Government uses inflation to regain control of English SE

After ceding control of English higher education to market forces, the government wants it back – and Augar’s response last week means it is well on its way to getting it back.

When the government tripled tuition fees in 2012 and then lifted the cap on student numbers entirely in 2015-16, it handed over huge control over how higher education operates in England. Suddenly, any student could study whatever they wanted, wherever they wanted, as long as a university gave them a place.

The number of students has increased. Universities have grown – and with notable gains in access. While the new higher fees were intended to make the market more competitive, the envisioned fee competition did not materialize and almost all universities were soon charging the maximum of £9,000 per year.

But all was not well at the Treasury – especially after the Office for National Statistics reclassified the way student debt was recorded, bringing it to the current spending books. The scale of public loan subsidies was now at the mercy of student choices and sectoral trends, and ministers had only a limited ability to tell where these trends were heading.

The increase in fees, remember, coincided with dramatic cuts to the teaching grant: £477 million in capital grant and repeated cuts to the recurrent grant too. The loss of income was supposed to be compensated by tuition fees, but whereas the government could previously decide where the tuition grant was allocated, students could borrow their loans wherever they wished. As the Treasury’s share of the tuition bill rose – estimated at 53 per cent last year, or around £4,900 for each student – ​​so did unease with the system.

Augar’s interim response from the government, published in January 2021, made clear its desire to “contain the cost of higher education”. This could easily have been done by lowering the fee cap to £7,500 – as Augar had recommended – and providing an additional subsidy only for courses deemed to be high priority. It looked like that might have been the direction of travel this time last year, when the Department for Education’s letter to the Student Bureau recommended reducing the tuition grant for subjects such as archaeology, media studies and the performing arts.

But that cut caused an outcry in universities and the creative industries, and then-Secretary of State Gavin Williamson eventually reversed the cuts to archeology courses. It’s no surprise, then, that a fee freeze proved more attractive than a reduction in Augar’s final response. After all, why bear the political cost of lowering fees when inflation will do the work for you?

Inflation has already reduced the real value of fees by 15% since 2012. According to an OfS analysis in 2020, universities are already facing deficits per student in all subjects, even the cheapest in the classroom. The OfS has estimated that by 2023-24 the resource unit per pupil will be back to what it was before the fee increase.

This is where the announcement of Augar’s response of £750m of new teaching grants comes in. We know this will be over three years and £450m will be capital investment. If this funding follows last year’s trends – and we have every reason to believe it will – it’s an additional £300m towards largely STEM and medical topics, to top up the increase in £85million they received last year after cuts to media studies and creative arts, as well as the removal of London’s weighting. Combined with the decreasing value of fees, this means that, essentially, we are slowly going back in time to before 2012.

In a sense, this might be something students are happy to hear; the IFS estimates the fee has risen with inflation from 2020-21 levels, by next year it should be £10,500. But students might not like how this direction of travel affects the courses offered. As inflation continues to erode income from non-priority courses, before long many will become unsustainable for universities – which is, of course, the whole point.

The supply spectrum will “tilt” – in the words of Augar’s response – to courses that offer “the best outcomes for students, society and the economy”. From this perspective, Augar’s response is a coup for the government: more control over which courts receive adequate funding, as well as a lower burden on the public purse, as new financial measures mean that students will have to pay off more of their debt.

But it raises fundamental questions about how the sector will meet future demand. With a demographic explosion on the horizon and a growing demand for international students every year, how will universities decide what their future student body will look like? This may not sound like a student finance question, but it is. To supplement the dwindling resource unit, universities could, for example, recruit more international students, whose fees are not capped, and use the surplus to subsidize domestic education – but only up to a certain point. point. University places are not infinitely expandable, and the current surplus of international students is largely used to subsidize research – a model that research-intensive universities, in particular, are loath to embrace. discard.

Augar may be over, but the hard choices are just beginning.

Alexis Brown is Director of Policy and Advocacy at the Higher Education Policy Institute.

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