared with 118,952 young men.

This represents a decline since 2010 of 2.6% for girls and 4.0% for boys, and a 5.9% decline for girls and a 7.5% decline for boys since 2011.

But in the 40% of English neighbourhoods where university participation is lowest, there were 1700 fewer boys aged 19 and under who were accepted for places in 2012 than in 2011. This represents a decline of 5.4% in the number of young men from these areas going to university this year. By contrast, the fall in the number of young women from these neighbourhoods going to university was smaller, at just 3.7%.

Perhaps of more interest, since it discounts any surge into 2011 to avoid the higher fees, when compared with 2010, the number of young male acceptances fell by 1.4%, while young female acceptances increased by 0.9%. By contrast, between 2009 and 2010, male and female acceptances rose.

In England, while the overall change in the gender gap in the less disadvantaged neighbourhoods was 1.6 percentage points between 2010 and 2012, the overall change in the gender gap in more disadvantaged neighbourhoods was greater, at 2.3 percentage points.

Although the decline in male participation in the most advantaged neighbourhoods was even larger, 20,000 more boys go to university each year from the two top fifth neighbourhoods than from the two bottom fifth neighbourhoods.

It means that the female: male ratio is now nearly 57:43 in the less advantaged neighbourhoods whereas it is closer to 53:47 in the more advantaged neighbourhoods.

With 2013 applications, UCAS has suggested that this gap is persisting. Its January applications report noted that 18 year women remain a third more likely in England to apply to university than men, but this rises to 50 per cent in disadvantaged areas.

If this is the case, it suggests that the information about the new loan repayments may be proving more attractive to young women than to young men, or that young men from disadvantaged areas are less likely to believe that the cost of a degree is worth it. Either way, there is a challenge here for policymakers to meet.

The Commission’s new report has two other important findings that should cause policymakers to take pause. The first is the familiar data on mature students – those aged 20 and over – who had 7.6% fewer acceptances in 2012 than in 2010, more than twice the 3.3% decline for younger students as a whole.

The decision to allow part-timers to have access to student loans hasn’t seen full-timers move to part-time courses either. HEFCE has shown a dramatic drop in part-time numbers, with 105,000 fewer students since 2010, or a 40% drop.

This is important for access, as studying later is an important route to social mobility for those from less advantaged backgrounds, and it is vital that the impact of fees on this group is not neglected just because the reductions among young people are smaller.

As the new President of Birkbeck College, Baroness Bakewell, put it at the weekend:

Part-time study is crucial for our society. It improves skills and kick-starts new careers – exactly what we need for the economy, employers and individuals during these difficult economic times. In response to the dramatic downturn in part-time students nationwide, unprecedented support is needed now to ensure part-time study thrives in future.
 

And the other key finding is perhaps a warning shot at this stage, but one that will need closer scrutiny as the university-level data becomes clear.

While there has been an increase in the numbers of young people from the most disadvantaged areas going to the least selective universities, there has been minimal improvement in the numbers going to the Sutton Trust’s list of the 30 more selective universities (which includes the 24 Russell Group members) and a small dip in the numbers going to the Sutton Trust 13 most selective group.

While the only rises to the Sutton Trust 30 were in the lower participation neighbourhoods, the only quintile showing a dip in acceptances to the Sutton Trust 13 was the lowest participation group. This means that there is a widening gap between this group and other more advantaged areas, and those from the richest fifth of neighbourhoods are ten times more likely to attend these universities than those in the poorest fifth of neighbourhoods.

Closer scrutiny of patterns among individual selective universities will be important here. Already, there is some evidence from HESA data that in 2011, the proportion of new undergraduates from state schools and colleges at the 13 top universities slipped for the fourth year in succession.

There is clearly an important issue for the most selective universities and their recruitment from the poorest neighbourhoods – and it is one that the Sutton Trust will return to shortly. The Trust has also commissioned the Institute of Fiscal Studies to examine the potential impact of students leaving university with debts likely to exceed £40,000 on their ability to afford graduate study, buying a house, and having children. Their findings will be published later this year.

