Today the Government has outlined its response to the Browne review, and the future of higher education funding. This is arguably the most challenging issue for Liberal Democrats in the coalition so far.
Our party has long prided itself on its commitment to education as the great leveller; the best way to create social mobility and equality of opportunity in society. The flagship “penny on income tax for education” was one of the reasons I joined the party in 1997. My first conference speech was in a debate about student funding, as we passed our policy to abolish tuition fees. Abolishing tuition fees remains Liberal Democrat policy.
I still believe that university tuition should ideally be funded from general taxation. Yet today, we’re facing a situation that is far from ideal. Labour left us with £1 trillion of national debt, and an urgent need to tackle the deficit – we are currently spending £120 million a day on debt interest alone.
Accordingly, the CSR outlined difficult cuts across Government, including in the Department of Business, Innovation and Skills, which until now has spent 70% of its budget on universities. By protecting science and arguing the case for further education which form most of the rest of BIS spending, the 25% reduction in the BIS budget has resulted in a £2.9 billion cut to the higher education teaching grant.
Without a way to replace this funding, our universities and students would suffer. Mass university closures, slashing of student numbers, severe reduction in teaching quality… not a tempting prospect. The alternative is to make up the shortfall by asking graduates to contribute more.
Of course, in the coalition agreement Liberal Democrats had negotiated an opt-out – an opportunity to abstain on the issue. We could have left it to the Conservatives to present plans for unlimited fees, with no regard for a progressive repayment system, and no requirements for top universities to do better on access for poorer students. Instead, we got involved to make a Liberal Democrat difference, and create a fairer system. That’s what Vince has delivered.
Under the government’s proposals, upfront tuition fees will be abolished for part-time students. Universities will be able to charge up to a £6,000 annual cap, which will replace most of the funding lost through the CSR. For those who wish to charge more, they will have to meet tough requirements on access for poorer students, and there will be an absolute cap of £9,000.
The graduate contribution system will be progressive, based on ability to pay. No graduate will have to start paying back until they are earning £21,000, and they will not accrue any real interest on their loan until then.
As their income rises, so will the interest rate they are charged, meaning that higher-earning graduates contribute more. If their income falls back below £21,000, for example because of maternity leave, their repayments and the interest accrual will stop. Richer people who want to repay their loan early will pay a penalty.
After 30 years, any outstanding debt is written off, which will apply to 60% of graduates: only the top-earning 40% will pay back in full. The bottom 25% will be better off under the new system than the current one. We are taking Labour’s flat rate poll tax for students and replacing it with a fairer alternative.
We didn’t win the election, so we can’t deliver on everything we promised to do as a Liberal Democrat government. On higher education funding, that means that rather than being able to increase government spending on universities, we have had to work for a fairer system.
I know that many members will find this difficult, but I hope it will also be understood that there is no easy answer to the unenviable choices we have to make. Cut higher education or further education? Or science? In the end, science has been protected in cash terms, and we have shielded further education from the worst.
Universities will still continue to have secure funding, but graduates will contribute more when they are earning more. We have improved the situation for part-time students, poorer students and poorer graduates. That’s a fairer system.