Tuition fees were welcomed by some universities, which saw them as compensating for government cuts – not the brightest of moves...

Universities in crisis as cuts start to bite

WORKERS, OCT 2012 ISSUE

The TURMOIL in higher education has reached a critical stage. Successive governments have been attacking and undermining higher education for decades, but now the coalition’s policies clearly define a different direction and purpose, for a greatly reduced sector largely financed and increasingly run by private companies.

Higher education has long been central to Britain’s economic, social, political and cultural life. Now we need it more than ever to earn our way in the world. Between 1989 and 1997 the Labour government cut university funding per student by 36 per cent, greatly increasing the student/staff ratio to 20:1 and resulting in far fewer contact hours between staff and students. This has been damaging enough. But the Browne Report of 2010 and the White Paper of 2011 are the only two major policy documents on higher education in the last 50 years not to see it as a public good. The present government wants us to see it only as a private investment for personal gain.

Billions lost

The 2010 Comprehensive Spending Review cut 80 per cent from the block grant to English universities for undergraduate teaching. Arts, humanities and social sciences lost all central funding, cutting £3 billion a year by 2015-16.

Demonstration against cuts and tuition fees in Newcastle, 9 December 2010, a day when Parliament voted to raise fees to £9,000 a year.
Photo: Smart7/Shutterstock.com

To replace this lost income, the government let universities set a new maximum tuition fee of £9,000 a year, almost tripling the £3,400 fees introduced by Labour, fees that the LibDems had pledged to abolish.

We will have the highest average level of student fees in OECD countries when the new system starts. This marketising of higher education will also increase inequality. Students who can pay the fees up front will pay less than the majority who will have to borrow. None of this was in any party’s election manifesto.

Some 800,000 students use the loan scheme. Students borrow to pay the fees and also borrow to cover their housing and living costs. These maintenance loans range from just under £4,000 a year to over £7,000 for those who are studying away from home at a London institution. After adding up loans for fees and maintenance, some may graduate with a debt of nearly £50,000.

Fewer students will be able to take on such debts. UCAS figures show a 14 per cent fall in the number of UK and European Union students taking up places in institutions in England for 2012-13 entry compared with the same point last year (down by 54,200).

The loss of income from these students could cost the sector about £1.3 billion over three years, leading to huge job losses and course closures. By contrast, student numbers are up in Scotland, where Scottish and non-English EU students are charged no fees, and in Wales, where fees are capped at £3,465.

Last year the recruitment cap on student numbers meant that more than 150,000 eligible students were unable to get a place. Many universities have been fined for breaching their caps (London Met £5.9 million). The government ended a programme to widen participation, claiming that scholarships and bursaries would do the job better, a claim contradicted by the research on the subject by its own Office for Fair Access.

It seems a casually contemptuous approach to a vital part of our economy. This is reflected in the shortfall in numbers of students applying with AAB grades or higher in A-levels, also engineered by government meddling. UCAS data show that 79,200 students achieved these grades in A-level and equivalent qualifications: the predicted total was 85,000.

That leaves several of the most selective universities facing significant student shortfalls under the AAB system, introduced by the government ostensibly to allow such institutions to expand at the expense of the others (welcomed by them originally).

Universities are only being guaranteed about three-quarters of their previous intake. To recruit extra students, they will have to compete in two pools of places. About 65,000 places will be reserved for applicants with A-levels of AAB or higher. Institutions whose fees do not exceed £7,500 will compete for another 20,000 places. Students recruited by private higher education providers from this pool will be eligible for loans, so public money will boost these companies’ profits. This policy will force less highly ranked universities to cut their fees to fill their places. This selling off of 20,000 places to the lowest bidder will be at the expense of the existing universities undercut by the new providers. This system will reinforce inequality.

Deficit

Replacing direct grants to universities with fees backed by loans appears to cut the government’s annual deficit. Borrowing to give grants to universities counted as public borrowing, but borrowing to make loans to students does not count as public borrowing. It is treated as capital spending, which takes it out of the annual deficit. But the increased borrowing needed to fund higher tuition fees and the resulting higher loans will add £5 billion a year to net public sector debt, far more than the £3 billion a year saved by the cuts to the grant.

The government expects most of this borrowing to be repaid by graduates. But this debt will only be paid down if annual repayments match and exceed the annual outlay. The Office for Budget Responsibility thinks this will be around 2032.

The number of graduates without a job six months after graduation has doubled in the past five years, according to the Higher Education Statistics Agency. The Office for National Statistics’ March 2012 survey, Graduates in the Labour Market, found that 35.9 per cent of those graduating in the last six years were filling low or unskilled jobs, up from 26.7 per cent in 2001. At present rates of job destruction, who knows what the figure will be in 2032? The government has almost certainly set aside far too little to cover the shortfall.

Under Labour’s 2008 Sale of Student Loans Act, loans can be sold on to third parties without notice, consultation or consent. Sales will require repeated annual subsidies to buyers, to make the purchase worth their while, paid for by the taxpayer. The government conducts these negotiations in secret. There is little statutory or contractual protection. The loan agreement says, “You must agree to repay your loan in line with the regulations that apply at the time the repayments are due and as they are amended. The regulations may be replaced by later regulations.”

This is part of the government’s wider policy to create markets for assets that start in the private sector, placing complex, unstable loans with the sector that launched the country's financial crisis, creating more opportunities for speculation. The government also wants for-profit “providers’” to be able to insure against the risk of students not repaying the loan, introducing trading in risks and derivatives into higher education.

The government wants to enable private companies to buy universities. “Private Equity Firms Looking to Acquire Universities”, said Education Investor on 22 September 2011. They want to get the billions coursing through a student loans system moving from government revenues to the student’s debt ledger, through the university, and out into the pockets of shareholders and chief executives.

The purpose and direction government has laid out for higher education is not in our interest. Fewer workers will be able to get higher education, and academic standards will be debased. ■