So, the truth is that the jury is still out on fees. We need to see whether these findings for 2012 become clearer trends in the next few years. It is vital, meanwhile, that Government, universities and schools do all they can to reach young people with the ability and potential to benefit from university, particularly in areas where university participation is already low.

Higher education predictions

I have contributed the following thoughts to the Guardian's website on higher education in 2012:


2012 will be the year when the government's HE changes are properly tested.  I think ministers will struggle to resolve the central tension in the government's approach to higher education: how to develop a market while paying the up front costs of higher loans. The redistribution of 20,000 places for those charging lower fees seems unlikely to do it, and FE colleges are finding it harder to gain university accreditation for their degree courses. Legislation due in the spring could see measures to try to force more of a market and a wider range of lower cost degree courses. The Open University will find itself accrediting many more courses than it does now.

If student numbers for 2012 are significantly down on 2011 figures {the final application figures are published later this month], there will be growing Lib Dem and Labour pressure for stronger access regulation that will be resisted by universities. At the same time, the reality of the fees will see renewed pressure to increase contact time with students. Parents and students will demand more teaching and tutorial time to justify the fees they are paying, and this will become a big issue in the autumn.

The UK will struggle in the international market, as Australian, other European and South East Asian competitor universities successfully highlight the 'hostility' of the UK government towards overseas students, and offer attractive packages including English booster courses, simpler visa facilities and postgraduate work experience. Ministers will be forced to rethink this aspect of their migration policy as they see the economic impact.

Alan Johnson should have stuck to his guns

Alan Johnson was right to have his doubts about a graduate tax, in today's Times (£), and wrong to have changed his minds. While he is also right to argue against the removal of teaching grants and the moves towards a £9000 ceiling, he should not have allowed himself to be dissuaded from arguing for a fairer version of the Browne proposals, drawing on his own work as higher education minister.

By contrast, there is a great piece in today's Guardian by Peter Wilby, who has long recognised the egalitarian case for fees and rightly argues that the focus of Labour's opposition should be the abolition of EMAs rather than changes to fees:

Once they look coolly at the economics, 18-year-olds make better judgments than their hysterical, ill-informed elders. To describe students as facing a lifelong "burden" of "crippling" debt is simply bizarre, particularly for a Labour leader who wants to replace the debt with a graduate tax that the rich would avoid as smartly as they avoid all other taxes.....Most bizarre of all is the argument that, because graduates of earlier generations benefited from free university education, they should not deny it to others. Should those who went to grammar school never argue for comprehensives, and those who inherited wealth never support higher estate duties? Should those who benefited from slavery not have supported abolition?.....Miliband should focus on the proposal to cut education maintenance grants, which rightly exercises young protesters more than fees. Introduced by Labour and targeted at poorer families, the grants played a vital role in getting more disadvantaged young people to university. It was at 16, not 18, that working-class dropping out from education always occurred. University fees do not deter, but a funding gap during A-level study does.

Vince Cable's extraordinary permutations

There were two options open to Vince Cable on his approach to tuition fees. The first was to battle for a credible series of concessions and support the policy that his Department agreed to. To some extent, he has achieved improvements on the existing system in the repayments schedule, but his failure to secure continued teaching funding for non-STEM courses suggests he didn't try hard enough. He had plenty of cards to play, but he chose to fold early on the final deal. Even so, he could still argue that as the minister responsible, he had a duty to support the final package. The other option is to argue that he made a solemn pledge to oppose a rise in fees - however daft that pledge was - and he should march into the No lobbies to oppose himself.

Had he chosen the first approach, with a clearer set of concessions and a fulsome apology for his party's stupidity and deceit to student voters, he may have retained some credibility. But by promising to abstain, then to vote for, then being not sure, and finally to vote for (probably) his stance looks absurd. All that is left is for him to borrow from Eamon DeValera in 1927 when he had to take the oath of allegiance to take his seat in the Dail, despite a solemn pledge not to do so. DeValera declared he was merely signing a piece of paper that had no meaning, except it allowed him to take his place in the Dail. Perhaps Cable could try the same logic on his bemused voters: he is merely voting with the Government as it allows him to take his place at the Cabinet table. It is no less credible than his shifting stances of the last week.

