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False Accounting? Why Higher Education Reforms Don’t Add Up

The Coalition government’s reforms to higher education funding in England have been enormously controversial ever since they were first announced. But why did the government decide to go down this path at all?

In this groundbreaking research paper, written on behalf of IF by higher education expert Dr Andrew McGettigan, he argues that the main reason why the government was so keen to enact wholesale changes to the English higher education system was because it would enable them to claim they were reducing the deficit. Directly funding higher education through block grants from the Treasury would have led to a bigger financial deficit; however, replacing direct funding with larger loans taken out by students enables the government to claim that it is lowering the deficit because of an accounting convention which treats loans as an asset rather than a liability.

This report shows that it will be future generations who feel the effect of this accounting trick in the long term, because a very high proportion of this student debt is unlikely ever to be paid back. In the meanwhile, today’s students are being burdened with more and more borrowing – which will lead to higher repayments during their working lives – in order to support a political narrative about reducing the deficit which, Dr McGettigan argues, is unlikely to produce any actual savings in the long run. This report should be read by anyone with an interest in higher education financing, as it offers a masterful exposé of the false accounting that has now been placed at the heart of the system.