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More fees, less loans, some grants?

By Joe Rukin

The long awaited review of higher education funding policies will be an even longer wait after it formed no part of the Chancellors comprehensive spending review, despite Tony Blair's insistence that the main priority would be education. Plans will now be finalised in October, but the government looks set to raise tuition fees whilst students from 'higher earning' families may be barred from receiving loans. The sticking point that has forced Gordon Brown to leave student funding out of next weeks comprehensive spending review is the question of whether to introduce a limited form of grant, which he is said to be dead against. What is definite is that plans for both FE & HE have one central theme- means-testing.

The government has been forced to rethink its plans for student finance after results for the overwhelming success of further education Educational Maintenance Allowances (EMAs) which have been trialed in 30 pilot zones. Civil Service sources say difference in retention and completion rates between colleges in and outside the trial zones is stark, and has prompted the government to realise the abolition of the grant has done the exact opposite of their HE policy objective, to increase social inclusion and participation rates at University.

EMAs are now likely to be extended to FE students in the rest of the country in the spending review, and may cover first year HE students whose families currently receive child benefit, but it will be a bitter-sweet pill. When Gordon Brown first announced the pilot in 1998 he said;
"If, as we expect, the new educational maintenance allowance succeeds in encouraging young people to stay on in education, we plan to introduce it nationally, using the money currently spent on child benefit post-16."
This accounting slight of hand will allow the Chancellor to kill two statistical birds with one stone, simultaneously cutting benefit expenditure and increasing education spending and saving Ł330m, just in time for the new figures to be ready for the next election, and has not only been slammed by the Child Poverty Action Group, but also ignores the pilot results. Up to now in the pilot areas, families have received the EMA whilst continuing to receive child benefit. The savings will come because child benefit is paid at a flat rate to everyone, whilst EMAs are means tested and currently worth Ł5-Ł40 per week. The chancellor now has three months to figure out a similar way paying for the extension of grants to HE students. Middle-income families are likely to be hit hardest. Martin Barnes, director of CPAG said
"An expansion of the education maintenance allowance scheme should not, and need not, be funded by the removal of child benefit. Abolition of child benefit could create understandable resentment for families on modest incomes. Child benefit has been paid to parents in the areas where education maintenance allowances have been piloted, so the impact of abolishing child benefit to finance a national scheme is not known. A commitment to tackling child poverty requires a commitment to maintaining a universal benefit which helps prevent families' falling into poverty in the first place."

The announcement that the government were to spend another at least another three months considering the plans came after the education select committee called to increase tuition fees through making the mean-testing scale a bit steeper, give limited means-tested grants, and bring and end to universal loans by, you've guessed it, means testing. The report more or less follows the predicted line, except that it says the abolition of the grant was an "inappropriate response" to the findings the Dearing Report in 1997. Despite the massive voices of contempt given to election canvassers in last years election over tuition fees and grant abolition, the education committee has decided that the Universities come off top in the battle for funding. The means testing of loans could also herald a pilot of commercial rate loans, which may be charged at 2% under commercial rates, netting the treasury an extra Ł400m/year, which is likely to be more than what will be spent on the partial reintroduction of 'grants'.

Tory leader Iain Duncan Smith has also told the audience of BBC One's Question Time that his plans were extremely similar;
"Getting rid of maintenance grants for pupils from low-income families was a big mistake. We certainly need to look at reinstating that. Tuition fees, the level at which people pay them is far too low - Ł10,000 - and we certainly need to think about lifting it above that, we need to make it much higher."

One place where there will be grants next year is Wales. The Welsh Assembly has announced the full details of the Assembly Learning Grant which will be available to 50,000 HE & FE students over 18 from next term. Under means testing, students will receive an average grant of Ł935, ranging from Ł750 to Ł1,500 on top of current loan levels. The Welsh Assembly has no power to influence tuition fee levels. Only "home status" students ordinarily resident in Wales will be eligible to apply. Grants will be awarded if residual parental income (gross income less taxable allowances) is below Ł15,000. In 1997, the British Government copied the Australian student funding which started in 1995. Student campaigners against the proposals to introduce partial fees in both countries had argued that once the fundamental principle of charging fees versus free education had been breeched, it would be only a matter of time before the proportion of the total fee paid would be increased. At the time Sir Ron Dearing (now Lord) who headed the report which told Britain to follow the Australians, but not abolish grants, suggested that the important thing was to broach this principle. He recently told the Guardian;
"I was very much of the view that there was a crisis in funding of higher education and the last thing I wanted was no resolution of the crisis. What mattered was a quick decision to produce a flow of money. It wasn't what we'd proposed, but the ice had been broken on tuition fees."