Why Ed should not oppose the tuition fees package

I've written a piece for this month's Progress magazine about how Ed Miliband and Labour should respond to the tuition fees hike announced yesterday. I have updated this version to reflect clarifications since I wrote the piece - and yesterday's announcements.

It was Peter Mandelson who commissioned Lord Browne’s university funding report, and his team were nominated by a Labour government. That explains why he has made so much effort to achieve fairness in a difficult financial environment, and why Ed Miliband should not oppose his plans – or the government’s version - when they are put to a vote.

Browne’s proposals lift the cap on tuition fees from £3,290 today to £6,000 from 2012, with universities able to charge more if they pay a levy. He has broadly retained Labour’s repayment mechanism, where graduates repay the costs of tuition and living expenses once they start to earn. However, he has introduced a real rate of interest and a higher threshold for any payments of £21,000 instead of £15,000 today. A graduate on £30,000 a year pays back just £16 a week in his system. Importantly, part-timers would be included for the first time, a huge step forward in terms of equity.

The coalition has broadly accepted the Browne package, though with a £9,000 cap on fees and a requirement that those charging over £6,000 do more for access. It is sensibly keeping the Office for Fair Access to monitor this.

The coalition was right to reject a graduate tax, as Labour did in government. As Browne points out, it would penalise low earners more (with a £6,475 threshold as that is when people start paying tax), be harder to collect from European students, not give universities the money they need now and impose a lifetime of repayments on every graduate.

Our universities need extra income to compete, and this is particularly true of our leading research universities who have welcomed these moves. However, we should not ignore the concerns of the newer teaching universities. Baroness Blackstone, a former higher education minister, argued on Progress’s website that the new system could deprive them of sufficient teaching resources. That’s because the coalition is cutting 40 per cent from the government’s teaching grant as the new system is introduced.

So, Ed Miliband should avoid the mistakes made by the Tories in opposition, when they opposed tuition fees despite having established the Dearing Review in government (with Labour support) that they knew would recommend fees. He should recognise that Browne has many of the advantages of the graduate tax he supports, without the disadvantages – not least because it builds on the system Labour developed in government.

In Progress, I argued that his support should depend on four things. First, the proposed cut in teaching funding for universities is too great and should be reduced, so that they see some added benefit from the new regime. This has yet to be addressed, particularly in the humanities. Second, there should continue to be proper monitoring and publication of how universities distribute bursaries for poorer students, with much better publicity of what’s on offer. This has partially been addressed.

Third, students should be able to see clearly how much contact time their courses provide and they should have more access to academics. This will become a much bigger issue when the higher fees are introduced. Ed should press this strongly. And there should be an upper limit on the new fees, of £7,000 or £8,000, so that students do not feel completely priced out of our top universities. The cap is slightly higher, but the principle has been accepted.

And then he should either support the government, or if he feels the final package is still lacking, abstain. He should not ally himself with Lib Dem rebels. To do so would exchange the short term discomfort of the coalition for his longer term credibility as a serious leader. The Tories did this to us in 2005, when top-up fees were introduced and Michael Howard suffered for it. They admit they were wrong. Ed should be bold enough to avoid the same mistake.

Browne's imaginative proposals

Today's report from Lord Browne on university funding offers an imaginative set of proposals to a difficult problem at an impossible time. By setting a partial cap at £6,000, with a tapered cap linked to student affordability above that, he has gone a long way to satisfy the universities, including those in the Russell Group who want to charge more without having the taxpayer subsidising the higher fees. Including part-timers in the loans system is a big step forward that reflects contemporary student realities. It also makes sense to increase the starting point at which students pay loans back to £21,000, which means a £16 a week repayment for those earning £30k a year, and to add interest to the loan: that will reduce the taxpayer's subsidy of student living expenses. There is also a larger grant for poorer students, though I wonder whether it would have made more sense to focus those resources on much larger targeted bursaries linked to getting poorer able students onto economically valuable courses.

