Can Britain afford higher tuition fees?

David Kingman asks if higher tuition fees that the government plans to charge will actually cost it more money because of a financial miscalculation


Since the government’s plan to charge £9,000 a year for tuition fees was announced, most of the debate surrounding them has centred on whether the plan is socially, rather than economically, viable.

Commentators have questioned whether it will hold back social mobility by further disadvantaging people from poorer backgrounds who decide to attend university, and if it will harm the vital role universities play in our society as engines of social, scientific and cultural thought.

However, a new criticism just launched centres on the economic affordability of the plan itself. Revised calculations suggest the government may not actually be able to afford an initiative that it originally came up with in order to save itself money – and the fact this wasn’t predicted at the time should make us all question its economic competence.

Universities charging higher than expected fees


According to the Government’s Public Accounts Committee (PAC), there could potentially be a shortfall of millions of pounds – but its true extent won’t be known until all students have enrolled on their courses in October 2012.

This is because the government pays all the students’ fees upfront in a block grant to Universities, and then recoups the money over a period of years from the students themselves.

However, when calculations were made about how large this block grant would need to be following the increase in tuition fees to £9,000 a year, the government assumed that far fewer universities would charge the maximum amount.

£9,000 per year was supposed to be charged only in what the government called ‘exceptional circumstances’ and it assumed that the typical university would ask for no more than £7,500 from its students. Yet reports suggest the average will actually be somewhere around £8,765, leading to a potential funding gap of £95 million pounds a year that will have to be plugged either by an increase in the block grant from the government – or by universities reducing the number of places they can actually offer to students.



Oxford stages vote of no confidence in David Willetts


It seems very obvious that the government should have predicted the universities would charge this level of tuition fees and budgeted accordingly.

To start with, cuts to other sources of funding mean universities need to derive more money from their students. At the same time, as much as universities are devoted to high ideas and intellectual progress, much of the work they do to attract students necessarily revolves around the grubbier business of brand-management. In many ways, Higher Education is a sector devoted to the superficialities of acquiring prestige – universities need students to view them as top-of-the-range places to study, or else they won’t come, and fewer students means less funding for teaching and research. Reputation is everything.

That’s why it should come as no surprise that almost every university wants to charge the highest possible level of fees, as not charging them implies that a place is substandard, and risks reducing its reputation in the eyes of students and employers.

The government should either have realized this in the beginning, and drawn up a budget that allowed for all the major universities to charge the highest possible level of fees, or found some way of severely disincentivising them from doing so if they were really serious about limiting £9,000 to ‘exceptional circumstances’.

This lapse reflects poorly on the government’s overall changes to university funding, and has added to the chorus of criticism which has been voiced by both academics and students since they were announced.

It reached a new level on Monday 6th June when the Congregation of Oxford University (a gathering of its senior academics) pledged a vote of no confidence in the Universities Minister David Willetts, the first time ever that this has happened.

Private options begin to grow


Meanwhile, some academics who despair at Britain ever striking a workable bargain between affordable government funding and student debt have gone about creating a radical alternative.

The philosopher A.C. Grayling, formerly of Birkbeck, University of London, has announced he will be the first Master of a new private college he intends to set up, alongside a group of other “big-name” academics and with funding from the private-sector.

New College for the Humanities, London, is set to open its doors in Bloomsbury in 2012. Students will be taught a range of courses in eight subject areas, including history, law, economics, English literature and philosophy, while students will also take modules in science literacy, logic, critical thinking and applied ethics.

Alongside Grayling in the auditorium will be evolutionary biologist Richard Dawkins, the historian Niall Ferguson and the literary theorist Sir Christopher Ricks, among other well-known intellectuals.

Their company doesn’t come cheap. The new university will charge students £18,000 a year, leading to accusations that it will entrench privilege within the higher education system; on the other hand, it was also announced that 20% of students in the first year will receive financial assistance, and the scheme has been lauded in some quarters as a viable way of increasing provision in the Higher Education sector.

Whatever people think about business-model, this may become the norm in a number of years’ time. Grayling himself said: “It is the economic reality. The £9,000 cap is completely unsustainable. The true cost is way more and that ceiling is going to have to be burst. Other universities might also think ‘either we sink or go independent’.”

This touches on the real intergenerational issue at the heart of the university funding debate, which is that for the first time the system will either require students to take on thousands of pounds’ worth of debt in order to fund their educations, or the government’s parlous, overstretched finances will need to be extended a little further to keep the current system in place.

That may only realistically be done with higher levels of government debt, which the present younger generation will then have to pay off through increased taxation when they’re older, in addition to the myriad of other generational disadvantages they look set to inherit.

Which is the better option for their future?