HE Funding Cuts & Higher Fees: Does the Taxpayer Save Money?

In light of the recent reports that university courses are to cost an average of £8,393 per year from 2012 – nearly £1,000 more than the £7,500 the Minister for Universities and Science had insisted they would cost and on which he based his calculations – I have decided to look again at why I opposed, and continue to oppose, the increase in higher education tuition fees.


„For a nation of our scale, we possess a disproportionate number of the best performing HEIs in the world, including three of the top ten.“

So says Lord Browne in his report on higher education funding and student finance, published last autumn. In fact, in the latest rankings, there are now four British universities in the top ten, with Cambridge sitting pretty in first place ahead of such vaunted private US institutions as Harvard, Yale and MIT.

I know what you're thinking: „If it ain't broke, don't fix it.“
Unfortunately, every silver lining has a cloud.

Lord Browne wasn't finished: „The current funding and finance systems for higher education are unsustainable and need urgent reform.“

Sure enough, the Coalition Government announced a budget that revealed a 60% cut in the teaching grant for universities, retaining some funding for science, technology, engineering and mathematics, whilst completely withdrawing funding for the Arts, Humanities and Social Sciences (the irony being that only one member of the Cabinet studied a science subject as an undergraduate, the implication being that people with their educational background do not add to the „economic health and well being of the nation“).

Luckily for us, Browne was a man with a plan and the Coalition Government tabled a motion based on his recommendations. On December 9th, 2010, the House of Commons voted to approve the Conservative/Liberal Democrat administration's plan to treble the maximum fees universities could charge students.

Claire Callender, Professor of Higher Education at Birkbeck and the Institute of Education, University of London, sums up the situation thus:

„The government is withdrawing the funds it gives universities for teaching most of its undergraduate courses but will continue to subsidise science, technology, engineering, and mathematics (STEM) courses at a reduced level. The lost income stream will be replaced by higher tuition fees raised from £3,290 to a maximum of £9,000 from 2012/13. Students will be able to repay their fees on graduation via income-contingent student loans, which will remain heavily subsidised by the government.“

Will Charging Higher Tuition Fees Save the Taxpayer Money?

Back in November 2010, Nick Clegg informed us that the raising of tuition fees was necessary „Because of the financial situation... The truth is before the election we didn't know the unholy mess that was to be left to us by [the Labour] party.“ The following month, he was at it again stating „An expanding HE sector means expanding public costs, too. In an ideal world it would not be necessary to ask graduates to paymore towards their degree. But we do not live in an ideal world. We have an economic mess to clear up.“

Sounds reasonable, doesn't it? How can we secure funding for an expanding Higher Education sector when cutting public spending is a financial imperative? However, one doesn't have to look very hard to see how the reality of the situation differs.

Firstly, and most obviously, the funding the inflated loans to students from 2012 onwards will increase public expenditure throughout this parliament and the next, which gives the lie to the repeated claims of Nick Clegg and others that the cuts are an unfortunate consequence of the current economic climate or even due to mismanagement by the outgoing Labour administration.

Secondly, rather than expanding, the Parliamentary briefing papers state that “higher education sector in England especially is faced with... no increase or a possible cut in home undergraduates.“
This flies in the face of the Browne Report's stated aim that „The higher education system will expand to provide places for everyone who has the potential to succeed“. Unless, that is, by „ everyone who has the potential to succeed“, Lord Browne means foreign students who have the money to pay upfront fees.

Thirdly, only a minority of graduates are ever expected to earn enough money to pay off their loans. The rest will struggle even to pay off the interest on their debt, before it is written off at taxpayer's expense after thirty years. The government itself estimates that 50-60% of graduates will have some or all of their debt written off.

In light of this, an analysis by the Higher Education Policy Institute concluded that if the new funding system yielded any savings to the taxpayer, they would be marginal. More worrying was their finding that the new system was just as likely to result in increased public expenditure in the long term.


In summary, passing the cost of higher education onto graduates will see them saddled with debt for the best part of their working lives. Funding the loans will not only increase public spending in the current parliament and the next, it is as likely to cost the taxpayer more in the longterm as it is to save public expenditure. The only people better off financially would seem to be the banks from whom the Treasury will need to borrow the money to finance the loans.


In a future post I will consider:
Does marketisation of HE improve quality for the student?
How will the changes affect social mobility?
Graduates earn more money than non-graduates, why should the taxpayer fund their education?
How higher education has been redefined as a private investment rather than a public good.