For the graduate, the package would mean higher debt, but repayments would be lower initially and his proposals reflect the good sense of the graduate repayment system introduced in 1998 (contrary to popular mythology, the level of student loans rose in 1998 by the same amount as the new £1000 tuition fees although they were given for living expenses, so 'upfront fees' were never actually required). Lower earners would do better from this new system.

We must await the government's detailed response. But they would be wise not to tamper too much with what seems like an elegant and fair solution. More important than tinkering with the repayment formula is ensuring that some of Browne's other proposals get implemented. The first is to increase undergraduate places. The second is to ensure that careers advice is radically improved, particularly at a time when cuts could threaten its extinction. Students must have a better teaching and tutorial experience while at university. And universities should use the availability of loans to sell the part-time route more effectively to those in work who could benefit from higher education.

For Labour, John Denham has issued a sensibly cautious response, drawing attention to the likely cuts in government support for teaching: it is important that ministers are clear about the extent to which graduates and taxpayers pay for universities now and in the future. The Browne proposals should not simply be a substitute for HEFCE grants - the must support expansion, particularly in science, technology, engineering and maths (STEM) courses. And there may be more to do in targeting support to able disadvantaged students. But how Labour responds to the final package will be a test of its seriousness. Browne has shown why a graduate tax would not work (indeed Labour found the same in government, as Tony Blair reminds us in A Journey) and the report explains how this proposal is fairer to low earning graduates. Provided that the final package is also fair, Labour should support it in a Commons vote. Doing so would do far more for its political credibility than propping up a Lib Dem rebellion.

Why should most undergraduates live away from home?

Today's newspapers suggest that the cap on university tuition fees is likely to be completely removed, if Lord Browne has his way, paving the way for fees up to £12,000 a year. That would be a mistake: it would be more sensible to lift the cap to £7000 a year, the figure sought by Universities UK. At the same time, as predicted by this blog, the silly notion of a graduate tax has been abandoned in favour of a more income-related version of the current graduate contribution. But what seems absent at a time when we are fundamentally reviewing our welfare state is any questioning of the idea that undergraduates should be expected to live away from home while they study.

Let's be clear about this. It is not the norm in most countries - including in Ireland, where I gained my degree cycling to college from my Dublin home - to study in another city when one's local university offers the course one wishes to pursue. Given that we provide subsidised loans - with subsidies worth 23% of the value of the loan - for three years simply to enable largely better off young people to pursue a 'rites of passage' experience, surely we should start to question whether this should be the norm for a third of all young people. Adults who increasingly study as mature students don't expect it, so why should young people? Fair enough for those from poorer backgrounds who win a place in a Russell Group university or on a rare specialist course in another university - indeed, decent non-repayable bursaries should be provided for those students - but can we really afford to continue subsidising this experience for everyone else?

That's the sort of question that Ed Miliband should be asking as he seeks to stake out a credible alternative to the coalition ahead of the Spending Review. He could argue for lower fees instead of automatic living expense subsidies. But, having adopted the graduate tax in his leadership campaign, he chooses instead to play games with Lib Dem backbenchers. He may even win a Commons vote by doing so, but he will do so at the expense of his own credibility as a serious leader. Living expenses are certainly something the Treasury should be challenging instead of seeking to cut programmes with far more genuine impact on social mobility that benefit toddlers of school students. Instead, we are left arguing about the size of tuition fees and their repayment, whilst ignoring this extraordinary - and unusual - subsidy that has far less to commend it than universal child benefit.

This post also appears at Public Finance.

Gradually moving away from a graduate tax

David Willetts, the universities minister, gave a characteristically thoughtful tour d'horizon of the challenges facing higher education, when he addressed the Universities UK conference yesterday. But important though a reshaping of the 1992 Further and Higher Education Act will be to many colleges and universities, it was his further refinement of the coalition's ludicrous contortions on the repayment of fees that has inevitably attracted the media's attention.

Willetts clearly thinks his boss Vince Cable was mad to start floating the idea of a graduate tax; since then, he has loyally been trying to find ways to shift the position back towards the graduate contribution that David Blunkett introduced alongside fees in 1998 and which was refined with the 2005 changes to fees. Yesterday was his latest attempt. He told journalists at the UUK conference that he ruled out a full-blown graduate tax but was looking at making the current system more progressive.

