This week saw the release of a report by the Higher Education Policy Institute (HEPI) ‘Undergraduate fees revisited’ (pdf) that offers a fairer solution to the university funding crisis. Economist Tim Leunig, who is a former Chief Analyst at the Department for Education, has opened up with a bold cost-sharing scheme. It mirrors what TEFS has been proposing for some time, but TEFS has a simpler solution (see TEFS 10th May 2024 ‘Funding students and Universities: a graduate National Insurance Levy is gaining traction’). However, Leunig’s idea is very complex despite promising that the,
“Highest earners would pay the most, as is appropriate in a social insurance scheme”.
Its complexity is likely to be its downfall and TEFS suggests a simpler solution that would achieve the same goals, but at lower administrative cost, ringfence funding for universities, and guard against inflation.
Saving the frog.
‘Boiling the frog’ was probably the most apt metaphor deployed by Vivienne Stern, CEO of Universities UK, to describe our universities at a fringe meeting of the Labour Party Conference this week. With the temperature rising slowly, the university ‘frog’ doesn’t notice the danger until it is too late. Now the government must do something before the poor frog expires. It will have to be ugent and radical. It’s a small world and the UK must continue to punch well above its weight and size to achieve Labour’s aims.
As an aside, this posting was written over the Atlantic on a flight from Dublin to Seattle courtesy of the Aerlingus wifi. The GPS map of the flight served to remind me of how connected the world has become. All academics understand this and the fragile nature of the UK’s influence. We must aim to lead in technical advances for good reasons and not be relegated to playing ‘catch up’.
A complex solution.
Finding the answer distills down to funding. Leunig has grasped the nettle of a shared cost scheme that lowers repayments by graduates and is more progressive than the current loan repayment regime. It has considerable merit. But there are too many parallel income streams to consider that might attract a number of ‘avoidence schemes’. It’s also hard to see how it would guard against inflation and it would be very costly to administer. There is also the danger of the income being diverted by the government and not ringfenced for universities and students.
In summary, the repayment period would be reduced to 20 years with no increase in the amount owed. All graduates would pay a minimum of £10 per week. Then there would be an additional repayment of 3% of income between the income tax and student loan repayment thresholds with graduates allowed to reduce their pension contributions in order to make higher student loan repayments more affordable.
Even more complex is a plan to introduce progression into repayments with higher interest rates for graduates earning over £40,000 pa to a maximum of 4% for those on over £60,000.
Very welcome is the proposed mix of maintenance grants, means tested up to a parental income of £65,000 pa and backed up by loans for income up to £100,000 pa.
Importantly, to offset the shortfall in funding available he proposes,
“A new 1% National Insurance surcharge for employers with graduates”.
This would offer some shelter from inflation. But more importantly, injects the idea of being cost shared and is a reasonable compromise between other proposals that assume students pay all or employers pay all. It has to be the best way forward.
Countering the calls for increased fees.
The Leunig proposal comes on the back of even louder calls for fees to increase. Rumours are widespread in the media that fees will rise with inflation soon and maintenance grants will resume. In response, Leunig describes his solution as the
“Only zero-cost reform package out there”.
He is almost right in his assertion, but he has not considered the ‘Graduate National Insurance Levy’ offered by TEFS (10th May ‘Funding students and Universities: a graduate National Insurance Levy is gaining traction’). However, along with TEFS he has proposed a shared cost scheme that should attract more attention from the government.
Graduate National Insurance Levy.
A shared approach, whereby those who benefit the most share the costs, is clearly fairer (see TEFS last week, ‘University crisis as balloon bursts: Radical old ideas for funding needed’). The simplest way to achieve this is to add a graduate levy to National Insurance for graduates and their employers. The fund would be ringfenced for universities, be progressive and track wage inflation to protect against inflation over time. It’s an old idea going back to the last Labour government. Unfortunately, it fell alongside a graduate tax.
Meanwhile back at the ranch.
Universities UK has yet to release their ‘Blueprint’, a new paper to set out the role of universities in addressing the government’s priorities. This will be critical of the current system and offer the government a view of how universities see their role. However, it is likely they will also join the clamour for a substantial increase in fees. There is a growing sense of urgency and this report cannot come too soon.
Writing in the Guardian this week Peter Mandelson, now the Chancellor of Manchester Metropolitan University concluded,
‘Universities are in a hole: linking student fees to inflation is the fairest way forward‘.
Sadly, this is yet another call to increase the burden on students who pay all costs. It is not reasonable. Yes, universities must be protected from inflation, but that must not be achieved on the backs of graduates who bear the full weight through student loan repayments.
Keep it simple.
As in the game of association football, the objective is very simple and the means to achieve the goal do not have to be complex. When playing as an amateur in the London commercial league many years ago, we had simple but effective advice. Firstly, it’s a game of triangles; passing moves usually involve three players (in a university context, the benificiaries; graduates, their employers and wider society). Secondly, ‘if in doubt, kick it out’.
Finally, ‘keep it simple’.
The author, Mike Larkin, retired from Queen’s University Belfast after 37 years teaching Microbiology, Biochemistry and Genetics. He remains optimistic and loves mixed metaphors.