Future Fees

There’s been a lot of news coverage today arising from a new report by the Confederation of British Industry (CBI) which argues that students should in future pay higher tuition fees to go to British universities. As you can probably imagine this has generated quite a lot of comment, but since some of the remarks I’ve heard are based on misunderstandings I thought I’d give my angle on  is happening and what the implications are.

For a start, the tuition fees paid by students at present are not the sole (or even the largest part) of the income paid to universities for undergraduate education. The way the funding councils work is to pay each university directly an amount for teaching each student (called the recurrent grant). This amount depends on the course. There is a basic level (which for 2009/10 is £3,947), but this is increased for subjects which require experimental work. The result is that there are four funding bands: A (which is clinical medicine, the most expensive); B (which includes science subjects such as physics); C (which includes subjects with laboratory or fieldwork element); and D (everything else).

The level of funding for an individual student in each price band in 2009/10 is

  • band A – £15,788
  • band B – £6,710
  • band C – £5,131
  • band D – £3,947

Physics (and Astronomy) is in band B, so the department receives £6,710 directly from the government for each student doing a course in these subjects.

Brought in in 2006, the “top-up” fee (currently £3225) is in addition to this, although it does not have to be paid immediately by the students. They can borrow the money at an advantageous interest rate and only have to pay it back when  they have left their University and started to earn money at a level sufficient to trigger the repayment. Here in Wales the situation is a little bit more complicated because the students don’t pay the full “top-up” fee payable in England. Instead they pay a lower rate (currently £1285) and the Welsh Assembly Government makes good the shortfall to the University. In Scotland there are no tuition fees payable by the students.

Anyway, for Physics at least, the tuition fee is only about one-third the total income for each student. It looks, then, like the government does actually pay the lion’s share of the cost of higher education, especially in science and medicine. However, it is worth remarking that if the UK devoted the same share of its GDP as the OECD mean (1.1%) then students would not have to pay top-up fees at all in order to fund the entire University system at an adequate level. Clearly a political decision was made that funding Trident, ID cards,  and wars in Iraq and Afghanistan was a much better use for taxpayers’ money than providing universal free higher education.

I don’t actually object to the principle that students should make a contribution to the cost of their university education but I think the fairest way to do that is via the taxation system. There are many problems with the system we have, which is an attempt at a British compromise that actually gives us the worst of all worlds. The Labour party was scared to allow fees to be set too high for fear of alienating its traditionalists by discouraging those from poorer background from going to university. On the other hand, it didn’t want to set them too low because that wouldn’t bring in sufficient extra money. In the end they settled at an in-between level, i.e. one that achieved very little and alienated people anyway.

For a start the level of top-up income is not really high enough to pay for the investment that is needed. Many leading universities are in fact making redundancies because the additional revenue  realised by top-up fees was not enough to meet the rising pay bill resulting from a generous salary settlement last year. Moreover, the idea that top-up fees would satisfy the right-wingers by introducing some kind of “market” was a complete delusion. All universities (big and small, old and new, good and less good) charged the same level of fee.

I went to university in the 1980s when the system was very different. There were no top-up fees and, because I wasn’t from a wealthy family, I received a full maintenance grant to cover the cost of living and studying during the three years of my degree. That’s the big difference nowadays: nobody gets a full maintenance grant. Universities do use some of their tuition fee money to provide contributions to poorer students but they generally amount to a few thousand pounds a year. That’s not enough to live on, so most students either rely on their parents to help them or have to work during term-time. I never had to do either of those.

Anyway the CBI report says that the level of tuition fees should increase to around £5000, the student loan interest rate should increase and there should be fewer bursaries. Even within its own terms I don’t think this makes much sense. In fact, I could understand them better if they had argued to remove the cap altogether. The posh places – Oxbridge and perhaps a few others – which can probably fill their places  charging whatever they like could actually afford a fairly generous bursary scheme that might encourage a few talented working class kinds to go there to ease these institutions’ consciences.  Other universities would be forced to set their own fee levels according to the demands of income and recruitment.  The system would be increasingly differentiated by cost and quality, but students from poorer backgrounds would  be excluded to an even greater extent than they are now. I wouldn’t like a university system built along those lines but it seems to me that it would suit the mentality of the CBI.

