The events post budget in the last month have shown what happens when free market ideology collides with the stark reality of our times. It’s not good, and the collision will probably slide well into 2023 as recognition of a crisis for our students and universities emerges slowly. There is a fear that this is deliberate and possibly staged to drive privatisation.
After a protracted bout of COVID, the author is emerging only now with some reflections on what has happened in recent weeks. The main event of a fresh budget emerged back on the 17th of November 2022 as the ‘Autumn Statement 2022’. It represented a major departure from the earlier Kwarteng/Truss budget in September, ‘The Growth Plan 2022’. This was reported by TEFS in ‘Budget 2022: Everyone for themselves’ on the 26th of September and ‘Budget 2022: Blowing the bloody doors off’ on the 2nd of October. These reports observed the catastrophic financial crisis that eventually led to the Truss administration being comprehensively forced out. The period with no government was mercifully short this time as Sunak was quickly put into place as prime minister. His warnings were clearly set out over the summer and his opposition to Truss was ignored by conservative party members who collectively bear considerable responsibility along with the Truss supporters in parliament. Their free-market ideology was totally misplaced as the money market hyenas savagely ‘shorted’ the government finances for a quick profit.
However, unlike the earlier Kwarteng/Truss budget, this time it was accompanied by the Office for Budget Responsibility (OBR) report, ‘Economic and Fiscal Outlook November 2022’, the same day. This makes grim reading and is the reality facing the UK. The free market ideology of Truss had crashed straight into it and we all came off worse. But the outcome could be that all underfinanced public services lurch toward privatisation and a chaotic outcome. Perhaps that was the idea.
What about universities?
Whilst recognising the importance of some of our universities as global leaders with, “achievements in R&D and innovation generate significant economic and social benefits for the whole of the UK and beyond”, there is little new on offer to alleviate the impact of rising inflation on students and their universities. However, those universities with large research operations will be cushioned to some extent by,
“Public spending on R&D will increase to £20 billion a year by 2024-25, a cash increase of around a third compared to 2021-22. This is the largest increase in R&D spend ever over a Spending Review period”.
This is vital but simply covers the loss of income from leaving the EU. It also steers research in the direction of business and technology. It is hardly as encouraging as the spin makes out.
What about students?
There was little about students and the spiralling costs they are about to endure. Tackling rising inflation through interest rates and monetary policy is at the core of the budget and will severely impact all families. So some help there is welcome but its not enough alone.
The OBR report offers more insight into students and the reforms to fees that are in the pipeline. They outline the considerable savings that are projected for the government over the next five years. This is driven by rising student loan interest rates. However, there is some comfort that the interest rate levied is being capped for now. Now, the rate is 6.5%, but will rise to 7.3% between March 2023 and August 2023. After that, there must be a fear that it could get worse. Indeed, the Student Loan changes for those who start in September 2023 will find the repayment threshold lowered from £27,295 to £25,000 and their loan repayments extending from 30 years to 40 years.
The perverse effect will be that the less well-off graduates will find they bear a greater burden than those earning much more. This can only be assumed to be a deliberate act by the government to further divide and deter students from less affluent backgrounds. Those in the top 30% of earners will repay less, with the very highest earners saving around £25,000 over time. In contrast, graduates on lower incomes will find that the overall amount they’ll repay will increase because their loans must be paid back for an extra ten years. It appears the government is seeking to close off routes to lower paid employment after graduation by making this less attractive. This fits with assertions elsewhere that many degrees are of low value
Then there is the impact of being unable to fill any shortfall in their living expenses where their families can no longer afford to support them. Worrying is the OBR observation of a sharp increase in the number of students inactive in the labour market since February of this year. They expect that “some of this rise to unwind”. However, a squeeze on the economy entering recession might close many employment doors to an increasing number of students seeking work. This will need to be watched closely.
Rising concern about how students will cope.