What he and his boss signally fail to do is to explain the basic fairness of the current system, particularly compared to other countries. Students not only get their fees paid while at university, but - unlike many other countries - they get a generous loan (with a grant for some) to cover living costs while they enjoy a rite of passage experience subsidised by the taxpayer to the tune of 23p in the £. (In many other countries, most students go to their home universities.) Once they have started to earn at least £15,000 a year, English graduates are asked to pay back their loan at a rate of 9% on all income over the threshold. Those who earn more pay the loan back more quickly, though some high earning professions also involve longer studies and larger debts. The interest charged on the loan is rather less than that on most commercial loans, and certainly a lot less than is charged by banks for overdrafts or credit card companies. It would be ridiculous for the government to move radically away from this repayment system.

However, if the loan system is to keep pace with any rise in tuition fees, it will cost significantly more to the Exchequer initially, unless costs are cut in other ways. One would be to increase the rate of interest charged on the loan, but this would actually see lower earning graduates repaying more, since higher earners would pay the loan back more quickly, though it might also discourage those better off students who take out loans just because they are there. Another option, apparently being considered by Willetts and expounded by Neil O'Brien of Policy Exchange in today's Telegraph would see graduates who earn more paying back a higher proportion of their extra earnings by continuing 'repayments' until after the loan was paid off. If such a progressive contribution is to be introduced, this seems a perfectly sensible way to do it. But it should be combined with a greater encouragement for students to go to home universities or colleges where the course they want is available there - the British taxpayer-subsidised rite of passage is not a universal experience - while universities should do much more to link undergraduates to paid and useful work experience both during term and in the holidays.

I don't imagine any of these deliberations will do much to improve Vince Cable's demeanour. He and his colleagues are already struggling to explain to their student voters in university cities that the Lib Dems sold them a rather scraggy pup.

A graduate tax would be a mistake

Vince Cable, the business and universities secretary, is a man with a problem. Despite Nick Clegg's best efforts, his party fought the election on a ludicrous higher education policy of scrapping fees. As domestic students paying a proportion of their fees for twelve years, reducing the burden on low-income earners who never went to university, the Liberal Democrats clung to their plan to scrap those tuition fees contributions. Purely to pull the wool over the eyes of students in a handfull of university seats. Now, faced with being in charge of higher education policy, Cable has to perform contortions to try to get himself off the hook. Hence his graduate tax idea.

Lord Browne's review has several options. One is to do nothing. A second is to increase the fee contribution from a maximum of £3,290 to £5,000 or more likely £7,000 a year. A third would simply involve allowing universities to charge what they liked, as they do already for overseas students. A fourth would raise the interest rate on the loans, while retaining the current repayment system, or expect universities to establish their own loans. In any case, universities need to be able to charge higher fees sooner rather than later, though it may be politically unrealistic to do so without a cap.

But under the current system, students get a very good deal. Poorer students receive grants as well as loans. All students can borrow the money they need for tuition and maintenance and repay it through the taxation system at a modest interest rate as and when they can afford to do so. What they are not required to do is to pay back more than they borrow. And they can be rid of their loan more quickly if they wish to do so and can afford it. In some cases - as with science teachers - employers could opt to repay the loan as an incentive.

Vince Cable thinks all this is terribly unfair. The fact that fees have not deterred students from poorer backgrounds, as the Liberal Democrats constantly claimed during the introduction of both phases of tuition fees, matters not a jot. What the Liberal Democrats are looking for is a backdoor way of raising taxes further on high earners. They want, in Alex Barker's words, a student loan that you never pay off.

But the graduate tax has two other not inconsiderable flaws. The first might trouble Cable's Treasury colleague, Danny Alexander: it raises no money for a long time, as it can only be levied on future graduates. In the meantime, the state would have to pick up the tab at a time of 25% cuts in Vince's budget. Universities could whistle for any money. And it could also encourage a brain drain, as good high earning graduates who wanted to flee their 'debt to society' could work abroad and pay back not a penny.

