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Questions by Austin Mitchell regarding the Higher Education Bill
Answers by Minister of State for Education Charles Clarke
(1) Does the HE Bill break a manifesto commitment? What is the urgency?
A: Ref. David Blunkett who states (Sunday Times, 4th Jan) “we are legislating now, but the changes as a whole will be placed before the country at a general election before they come into effect in 2006.”
Concern: Blunkett begins this article by stating: “In 2001 Labour’s General Election Manifesto promised “We will not introduce top-up fees and have legislated to prevent them.”
(2) What research has been done on the effects of the abolition of maintenance grants and the imposition of fees in the last Parliament, on participation rates from the different social groups and on the rates of increase in total participation and drop-outs before and after? Has any research been done on the likely effect of increasing fees on class and total participation in the future?
A: “…the proportion of students from [low-income] backgrounds…has remained stubbornly static for far too long – but it was not adversely affected in a significant way after we introduced tuition fees in 1998.”
Concern: So HE policy of recent years has not stimulated access from low-income families. Will the Office for Fair Access (OFFA) confront this access issue effectively?
Concern2: Apart from “Experience from abroad – for example Australia and New Zealand…” what research has been done on the likely effects of increasing fees? If none, have student welfare and access been given sufficient regard? - ‘there is no plan B’
(3) What happens to interest repayments on loans before repayment begins? Do they continue to accumulate and compound when payment is delayed? What happens to those who go abroad?
A: Loans are offered at a zero rate of real interest (i.e. interest = basic inflation, currently 3.1%) which begins accruing from the point at which the funding is paid out until the loan is paid off. Interest continues to accumulate when a student stops earning. The loan for fees will be added to the loan for maintenance, and the whole lot paid back at a rate of 9% of salary above £15,000. Students who go abroad must still repay their loans through the Student Loans Company (SLC) who will be required to chase them up.
(4) How many graduates are escaping debt by becoming bankrupt? Is this an escape route from debt that students will be able to take advantage of under the new proposals?
A: The SLC has identified more than 1400 student loan borrowers who have bankruptcy orders against them, with more than £5 million of debt outstanding. Provisions in the new Bill will close this loophole.
Concern: Continued question marks over the legality of ‘closing this loophole’ (EU Convention). Once loans are extended to cover fees, and the temptation to follow this route becomes greater, the government better be sure that this loophole is closed, or risk losing millions in funding revenue.
(5) When and how will these desperately needed funds reach universities? If the Government must raise public borrowing to pay the fees to HEIs until the students pay them back, what will be the effect on the PSBR?
A: “The income from fees will be paid to universities in the academic year for which the fees are levied.”
We will not know until 2006 how much income will be raised by variable fees…”
The suggestion in the Regulatory Impact Assessment (RIA) is that the plans will bring in around £1.8 billion - £1 billion of which comes from variable fees. The major up front cost of deferring existing and additional fee income, and the loan write off after 25 years is, £665 million/year, leaving steady state benefits of £1.135 billion. Administrative development costs to the Inland Revenue and the Student Loans Company are estimated at only £400-450,000 to be met by the DfES.
(6) Will all universities charge the £3000 maximum, or just the elite institutions? Bursary payments will surely encourage the maximum charge. Has an assessment been made on this?
A: One Russell Group University has stated they might charge nothing for Physics, in order to encourage students to take up Physics, for which there is low demand. Fixed fees would be unfair as it would be the same fee across the board – for diploma students/Foundation Degrees and Honours degrees alike. Fixed fees are “wrong and unfair.”
(7) A justification for fees is that graduates earn more later in life, though on a priori grounds this differential should diminish as a higher percentage go on university. Has the differential benefit been calculated as an overall improvement benefiting all graduates and has it been analysed by university and course, noting that a priori, certain degrees yield far greater incomes over a lifetime than others?
A: Graduates from different universities earn a 44% differential between the two extremes of the pay scale. The HE White Paper contained a table which set out the earnings premia for women graduates compared to non-gradate incomes. The premium for law graduates was 40%, whilst the premium for Arts subjects was just over 15%. The implication is that the markets will set fees at a level representing fairly the financial and other benefits gained from studying a chosen degree.
Concern: No mention of research into earnings differentials diminishing as more gradates go to university. Differentials are calculated using the incomes of graduates from a time in which far fewer people went to university and when the privilege was relatively greater. Modern-day graduates are to pay fees on the assumption that they are to achieve the financial benefits of a degree that their parents’ generation achieved.
(8) What calculations have been done about the correlation between a university’s need and its ability to raise fees? What of the argument that elite universities break even on undergraduate teaching but need more money, mainly to maintain excellence in research and a world wide reputation?
A: “…our proposals will allow institutions to raise significant extra income from variable fees – this will benefit both modern universities…as well as members of the Russell Group.”