The underlying assumption by the government appears to be that the families of students will step with more to help their offspring. Thus, it is fine to squeeze them for more. Yet the reality is that most universities were less sure and were already planning to make big increases to their hardship provision at the start of this term. See “Universities in England and Wales double or triple student hardship funds’ The Guardian 20th October 2022.
They have had to anticipate a rising demand and evidence for this soon started to emerge. A 2021 survey by Save the Student set out to track the reality of the relative importance of parental contributions. This could be broken down to parents (66%), part-time jobs (66%) and maintenance loans (65%). Worryingly, all three of these figures decreased in the 2022 survey to land at parents (59%), part-time jobs (62%) and maintenance loans (53%). The relative value of the maintenance loans has declined fast this year and is likely to have a greater negative impact in 2023. Less is coming from parents, jobs are scarcer and they are not keeping up. This becomes a crisis when the same survey also showed that 62% of students need part-time jobs at university.
The failure of student maintenance loans to keep up with inflation follows a similar pattern to the declining income of all public sector workers. This is because their income was set using earlier inflation figures that were quickly overshadowed by rising inflation in the intervening period. The failure to react to that lies at the core of the discontent causing strikes. The scandal is that the administrations across the UK are sticking with earlier estimates of inflation to set the maximum levels of maintenance loan. The maximum funding for student maintenance loans is increased by 2.3% in England and a staggering 0% is on offer in Northern Ireland, where needs are probably greater. Elsewher, students are a bit better off with an increase of 4.5% in Scotland and 3.5% in Wales.
The result of this was clearly evident in November in the report on the National Union of Students survey ‘Cost of Living Crisis: HE Students’. It makes for grim reading with the headline discovery that ‘42% of UK university students living off £100 or less a month’. This is a dangerous path to be following.
The penny is beginning to drop across the sector.
The launch of the latest report on student fees from London Economics last week drove home the extent of the problem for the government and students alike (see HEPI / UAL event on the future of higher education fees and funding, 13 December 2022 ). It appears that awareness of an impending crisis is rising with influential figures emerging to offer some recognition of this issue. A recording of the event can be seen here. Notable speakers were David Willetts (aka Lord Willetts), who chairs the Resolution Foundation and was the original architect of the current student fees system, and Vivienne Stern, the Chief Executive, Universities UK. Their comments are here.
Willetts made clear and unambiguous reference to student maintenance provision and bemoaned the loss of student maintenance grants. In answer to a question from the author, Stern offered her views on a crisis in university funding but fell short of seeking an increase in the maximum fees levied on students. This is not the way out and other sources of income will need to be secured in time. The obvious source will be even more international students arriving on high fees. This factor was not broached in the London Economics analysis but will surely be of increasing interest as the government seeks to limit their numbers, particularly on ‘low value’ degrees and at institutions thought to be of lesser importance.
The London Economics view on loans, repayments, and a graduate tax.
In a nutshell, their report concluded that the, “Current system is fiscally unsustainable”. They are right and they also concluded that the changes proposed for 2023 will hit those on lower income the most. They instead proposed a fairer approach through either a more progressive loan repayment system or graduate tax.
They concluded that, “The graduate tax would make the repayment profile significantly more progressive than the current system, the DfE’s response to Augar, and the stepped repayment system”.
This is clearly a better option for the future despite the problems in phasing in such a replacement funding model over time.
The lived experience and the last word for 2022.
The Higher Education Institute today offered the views of a student in a posting that should cause us to reflect on what is happening. Izzy Cresswell, a current Arts University Bournemouth student asks the question, “What springs to mind when I bring the words ‘homelessness’ and ‘university’ together?” arising from lived experience. The divided progress of those with and those without is all too real with a stark recognition that “University is still an exclusive club…….All too often, those who go to schools with money, those who have family stability, or those who come from white middle-class backgrounds are the ones it is assumed university is really for”.
It has been like that for a long time.
The author, Mike Larkin, retired from Queen’s University Belfast after 37 years teaching Microbiology, Biochemistry and Genetics.