The big issue about today’s debate, however, is that neither the Labour nor the Conservative Party is going to say what they’re going to do about university funding until after the general election next year. Certainly  neither of them will say whether the fee will go up to £5000. For once, I agree with Sally Hunt  (general secretary of the Universities and Colleges Union) who has urged them both to come clean. Keeping silent about this when other public sector cuts are clearly on the table is both spineless and dishonest. Just what you’d expect from politicians, in fact.

For what it’s worth I predict that after the next election higher education will suffer a classic double-whammy. Whichever party takes power, the resulting government will be forced to make large-scale cuts in public spending to keep the country’s finances under control. I think what they’ll do is cut the unit of resource (probably by a large amount, say 25%) at the same time as increasing the tuition fee element. They can then claim that University funding has been protected while at the same time cutting the cost of the system to the public purse. Students will end up paying more for less. But, hey, at least it will keep the bankers happy and that’s what we’re here for after all.

6 Responses to “Future Fees”

  1. Chris Crowe Says:

    Very informative article, Peter.

    I am from a working-middle class background, and I was eligible for a loan from the Student Loans Company (the same one everyone uses I believe). I received about £4000 in the first year, which gradually decreased each year until it got to about £3100 in my final year at Nottingham. My family was not poor enough (at the time) to qualify for any additional help, which meant I had to pay £1250 tuition fees each year. Basic annual maintenance in Nottingham is probably around £5000 (living very frugally), so the loan certainly did not cover everything, although it was very useful, and the low interest rate was certainly a factor in deciding to take the loan. A mixture of part-time jobs and parental help made up the shortfall. If the fees had been what they are now, I probably would not have gone to university, fancy loan or not. Even though it does not have to be paid until one is earning over £15K (?), the possibility of such a monstrous loan hanging over a young person’s head is more than enough to put-off a large proportion of those from less-privileged backgrounds. I know many of my younger peers have decided not to go into higher education purely for this reason. Cutting bursaries and scholarships just adds to the bad image the government has conjured up regarding higher education funding. Most people just hear ‘it’s gone up, and there’s no scholarships. I might as well not bother.’
    Certainly for Cambridge, tuition fees make up only a very small part of the total income, so should the onus be on institutions to have the last word when it comes to government spending plans, starving students or not? I think that allowing universities to set their own level of fees will just make the best better and the worst worse, and I do not know whether that would be a good thing or not….

    • Chris

      I guess it’s a very different experience being a student nowadays compared to what it was like for me. I had a full maintenance grant and no fees to pay. I also had to do the Cambridge entrance examination, which is taken in November so managed to fit almost a year’s work in before going there the following October. I never really had to worry about money all the time I was there. What did worry me was being a social misfit, since I assumed my background would set me apart from the others. It did a bit, from some of the Magdalene crowd, but it was nowhere near as bad as I thought it would be.

      Since I was a student >25 years agoand I don’t have any kids of my own going to University it’s difficult to know too much about what the financial issues and other things are like these days. I am, however, pretty sure that with the grant and with having to pay fees I couldn’t have gone to University. My family certainly couldn’t have helped me financially.


  2. Peter,

    I welcome your explanation of the current university funding system in Britain as relatively few people studying, and some working, in universities seem to understand the fairly modest scale of the contribution made by student fees.

    It should be said that the “top-up fees” paid by students were introduced to supplement the fees that were (usually) paid on their behalf by local authorities. This was in addition to the funding from the higher education funding councils, as you explained. Then universities receive research funding from the funding councils (which only indirectly impacts on teaching); and then there is funding for universities from research councils and other agencies (to pay for specific activities such as research).

    I am surprised that the British government chose to develop the current system of student fees. There are arguments for and against having students make a significant contribution to the cost of university education; I shall not enter that debate here. However, given that students are now expected to make a contribution, I have felt that the current system is one that significantly deters people from poorer families from studying at university.

    People from families which have little spare income, and which have little experience of universities, will be significantly worried about the cost of higher education. We know that university education usually means that students go on to careers that pay appreciably more than do the jobs they would have been limited to had they not studied. But individuals from poorer backgrounds often lack confidence that this will be true for them. A central failure of the current system is that the cost has to be paid regardless of whether university education leads to a well-paid career.

