Pat McFadden on the Browne report

Student finance always combines policy with highly combustible politics. And so it is with the parties treading round the Browne Review as if it was an unexploded land mine, accompanied by headlines about degree costs running into tens of thousands which alarm students and their parents alike.

But first, step back. Many similar headlines were around in 2004 when legislation increased fees to £3,000. Since then participation has continued to rise, including from low income groups, confounding predictions that fear of debt would put off prospective students. Upfront fees were abolished, making higher education free at the point of use for students. Graduates paid but only when they were earning. And safeguards were built in to write off debt if graduates took time out of the labour market to have children or had low lifetime earnings.

There were also less welcome consequences of the 2004 changes. Charging no real rate of interest on loans had the unintended side effect of limiting student numbers because it costs the state more to borrow the money for the loans than it gets back in repayments. So although participation has gone up, universities are still held back from taking on as many students as they would wish because it is too expensive for the government.

It may be galling for today’s generation to be told by Lord Browne’s report that they will have to pay more by a generation that received higher education for free, but free higher education meant higher education for the few. Far more people go to university today. And the benefits of a degree in terms of employment and life chances are still significant. Payment is here to stay and the issue for the future is will it be done on a fair basis which will drive up participation across the income scale and the quality of our universities?

Browne maintains the position that students should not have to pay upfront. But he proposes a number of changes to the current regime too. Fees for part time students are to go – something long overdue. The repayment threshold is to be raised from the current low level of £15,000 to £21,000 and after that lifted in line with average earnings.

For low-earning students he keeps the loans free of real rates of interest, but for higher-earning students they would now pay a real rate of interest equivalent to the government’s cost of borrowing. This means that higher earning students will pay more and reduces the perverse incentive on governments to hold back participation because of the cost of borrowing for the loans.

If you’re unemployed, you won’t pay. If you have a lifetime of low earnings, the rising threshold protects you and the remaining debt is written off. If you take years out to have children, you won’t pay.

More controversially, he proposes no cap on fees but instead a clawback mechanism where, as fees go beyond £6,000, more and more of the money goes back to the government to be recycled into support for low income students. This may mean an effective cap at some level above £6,000 but the lack of a hard cap could result in a fear factor which is unnecessary. If some of the very high fees speculated about in recent days are unlikely in reality, then there may be a case for a cap to stop fees rising without limit.

Finally, he rejects a graduate tax. His report says it would have heavy upfront costs because no revenue would come in for years, that some graduates would end up repaying several times the cost of their degrees and that repayments would start when graduates earned £7,000 per year instead of the £21,000 under his proposal. Advocates of a graduate tax respond by arguing for higher starting thresholds, caps on repayment, cut off dates and other changes which gradually make the proposal look more like Lord Browne’s by the time they are finished. In the end, the real difference is whether the money goes to the universities or to the treasury and whether or not what you pay relates to the cost of your degree.

The truth is that there are many tax-like elements to the Browne plan. You only pay when you are earning above £21,000. And you pay more if you earn more. Someone earning £20,000 will pay nothing, someone earning £25,000 will pay £7 per week and someone earning £50,000 will pay £50 per week.

While that argument continues to run, there are other changes Labour could argue for. One area could be a cap on fees. And if this meant some revenue was lost, either interest rates on higher earners could be raised or their repayment period extended, making the system more redistributive. Thus the recommendations could be amended to give greater certainty on future costs for graduates while spreading the burden of doing so according to earnings. And Labour should certainly take the government on over levels of participation because the government’s continued attacks on Labour’s ambitions to increase it are shortsighted and will end up denying people the opportunity higher education brings.

The Liberal Democrats have of course received a lesson about what is wise or unwise to sign before an election. Vince Cable has ditched his flirtation with a graduate tax and now finds himself trying to sell the new progressive repayment element as a reason for abandoning the pre-election pledge not to raise fees signed by all of his MPs. Expect much talk too of what a great victory it is that students will not have to pay upfront, even though they haven’t had to do so since 2006.

While Labour should certainly point out that future Lib Dem piety about honesty in politics will be treated with the respect it deserves, we should also argue for a system which could be implemented soon, raise participation, and institute fairer repayment than at present.

Universities will not want to see this bogged down for too long. They know that the chancellor stands with his axe over their funding and more money has to come from somewhere if the funding per student is not to be decimated and the critical role higher education plays in our economy not damaged for a generation.

Pat McFadden is Labour MP for Wolverhampton south east.

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3 Responses to “Pat McFadden on the Browne report”

  1. Ian Pace says:

    Are we to take it that you will vote for the bulk of these measures, then, in opposition to the principled Liberal Democrats who still intend to oppose them? Like so many, you are prepared to take much of what’s said by Browne as it stands, rather than seriously challenging it – but that’s not so surprising considering this is the culmination of a process set up by Blair’s New Labour.

    The relative proportions of GDP spent on higher education in the UK and other developed nations (including even the US!) is all-revealing. Proper progressive increases either in taxation or distribution of revenue raised through taxation is necessary to maintain a decent HE sector, however much that conflicts with the Blairite hijacking of the Labour project.

    You say ‘Universities will not want to see this bogged down for too long’ – who exactly represents the ‘Universities’ in this case? Not the students, I’m quite sure, who have basically been sidelined from the whole process. In line with the Blairite agenda from which I was hoping the party was finally moving away, you associate the interests of an institution merely with its bosses. This whole affair is a stich-up between over-paid university VCs and administrations and their chummies in all political parties.

  2. AnneJGP says:

    University funding is a difficult topic, I acknowledge. Personally I am uncomfortable with the ethos of “student loans” because it makes the assumption – and teaches our young people – that going into debt is normal. For that reason I would find some kind of “graduate tax” scheme more acceptable, even if the practical out-working was virtually identical.

    Student loans were introduced against a background of personal debt having become socially acceptable. We seem to be making the assumption that this view will continue. It may not.

  3. Cobbett says:

    Has anyone noticed how the government will scam students if it follows Browne`s suggested “levy” to control excessive fees ?
    Every £1000 of fees above £6000 has a rake off to the government (report p.37). Browne`s suggested £7000 fee to cover the total withdrawl of government funding for the humanities already gives the government £60 per student that the student will be paying back for 30 years.
    If Oxbridge goes for fees of £12000 a year the government rake off from the student`s £36000 is over £9000. Every £1000 over £12000 the government takes £750 but it would still be worthwhile for Oxbridge to try, may be, £20,000. The student pays back £60000, the government gets £27720.
    Fees at these rates give big profits on staff costs to Oxbridge colleges, allowing them to accumulate all their endowment income. In 2008-2009 Oxford colleges had £738 million in land, £1550 million in shares and cash ( up from £1.2 billion in 2001. Cambridge has more.(THES 13/7/01)
    Browne hits teachers and the children of teachers and showers money on Oxbridge and government.

    Chummies indeed !!!

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