New university data shows everyone was wrong about tuition fees

May I introduce you to my latest graph? It’s based on the new data just published about university applications in England and compares the application rate for university places from the most deprived parts of the country with those from the least deprived. As you might expect, the least deprived areas see a higher university application rate than the most deprived. But look what’s happened to that gap:

University application rate graphs

Yes indeed, since the changes to tuition fees in England we’ve seen the gap in applications between the most advantaged and the most disadvantaged areas of the country drop sharply.

That’s the opposite of what critics of the merits of the new system warned about – and indeed not even its keenest supporters that I could find were predicting such an improvement.

Those pesky teenagers have made fools of everyone…

 

Note as per my tests for making sure someone is talking sense when looking at student numbers, tuition fees and all that:

  • These calculations are based on the application rates, rather than raw numbers of applications, and so take into account the falling number of teenagers.
  • These figures are for application rates amongst 18 year olds, so these figures are relevant to discussions such as about the life chances teenagers are getting. They however exclude applications from mature students.
  • And yes, they are application numbers not actual number of acceptances. Those are based on how many university places are being funded in total but the social skew amongst applications is relevant to how socially skewed the acceptances are likely to end up.

* Mark Pack has written 101 Ways To Win An Election and produces a monthly newsletter about the Liberal Democrats.

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80 Comments

  • Richard Dean 31st Jan '13 - 8:52am

    Does it mean that the least deprived are applying less, or the most deprived applying more, or some combination?

  • Interesting. You might conclude that current economic conditions are persuading the least well off that its worth investing in their future, or that there are fewer opportunities for them to go straight into employment, or both.

  • Helen Tedcastle 31st Jan '13 - 10:04am

    To those who are getting excited about the data showing more disadvantaged young people applying to university: We are in the middle of a double dip recession; many young people can’t find a job, ergo, more young people apply to university.

    This is not a vindication of Nick Clegg’s humiliating U-turn on tuition fees – this did a great deal of damage – it’s a sign of the fact that young people are doing the obvious thing in a dire economy with few jobs and apprenticeships on offer.

  • Matthew Huntbach 31st Jan '13 - 10:33am

    “Everyone”, Mark?

    I quote from my article in Liberator June 2011:

    Teenagers are not known for an ability to make careful balanced judgements about their finances and where they will be in middle age. Optimism will win out, when they find the £9000 is automatic and payment is made when they become the wealthy person they all suppose they will, they will take it and not settle for the “second best” of a cheaper degree – even if the cheaper degree is better.

    OK, I’m not explicitly predicting the decrease in the gap between university applications rates from those of differing social backgrounds these figures are showing, but I am going very much against the standard criticism of the system from the left, with its idea it would mean mass drop-out of application on the grounds “they won’t apply, as they can’t afford the fees”. I’m also criticising the right with its naive supposition this would lead to market competition with prices thereby driven downwards.

    Please put this one alongside other predictions of mine which have turned out to be accurate, though when I made them I wasn’t saying the fashionable thing of the time.

  • “This is not a vindication of Nick Clegg’s humiliating U-turn on tuition fees – this did a great deal of damage – it’s a sign of the fact that young people are doing the obvious thing in a dire economy with few jobs and apprenticeships on offer.”

    @Helen: Provide evidence that:
    1=People are more likely to apply for Unversity in tough ecomonic times.
    2=This great damage you speak of?

    Otherwise, it just sounds like you are trying to vindicate your own presumptions.

  • Peter Watson 31st Jan '13 - 10:51am

    Simple question:
    What is Lib Dem policy on tuition fees?

  • Laura Davies 31st Jan '13 - 10:55am

    Is there any data available for mature students?

  • To add to Frank’s answer – there is currently a higher education working group deciding on a new set of policy proposals that will be debated at a future conference.

  • Helen Tedcastle 31st Jan '13 - 12:07pm

    @LiberalAl: ” Provide evidence that:
    1=People are more likely to apply for Unversity in tough ecomonic times.
    2=This great damage you speak of?