In England & Wales the maximum percentage of the total average fee paid by a student is 25%. This was set at Ł1,000 per year on introduction in 1998 and has risen Ł25/year since then. In Britain, last years Ł1075 fee was deemed to be 25% of the national average cost of university tuition, where in Australia fees are a percentage of the actual course each student does, making many science based courses extremely expensive. In Australia in 1995 the percentage was set at 20%, in 2000 it was 32%, whilst the average percentage of the tuition fee (taking into account students who qualify for reduced fees) has risen from 18% to 25%. 'Making students from high earning families pay more for higher education' is what the current British plan is currently being described as, but whether this will take the form of a secondary 'top-up' fee paid direct to the institution, or whether it will simply mean raising the maximum fee and changing the means-testing boundaries or whether it will mean paying a percentage of the actual course of study -or even the average of the institution in question- is unclear.

Currently all three sides in higher education; universities, lecturers and students are all demanding more money. Lecturers are threatening Strike Action for next term, whilst universities claim they need Ł5bn to repair buildings and have been pushing for top-up fees. It seems the universities have had the best lobby so far as their wish will be granted. A source Edinburgh University said: "One of the problems is clearly that the funding to teach the students is going down on a per capita basis and continues to decline. It can't go on, something has to be done and top-up fees would be a route to solve the problem. Obviously in Scotland the problem is that the Executive has set its face quite strongly against top-up fees and most of us would prefer not to have them, but if it's the only route of sustaining a higher quality education system I think the sector will almost be forced into it."

Both Estelle Morris the education secretary, and Margaret Hodge have agreed that any extra money for higher education should go into university budgets rather than students' pockets following government-commissioned review had identified a Ł1bn annual shortfall in funding for higher education, but wouldn't go as far as admitting they were wrong. Sir Richard Sykes, former member of the Dearing Committee and now at Imperial College and one of the hardest advocates of top-up fees admitted
"Dearing was stitched up before he started. It was a political issue. It was purely to get the thing of some students paying something towards their education on the table. This was a cross-party arrangement... a lot of good things came out of it but it could have been a lot more aggressive in its recommendations. The recommendation was that maintenance grants should be maintained and they bloody well scrapped them before the report came out... you can't deal with it like that."

In an article to the Guardian, Mandy Telford, NUS President praised the governments efforts to tackle student funding;
"It takes a good government to recognise its mistakes, but it takes an even better one to rectify them. Both Tony Blair and Gordon Brown made a promise at last year's Labour party conference to improve the student funding system; now is the time for them to honour that promise."

"The government has made a manifesto commitment to get more young people into higher education, an ambition the NUS applauds, supports and actively works towards with the Department for Education and Skills to help it deliver. It is now time the government supported students' ambitions to complete their education. The spending review and the finance review are golden opportunities for them to finally deliver."

Paul Mackney of lecturers union NATFHE said that there was little to look forward to;
"It is encouraging that the report recognises the need to provide maintenance support for FE students, who until now have been ignored. It also recognises that finances available to students should 'reflect the realistic cost of studying'. Sadly, this principle is used to advocate bigger loans - with their consequent bigger debts - instead of a realistic maintenance allowance to attract poorer students."

"The continuing prospect of inadequate loans and future debt will still deter many potential working class and ethnic minority students. These proposals won't attract sufficient non-traditional students into HE for the government to reach its targets for wider participation. It is disappointing that the committee failed to reject the idea of institutions charging differential tuition fees. This would lead to a two-tier system of HE and whilst some bursaries might accompany its implementation, high-fee institutions would still become 'universities for rich kids. If the government really wants to widen participation it should bite the bullet and fund it through progressive taxation."

Universities may also be hit in the pocket by a test case ruling from the European Court of Justice involving a German University stating that exempting academic bodies from VAT on commissioned research is illegal, which may price many out of research. Though this problem will be worse for some. After this years RAE which cut research funding to many institutions, the select committee will also separate funding for top research institutions and encourage the rest to "play to their strengths".

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11th July 2002
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