On Friday the expected tax cuts and a new budget were released by the chancellor. They represent a major change of direction for the UK economy not seen since the Conservative budget of Anthony Barber in 1972. The ensuing economic chaos, and high inflation, caused significant damage and led to the fall of Edward Heath’s Conservative government in 1974. We can only expect the same to happen again. In the meantime, there is nothing indicated that would alleviate the inevitable hardship that will fall upon most students and their families.
Called simply ‘The Growth Plan 2022’ the 38 pages of the current budget is focused on tax cuts as a means to stimulate economic growth. At first reading, it appears to be wishful thinking and somewhat naïve. But it could also herald a ‘dash for privatisation’ as spending on public services is cut.
Reactions.
The Resolution Foundation was quick off the mark with a damning analysis of what will happen in ‘Blowing-the-budget’ stating that, “Yesterday, the Chancellor decided to blow the budget on a £45 billion package of tax cuts, the biggest for 50 years. In doing so, he rejected not just Treasury orthodoxy but also the legacy of Boris Johnson, unveiling a wholly new approach to economic policy”.
Of course, it is not so new and follows a well-worn path of tax cuts by Conservative governments since Barber in 1972. Each one favoured the richest in our society.
Are the government taking advice?
It seems not. The traditional route taken is for the Office for Budget Responsibility (OBR) to issue a detailed analysis and forecast for the government of the day to digest. Their mission is simple and stated as “It is the duty of the Office to examine and report on the sustainability of the public finances”. To this end, their forecast papers are usually released at the time of the budget to indicate what advice the government is acting upon. However, this time no such papers have been released and appear to have been suppressed. The Institute for Government takes a very dim view of this in, ‘Blocking OBR forecasts undermines the credibility of Liz Truss’s economic plans’. The last medium term forecast of the OBR dropped on their desks back in March and seems to have dated fast. Their ‘Commentary on the Public Sector Finances August 2022’ is also out of date after last week’s budget. As is their earlier longer-term projections made in July in, ‘Fiscal risks and sustainability. The risk scenarios and associated projections are frightening and surely must temper any moves made by the government. However, with a chancellor only in post for a few days, there is a horrible realisation that he is not heeding the OBR risks and forecasts. Indeed, it appears he is trying to emit a smokescreen to obscure their work. They must be allowed publish projections based upon the current budget as soon as possible if confidence in the government is to be restored.
Forgetting student hardship.
The budget papers make only one assumption about our universities in a single mention with, “The UK has world-leading financial and professional services sectors, life sciences and creative industries, and elite world-leading universities”. The use of the comma is interesting. I worked in the life sciences sector as a university professor for many years and never did I consider it to be ‘creative’ as such. Setting that aside, the assumption of being ‘world leading’, without considering how it might be paid for with rising inflation, is hopelessly naïve. With government borrowing set to rise sharply alongside interest rates, it becomes inevitable that spending cuts will occur to pay for the tax cuts. If the economy fails to grow faster than government debt interest payments, then we are in deep trouble. The government will find it increasingly difficult to sell guaranteed bonds from a ramshackle economy heading downwards. The IMF may even intervene to control spending. For students at all levels they can expect little assistance in this scenario as they descend down the priority list.
The pressure students will encounter in the coming year.
The list is extensive, and many students and their families will not have planned for the shortfalls. Rents and energy costs will bite soon, especially in the private rental market. If businesses start to falter, the number of part-time jobs for students will also decline. Those with some money will spend less and add to the grief. Some families will be fortunate to have reserves to fall back on and no doubt will spend more to support their student offspring. Others will not get the support expected. Those ‘independent’ students estranged from their family, or progressing from care, will see little to improve their situation.
Student maintenance is inadequate.
The student maintenance loan from Student Finance England for 2022/23 has been raised by only 2.3% and is now well below the current inflation forecast. This was indicated in their November 2021 equality analysis and appears to have remained in place for now. Things must change, and fast, before students start dropping out before Christmas. In June, The Institute for Fiscal Studies told us that, ‘Student living cost support cut to lowest level in seven years’. In the last few days, The Student Tab calculated that in 2022/23 ‘Students need an extra £439 every month on top of their maintenance loan just to survive’. Only families and part-time jobs will plug this gap. Even Universities UK is in on the act with some alarm and demanding, ‘Don’t overlook students in cost of living crisis, say university leaders’. Despite serious questions being raised, the new minister, Andrea Jenkyns, is not revealing any response or plan. Further, she is billed as downgraded to a ‘parliamentary undersecretary of state for skills, further and higher education’ and, unlike her predecessors, will not attend cabinet meetings. This indicates a less than serious intent from the government. Increasing maintenance support is the obvious mechanism to deploy to help students stay in their courses. Seeking hardship support should be a last resort.
Hardship funds are drying up.
With the situation worsening by the day, there are bound to be more students seeking support from their university hardship funds. This can be a difficult bureaucratic process to navigate, and universities will find it difficult to meet the demand. However, the track record of the government in recent years is not a good one. Back in 2020, the government indicated they were spending more on hardship support. However this was a devious sleight of hand as they simply shifted funding from the student premium funds and the reality was a CUT in support of £21 million (covered in detail in TEFS 11th September 2020 ‘Government response to digital poverty, job losses, and student hardship: A £21 million cut to its support’). The pandemic then revealed a doubling of the number of students seeking hardship support across our universities. This was reported by TEFS in July with, ‘Student hardship: it’s going to be a cold winter’ where the lessons of the pandemic response and the warnings for the coming year were made very clear.
Dash for privatisation.
The inevitable tightening of government spending will mean less funding for many services, including education. This will initially lead to schools asking parents to stump up for essentials and has been happening for some time, as reported by the Times Educational Supplement in 2018 with, ‘Schools ‘should be bold enough to ask parents for money’. However, it can only get worse. Similarly, students at university will need more parental support. This will lead to a creeping privatisation as families take up more of the burden. Those able to pay will gain significant advantages as the disadvantage gap widens.
The demeanour of the government points toward an acceptance of this and probably a deliberate furthering of this approach. The logical upshot will be people seeking private services to bypass the inadequate public offering. This would be seen as dangerous in health services as the NHS deliberately deteriorates. But we should not forget that universities may also seek to offer a private education in time. After all, many now rely in higher fee-paying international students. Back in September 2021, TEFS looked at this scenario at depth with ‘Privatisation storm looms for universities’. The pressures observed then are now magnified by much higher inflation than anticipated and no income boost in on the horizon. There is a storm on the way and the government may be deliberately whipping it up to nudge the economy in this privatised direction.
The author, Mike Larkin, retired from Queen’s University Belfast after 37 years teaching Microbiology, Biochemistry and Genetics.