    1. There has been a rise in the number of young people this year applying to university, after a dip last year – I don’t regard this as a triumph for Nick Clegg or the coalition’s policies on education – if I was a young person and had to decide either to go on the dole or apply to college, I know what I’d do.

    2. Where have you been the last two years? I draw your attention to Nick’s ‘I’m sorry’ PPB as more ‘evidence’ of public humiliation.

  • Stuart Wheatcroft 31st Jan '13 - 12:19pm

    Helen Tedcastle – Your point (1) is circular: you are arguing that the increasing applications are explained by young people who are unemployed trying for university instead, and citing as evidence the fact that applications are increasing.

    Your point (2) is I think merely a point of confusion: I, and I suspect others, understood it as referring to damage to opportunity, which now appears not to be your intention. That there was political damage is, of course, hard to dispute.

  • The below tells us that there was a sharp drop in applications in the first year that the new fee scheme applied, and that there has then been a slight, partial, recovery this year. It seems difficult to conclude anything very much from that, other than that the new fee scheme seems to have retained a moderate deterrent effect.

    http://www.bbc.co.uk/news/education-21245882

  • Stuart Wheatcroft 31st Jan '13 - 12:44pm

    With the first year, it’s important to remember that there was a degree of transfer to the previous year: people who might otherwise have taken gap years in some cases decided not to do so. The pre-change figures are therefore very likely inflated, with an artificially big drop the following year. Although it is important to note that if we are considering sixth form-leavers then the dip was nowhere near as big as the headline figure.

  • Isn’t the Application figure somewhat misleading? The only figure that matters is ”bums on seats’ . I suspect many kids from lower income families may apply but then get cold feet when it comes to the crunch in Sept/Oct . but I have no idea if this is the case. . Also relevant is the drop-out rate. So we should be looking at how many students actually start University from the various socio-economic groups and how many of these graduate. It’s too early for the latter figure I guess (if the question is impact of tuition fees) but are the application figures very illuminating? I know many people who apply because it is the done thing and also to keep their options open.

  • Richard Harris 31st Jan '13 - 12:59pm

    Please correct me if I am wrong, but I thought those from deprived backgrounds (family income of under 25k) got extra help with their finances directly from the university. Is it not surprising then that applications from deprived areas have held up more than the average?

  • I suspect the huge furore has meant that 17/18 year olds are now more aware that the £9k is not due up front and that nothing is paid back (now) until £21k pa is earned. Now that this awareness is out there it’s possible that reducing the cap back down might lead to even further enthusiasm from potential low-income family applicants as H.E. would become more affordable to those currently at the margin.

  • Peter Watson 31st Jan '13 - 1:58pm

    @Mark
    A quick question about the data in the graph above. Is it based upon Figures 6 & 7 in the UCAS publication to which you link? In my hurry I might have missed something obvious to do with a quintile being a proportion of the total, but those figures show that for the most advantaged quintile (England) the application rate increased from about 47-54% and for the most disadvantaged quintile from about 11-19%. Could some of the “closing of the gap” simply be because there are fewer of the most advantaged children who might apply to university who don’t already do so (i.e. a saturation effect), reflecting a general increase in application rate rather than any effect (positive or negative) from tuition fees?

  • Helen Tedcastle 31st Jan '13 - 2:03pm

    @ Stuart Wheatcroft: ” : people who might otherwise have taken gap years in some cases decided not to do so. ”

    Evidence for this assertion? What is the evidence that young people from lower socio-economic backgrounds would take a ‘gap year’?

    The latter is a middle class luxury – typical that some Lib Dems think ‘gap ‘years are a rite of passage for all young people.

  • Mark “its acceptances rather than applications which matter much more in the end, on which see the note at the end of my post”

    Thanks, but what about my other point about ‘drop out’ rates? Isn’t it the number of ‘graduates’ rather than acceptances which ‘ matter more in the end’ ?

  • @Helen – ‘gap year’ does not always mean a jaunt round the world with a backpack. Some people spend a year or two in work before their studies, as several friends of mine did.