Rather than performing contortions over the issue, Cable would be better allowing his formidable universities secretary, David Willetts, who had the intellectual good sense to rescue the Tories from an equally daft opposition to fees, to work with Lord Browne's team on getting an answer that keeps UK higher education competitive and achieves the right balance between government and student payments. The future funding of higher education should not be held to ransom in order to rescue the Liberal Democrats from their own intellectual incoherence.

This post also appears on the Public Finance blog.

Who really betrayed universities over funding?

David Willetts, the universities minister, is too clever to believe the partisan tosh that he is mouthing about university funding today. He is right to argue the case for higher tuition fees and new approaches to higher education. But he also knows that Labour - with his support - established an independent review of university funding precisely to address the issues involved. He also knows that the solutions that he is talking about - including a greater focus on teaching quality and on FE college-based higher education were set out with admirable clarity by Lord Mandelson in his higher education strategy paper last year.

If Willetts wants to look for people to blame over higher education funding, he need look no further than his own front bench before he and David Cameron performed their overdue u-turn on tuition fees. (He might have a chat with the Home Secretary, who spoke on education when Labour first introduced fees). And while he's at it, the universities minister might care to educate his coalition colleagues - including his Secretary of State - who cynically misled university students about the potential for scrapping fees.

Such a strategy would be far more credible than attacking Labour ministers who took brave decisions in the face of such political cowardice. After all, he may need Labour support when the time comes to implement his tough decisions.

Universities must give students a better deal if they want higher fees

I have a piece in today's Independent, arguing that if universities want fees to rise to as much as £7,000 a year, they must provide students with a better all-round deal. And this should be an explicit part of the forthcoming fees review. Here's an extract:

In the coming weeks the Business Secretary, Lord Mandelson, will announce the terms of reference for a review of student fees. The cross-party investigation is likely to recommend an increase in tuition fees from £3,225 to as much as between £5,000 and £7,000 a year, increasing the proportion of courses costs paid back by students after graduation. But if universities want the right to charge higher fees, there is growing political consensus that they must also be prepared to improve greatly the experience they provide for undergraduates.

The Higher Education Policy Institute has shown that the combination of teaching and private study for undergraduates in some humanities and social science courses amounts to just 14 hours a week, though it is much higher in the more demanding universities and the average is 29 hours, including 14.5 hours' contact time. But the higher the fees become, the greater the expectation of students and their parents.

This isn't just a problem with domestic students. Overseas students, who contribute £4bn a year in fees (more than eight per cent of the total income of UK universities) already pay £10,000 to £20,000 a year for most courses. Their numbers have grown over the last decade, but there is greater competition within Europe, Australia and the United States, and Chinese and Indian students increasingly have less expensive options closer to home. Unless they feel they are getting good value for their money, they will go elsewhere.

Some universities are recognising how important it is to provide a good student experience. Lancaster, Manchester and the London School of Economics give students clearer commitments on contact time, class sizes and access to lecturers than many. Others, like Northumbria, provide substantial hands-on facilities and work experience in subjects such as law and health.

But there is still a sense among too many vice-chancellors that they should be allowed to charge higher fees without needing to improve substantially students' overall academic and pastoral experiences. That's why the terms of reference for the new review must explicitly include the issues that Mr Willetts suggested [contact hours, class sizes and employability]. It will be hard enough selling another fees increase to Middle England. Unless their anxieties about what happens at university are addressed, it may prove politically impossible. Vice-chancellors must raise their game if they want the right to raise their fees.

A solution to Nick Clegg's tuition fees dilemma

It is a bit like Life on Mars listening to the World at One, and all those Liberal Democrats pretending that tuition fees are not a successful fact of life. Their debates are like those in the Labour Party that preceded the actual introduction of tuition fees; the only difference is that we now have hard evidence of their impact.

One objector complains that fees have stopped lots of young people going to university: yet the problem faced by universities has been precisely the opposite, in that so many want to do so. Numbers rose 8 or 9 per cent a year in spite of fees. Even the National Union of Students now favours a graduate tax. But since his party clearly has so much trouble coming to terms with reality, I have a solution for Nick Clegg.