    A better system would have been to retain grants and fully-subsidised fee-payment and pay for them by a graduate tax. Perhaps there could be a supplement to income tax payable for 10 or 15 years after graduation. This would mean reclaiming some of the cost of higher education from students but the more financially successful would pay more of the burden. A graduate who took a low-paid job would pay less of the study cost. Potential university applicants from families which have experienced little financial success need not be concerned that they might not benefit financially from university study.

    I had thought in the late 1990s that the Labour government was going to choose an option like this, and I was expecting an announcement about a system of government bonds to generate funding for the several years before the graduate tax began to produce regular revenues. But the government took a very different direction.

    I too attended university at a time when my fees were paid in full by my local authority and my living costs were paid by a (rather meagre) grant. I was poor as a student, but survived without any significant worries about money. I did not have to take a part-time job as a student: doing so would have adversely affected my studies. I was able to go to university and study alongside people from much wealthier backgrounds on an equal basis.

    The system we have in Britain does deter potential university applicants from poorer backgrounds. As such, we have a process that effectively maintains class differences. Many people would agree with us that that is a very unfortunate situation.

  3. One of the sad things about the tuition fee debate is that it has led to university education being discussed solely in terms of how much it increases the earning potential of the students. That wasn’t on my mind at all when I went to university. I just wanted to do something with my mind. Although I have to admit that I am now comfortably off, I went through a PhD and postdoctoral positions that had pretty poor salaries, and it was only a lot later that I started to earn a decent wage. I don’t think universities are there to help people earn enough to buy a big house and a fancy car and spend their lives on the dreary materialistic treadmill that modern society seems to offer. Certainly the country needs qualified doctors dentists lawyers engineers and the rest, but that’s just one purpose of the university system and not – to my mind anyway – the main one. The real reason for having universities is to nurture independent thinkers and to cherish scholarship and research. These things are ends in themselves and need no further justification. Call me old-fashioned.

  4. Chris Crowe Says:

    I agree that long-term job security is indeed an issue. As someone just about to start a PhD, I am unsure exactly how a possible academic career will pan out. It seems to involve ‘floating around’ between institutions until you have done enough 1-2 year post-docs to secure an longer-term position. Whether or not salaries are increased by X%, some would still be deterred purely due to the difficulty in settling down somewhere (wife/kids are still many many years away for those embarking on doctorates I fear).
    Those who are most determined to succeed in their field will work for a pittance, and as Peter quite rightly says, the real reason for having (research) universities is to nurture independent thinking and to cherish scholarship and research. People who are enthusiastic about research have already accepted thay they will not be yachting around Saint-Tropez with *insert trendy celebrity here*.
    Lets see who gets into power next, I certainly don’t think it will be Labour!

  5. We should note that the money borrowed by undergraduate students in Britain to pay their top-up fees is usually less than the money they have to borrow to pay their living expenses. (There are exceptions to this, with students living with their parents sometimes not having to pay living expenses, while the fee systems in Wales and particularly Scotland are more generous to their domestic students.) So even if fees were paid by the state in entirety, most students would still have to borrow significantly to study.

    Peter’s post was about the undergraduate funding system, but some of the comments have mentioned the career system in research and academia. This is perhaps not the place to discuss academic careers in detail, but Chris and others starting their PhD studies need to understand just how poor the career system is in astronomy in Britain. The system is designed to provide long-term careers to a very small minority of people who obtain PhDs. We can argue about what fraction of those obtaining PhD in astronomy (including astrophysics and cosmology) in Britain will go on to long-term careers in university research and teaching here: is it 25%, 20%, 10% or less? (I fear it is 10% or less.) The rest of us must either emigrate or leave astronomy. I hope Chris, if he chooses, is one of those who succeeds to a permanent lectureship. But most people leave through choice, through a disatisfaction with the disruption to their lives imposed by short-term contracts, sometimes through a disatisfaction with the relatively poor salaries, or through reaching the end of the system where there are no further employment opportunities open to them. Phillip will, correctly, express his concerns about the role of luck, rather than ability alone, in securing a permanent position. The system is an almighty mess, but that is the reality.

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