Concern: No mention in the answer of the fact that new universities, with a vastly greater number of students from poor backgrounds, will have to pay out more in bursaries. These proposals are arguably regressive in the treatment of universities.
(9) What assessment has been made of the Liberal Democrats proposal to increase the maximum tax rate for those earning over £100,000? How much would this bring in?
The Liberal Democrats would allocate £2 million, from an expected £4.5 – 5million increase in tax revenue, to higher education. Additional revenue would come in slowly. There would be no control for HEIs over extra funding, no guarantee that HE would receive extra funding, and no relationship between what a student receives and what a graduate pays.
Concern: On the last of these points, there is hardly a good and fair relationship between what a student receives and what he/she pays in the above example of a student studying Physics at a £0 fee at a Russell Group university. The issue here is not about student choice & fairness, but getting students studying on industrial/technical/scientific courses.
(10) What would be the pros and cons of a graduate tax? Is a hypothecated graduate tax a fair option?
A: Hypothecation back to education cannot be guaranteed. Hypothecation back to individual HEIs would be an administrative nightmare. The increase in public expenditure would be around £4 billion immediately, and revenue would only come in very slowly. It would take around two decades to reach break even point.
Recognised positive features of a pure graduate tax, that are also shared by present proposals:
• Students do not pay – instead graduates do, once they are receiving the financial benefits of their qualifications (£15,000/year)
• Repayments are made through the tax system
• Repayments are linked to earnings, in an affordable & progressive way
• If a graduate is not earning (e.g. if they take a career break) they do not pay
Concern: Progressive element is based on parents and not on individuals. Means-testing is unfair and produces many anomalous cases. And why means-test parents to determine graduate contributions when the graduate is treated subsequent to her graduation, as an individual??
Concern: Graduates in low-paid jobs face heightened effective penalties for choosing low-paid, often socially important careers, including nursing, teaching, and care work. Many of such courses are longer, and incur greater costs than other degrees.
(11) Should bursaries be a local or national affair? How much would bursaries detract from the increased university funding available through fees?
A: No institution will be able to charge higher fees without an approved access plan that includes offering financial support and outreach schemes. OFFA will scrutinise plans. The Government wants to ensure that students from the poorest backgrounds do not need to take out any further loan on account of higher fees.
We have considered a national bursary scheme and decided against on the grounds that universities are autonomous and must take responsibility for ensuring they have a scheme that is sensitive to their own access agenda.
Concern: That the actual, underlying reasons for the Government’s reluctance to run a national scheme are the administrative cost and accountability – that the Government wishes to distance itself from such controversial considerations as access.
(12) Increased fees are being sold as egalitarian/redistributionist measure. This raises three issues.
(a) That the majority of the population does not go to university and should not be required to subsidise through taxation those that do. What is the proportion of HE costs borne out by public spending currently?
A: “The state will continue to provide the bulk of funding for higher education.”
(b) The New Labour Party is clearly attempting to be redistributionist without higher taxation on those most able to pay. What is the evidence available from the last few years of fee paying about the extent to which better off parents finance the education of their offspring so that kids shoulder a lower, or even non-existent, burden of debt when they graduate. Is it not those who we used to call ‘lower middle class who will face the greatest difficulties here?
A: “We already recognise that better paid parents can make a greater contribution to the higher education of their children: that is why tuition fees are means-tested; and it is also why the maintenance loan is only available in full to students whose parental income is below £31,000.
Concern: The question of the anomalies of means-testing (specifically those ‘lower middle class’ students with e.g. parents earning over threshold for the first time, with huge debts themselves, elderly parents, numerous siblings etc.) has not been addressed. Where are the safety nets? And what will the Government do to ensure that students are aware of them?
(c) What calculations have been made and what expectations do you have about participation of the different economic groups at different universities?
A: “I do not believe that our proposals will make ‘elite’ universities even more elitist: that assertion is based on a fundamental misunderstanding of the proposals. We know that ‘elite’ universities have the most to do on widening participation: that is why our proposals to tie variable fees to access agreements monitored by [OFFA] will have a greater impact in these institutions than elsewhere.”
(13) The labour market problem. How was the 50% target for going onto university calculated, and where does it come from? How does this aim truly fit in with labour market requirements?
A: “The rationale for the target comes from the very high private and social rates of return to HE in the UK – among the highest in the OECD…The Institute for Employment Research (Projections of occupations and qualifications: 2000/2001) has estimated that between 1999 (when the target was announced) and 2010, the UK will need to fill around 1.7m net additional jobs of the sort most likely to be filled by people with HE-level qualifications.”
“…other rapidly growing countries: for example, Australia, New Zealand, Finland, Iceland, Norway, Poland and Sweden al have HE entry rates for young people of over 60%.” |