The Liberal Democrat leader wants to pretend that his abandonment of this principled attempt to secure a few university seats for his party will be delayed rather than abandoned. Fair enough. But does he really need to present it quite so negatively? All he needs to say is that the Liberal Democrats will scrap tuition fees once they win a majority in the House of Commons. Surely all Liberal Democrats can sign up to that one.

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.

Moving the tuition fees debate on

Lord Mandelson's speech to Universities UK, in which he argues that any fees rise must be linked to access, is important for two reasons. The first is that he is clearly making a serious effort to engage with the parts of the education sector for which he is responsible. But the second and more significant is that he has effectively made clear that an increase in the maximum level of fees will come after a review due to start later in the year. In his speech, he says this:

“I do not believe that we can separate the issues of fees, access and student support. Any institution that wants to use greater costs to the student to fund excellence must face an equal expectation to ensure that its services remain accessible to more than just those with the ability to pay. Whatever funding mix for higher education we develop, there must always be a link between what an institution charges and its performance in widening access and supporting those without the ability to pay.”

Of course, it could be argued that this doesn't say anything new, and he assures us that he doesn't wish to pre-empt a review which is likely to see fees increase from £3225 to between £5,000 and £7,000 a year some time after a 201o election. Both main parties are happy for a review to report then, as happened with Dearing. And neither party will want to argue the case for an increase. But today's speech suggests a rise is inevitable, not least if universities are expected to bear cuts in their grants after 2011 with the main parties trying to protect schools, hospitals and overseas aid.

After all, the notion that fees that are paid by income-earners after graduation are deterring would-be students is hardly borne out by the record numbers of applicants this year, after several years of rapid rises. Even the Lib Dems seem set to abandon their opportunistic opposition to fees.

This shouldn't mean that universities don't have to make a better case for a fees increase than they have been making to date. Universities need to make more of their wider contribution to the economy and society, through research and teaching, or their role with schools in lifting aspirations and improving social mobility. They also need to do a lot more to show students that they are getting a good deal, with first-class teaching and learning resources. These too should be a part of the review of fees. After all, getting students to apply is only a start; ensuring they get the most from their university experience matters just as much.

Make the case for higher fees first

What can have possessed Universities UK to raise the spectacle of tuition fees of £5,000 or £7,000 right now? Of course, there is a promised review of the issue later in the year, and doubtless ministers will ensure that it reports to an incoming post-election government, just as Gillian Shephard did with Dearing's 1997 review.

But vice-chancellors who opined on their preferred fee levels for a separate BBC survey need to make a case for higher fees, not simply declare their ideal level of fee. At a time when the country is in economic recession, people need not only to hear the case for higher education as a way of generating a successful recovery but also the rationale for what could be a 100% fees hike.

And there is a good case for tuition fees (despite cries of 'middle class debt' from the Daily Mail), not least as the method of their repayment is both fair and progressive according to post-graduation income: those not in work pay nothing until they are. Moreover, the predictions from student leaders that fees would deter students have clearly come to nothing.

But the case for lifting the cap of £3225 has not been made yet by the vice-chancellors, particularly to a secretary of state who is not keen on doing so and a prime minister who thinks universities are hotbeds of inefficiency (and perhaps prejudice). Rather than fuelling wish lists, the VCs need to get back to first principles. As any undergraduate would (hopefully) tell them, you should make the case and marshal the facts before presenting your conclusions.

Ireland looks at tuition fees again

Here's a surprise! Having abandoned university fees in 1997, just as England was facing the reality of mass higher education, and introducing them, Ireland's education minister has put the issue back on the table. The abolition of fees has been terrible for Irish universities and has done nothing to address inequalities in access to higher education. But successive governments have been terrified of a backlash among the middle classes who have benefited from the measure, despite regular independent advice that fees were needed. Gradually increasing 'capitation charges' are all that has been allowed. However, with Ireland facing a credit crunch at least as sharp as that in the UK, and the prospect of a pay cut for lecturers to keep universities afloat, fees are back on the agenda. Ireland's university leaders will be hoping that education minister Batt O'Keeffe has the courage of his convictions.