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Higher Education funding

I wrote the following article for Tribune in 1997:


LYNNE JONES looks at what the Dearing Report really said and considers its implications -  31 October 1997 TRIBUNE

The past 20 years have seen the arrival of mass higher education, with more than a doubling in the number of students.  Britain now has one of the highest participation rates in university-level education in the world.  However, public spending on higher education, as a percentage of gross domestic product, has stayed the same and the unit of funding per student has plummeted by 40%.  Present public expenditure plans envisage a further real-term reduction in spending per student of 6.5% between now and 1999/2000.

It is a tribute to British universities that, so far, they have avoided the high drop out rates common in other mass university systems but doubts about the quality of the learning experience have grown.  For example, Professor Tony Trinci, President of the Society for General Microbiology, wrote to all MPs last year stating that the Germans are now convinced that British first degrees are equivalent to their Fachhochscule diplomas, rather than first degrees.

Everyone agrees that a world-class education system is vital to Britain's economic success.  Arrangements for university funding were in a mess, so Sir Ron Dearing was called in to sort it out, putting education on the back burner until after the election.  But both main political parties made it clear that there would be no new money from the public purse.

The Dearing Committee's Higher Education in the Learning Society was published in July.  His bold, but under-reported, conclusion is that there will be an additional funding requirement in 20 years' time of £3.3 billion minimum (at 1995/96 prices) and that options for additional income could, at best, provide only £1.3 billion.

In the absence of any prospect of extra funding, the report concluded that, while the state should remain the major source of funding for higher education, the main beneficiaries, graduates, should make a greater contribution once they started working.  It recommended that, unlike the present student loan repayment arrangements, contributions should be based on income, but then went on to wrestle with how this could be done without hitting lower socio-economic groups who, Dearing was shocked to discover, are scarcely better represented now than they were in the days when only 1 on 10 went to university.

Dearing and his committee looked at a number of ways of operating an income contingent contribution scheme.  They ruled out a graduate tax or deferred contribution scheme because they would not deliver additional funding quickly.  They then went on to examine a range of options for supporting graduates to make contributions by providing loans during study to be repaid on an income contingent basis by the graduate once in work.

Surprisingly, the view put forward by the Labour Party, and others, to convert existing support for students' living costs from 50:50 grants and loans to 100 per cent loans was rejected for the laudable reason that this would take away subsidies from the poorest families and redirect them to others.

Instead, as was widely publicised, Sir Ron and his colleagues proposed a flat rate contribution, through an income contingent mechanism, irrespective of the course.  This should, by analogy with the contributions expected from adult further education students, be of the order of 25% of average tuition costs each year, about £1000

Less well-publicised was Sir Ron's concern about the way loans for students are treated in the national accounts and his assessment that private finance for student loans does not offer value for money.  This is of fundamental importance.   The Dearing Committee's voice has been added to the growing bandwagon in favour of bringing Treasury accounting practice in line with that operated in other countries.

The fact is, without this, the politically painful decision to start charging fees to those engaged in full-time study will yield next to no income for years to come because all lending to students counts just as if it were a grant.

Dearing, therefore, makes it clear that because income contingent loans will not deliver the immediate resources needed (quite the reverse), the only immediately available source is students' parents.  Even then, if tuition contributions were means tested, in the third year of the scheme, the yield would only be of the order of £50 million (constant prices), far short of the sums required to alleviate the crisis in university funding.

Scarcely was the print on Dearing's 1,700-page report dry, than the new Labour Government gave its response, throwing out the recommendation to retain grants for poor students but paying scant attention to Dearing's recommendation on Treasury accounting, grasping at the straw of additional funding from fees (a suggestion previously ruled out).

The net effect of these grant and fee changes is that richer students will graduate after a typical three year course with a state-organised debt £3,000 higher than under the present arrangements.  For the poorest students, the state-organised debt will be £10,320 (outside London), £12,735 (London), respectively £5,265 and £6,480 more than now.

Had David Blunkett given himself longer to consider, he might have come to realise that his proposals (which explicitly state that parental contributions will not go up) bring not a penny more into higher education unless he can persuade Gordon Brown to change Treasury rules.

On September 23, desperate to give some indication to university vice-chancellors that help was at hand, the Education Secretary announced a £165 million 'package' for universities and students in 1998/99, the year fees are to be introduced.   However, closer examination of the source of this 'extra' funding reveals that it is to be released from the existing budget for 1998/99 by splitting student loan payments into three termly instalments, with the final instalment to be paid in the 1999/2000 financial year.

I write to Baroness Blackstone, Minister of State, querying the implications of this for funding in the academic years beyond 1998/99.  Two weeks later, a telephone call to the Department for Education and Employment elicited the reply that they were still working on an answer.

In the meantime, Blunkett has been defending his proposals on the basis that 'increased funding' must be linked to specific plans to increase access to higher education for under-represented groups.  What these plans are, or the fact that there is no extra money, were not spelled out.  Neither were Sir Ron's concerns about fairness mentioned.  Delegates at Labour Party conference, no doubt impressed by his inspirational style, swallowed Blunkett's line.

To judge the reality, it is worth considering another report also published in July.  Class and Higher Education: the participation of young people from lower social classes by Hilary Metcalf of the Policy Studies Institute examines the reasons why those from lower classes remain grossly under-represented in higher education.

A number of studies show that the influence of social class is strongest at earlier stages in education than entrance to higher education.  Sixteen per cent of young people from the lowest social classes, 27 per cent from the middle and 50 per cent from the highest achieve minimum requirements for HE.

However, of those qualified, only 47 per cent of those from lowest social classes, 59 per cent from the middle and 77 per cent from the highest social classes enter HE.  Further, at low attainment levels, those from higher social classes were more likely to persist of the academic path.  They are certainly more likely to have parents willing and able to make financial contributions while they study.   According to Barclays' 1997 Student Survey, the average student is getting £631 a year from parents over and above grants and assessed parental contributions.

If the Government's aim is to improve access for people from poorer backgrounds, the statistics point to the need for action on two fronts.  First, there is a need to improve the educational achievement prior to post-compulsory education.   It is to be hoped that this is being addressed by measures proposed in the White Paper, Excellence in Schools.  But later hurdles to working-class participation in higher education must also be understood and dealt with.

Many young people, particularly those from less affluent backgrounds, see education as irrelevant and not necessarily leading to better job opportunities.   The desire to work and earn money is a major reason for leaving education.   One of the Metcalf study's conclusions was that measures are needed to reduce the income differential between being a student and being employed.  Replacing the maintenance grant, worth around £2,000, with a loan has exactly the opposite effect.

This view is reinforced by evidence now emerging from other countries where loans and fees were introduced.  In New Zealand there was a drop of 9.6% in university enrolments between 1996 and 1997.  More reductions have been observed in the number of Maori students and second-chance learners.

Despite the rhetoric, the Government has yet to find a solution to the existing funding crisis in higher education, let alone spell out where the money will come from to fund the Prime Minister's conference speech promise of an additional 500,000 places into further and higher education by the year 2002.

Dare it be suggested that the principle that graduate earners should contribute to education funding would most easily be met by increasing taxation on high earners?  Those in that bracket who did not themselves benefit from a university education will, almost invariably, have or have had children who are, or aspire to be, graduates.


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