    @others – it is of course possible that any growth in university applications is due to difficulties in the labour market. However university applications have been rising for a long time. How much past growth can be attributed to the labour market?

  • “Duncan Stott “others – it is of course possible that any growth in university applications is due to difficulties in the labour market. However university applications have been rising for a long time. How much past growth can be attributed to the labour market?

    Yes I have noticed this and also a corresponding. Increase in drop out rates. My experience is that going to University is now the ‘done thing’ for many young people – ever since Labour’s 50% target. Actually ever since John Major’s time. Young people who would never have had to go to University in the past to peruse their chosen career are now having to do so. For example, our niece wants to be a Fashion Buyer. In the past she would have joined a good fashion house as an apprentice and worked her way up. Now she has to study for three years at University. A first degree is now so much more common that you see Receptionists and administrative staff who are graduates and many more people having to do second degrees to differentiate themselves. From all the young people we know, it seems the assumption that they will all go to ‘uni’ whether this is the right thing for them or not. All three of our nieces have changed courses half-way.

  • Peter Watson 31st Jan '13 - 4:58pm

    @Phyllis ” From all the young people we know, it seems the assumption that they will all go to ‘uni’ whether this is the right thing for them or not.”
    For some careers, rightly or wrongly, degree level entry has become standard. Interestingly, related to this matter it would be interesting to know the impact on the figures Mark reports above of the requirement for “All new nurses to have degrees from 2013″ (http://www.guardian.co.uk/society/2009/nov/12/nurses-nursing-qualifications-degrees-nmc-rcn).

  • I think we can all agree that there are factors that cannot be taken into account with these figures, and Mark did acknowledge this at the outset. The issue I have is that they are already being used to justify the de-facto change in policy and the wholehearted support of so many senior Lib Dems for something they had campaigned against.

    Free education (up to first degree level for those willing and able to attain one) is a principle I used to hold in common with the party I voted for. Instead I got a bunch of, mainly graduate, MP’s voting for a system that would charge students for the degrees they had the opportunity to get for free. It wasn’t even portrayed as an absolute requirement of coalition, it was defended.

    To my mind it doesn’t matter whether students are put off or not (Matthew Huntbach makes an interesting point about the quality of youthful decision making and I certainly made some howlers before I reached my mid 20’s). It is probably also worth noting that those who are being offered the closest to a free education (due to the additional help available) are within the group whose applications are rising.

    The inconvenient truth is that if 100% of teenagers applied for a University place it only shows that the new system does not discourage them, not that it is fair.

  • Helen Tedcastle 31st Jan '13 - 6:05pm

    @ Mark Pack: ” Those pesky teenagers have made fools of everyone…”

    Not quite.

    The Independent reports that while there is a modest increase (3.5%) of applications for September, the biggest rise is from overseas applications from outside the EU (9.6%) while home applications have risen by 2.8%. That means applications are back where they were in 2010.

    Further, among disadvantaged young people, girls were 50% more likely to apply for a university place than boys.

  • “The issue I have is that they are already being used to justify the de-facto change in policy and the wholehearted support of so many senior Lib Dems for something they had campaigned against.”

    Very good point. The Lib Dems are in a sticky position on this one. If it is argued that tuition fees are not putting young people off going to University then the Tories are vindicated as it is seen to be “their” policy which the Lib Dems had to go along with because of the lack of money with which to fund free higher education for all (the actual Lib Dem policy). No matter what happens, Lib Dems will always be always be associated with betrayal of trust on tuition fees, regardless of whether the policy turns out to be regressive or not. And then there is the question of what the Lib Dem Manifesto 2015 will say about tuition fees. If it keeps the actual Lib Dem policy of free education funded by general taxation then it won’t be credible. If it commits to the current Government policy, the Lib Dems will be seen as being “Tory-lite” and in any case many Lib Dem activists will be opposed to this.

  • Peter Watson 31st Jan '13 - 7:37pm

    I certainly think that regardless of the merits or otherwise of increasing tuition fees and restructuring student loan repayment, Lib Dems have a difficult balancing act to achieve in the campaign leading up to 2015. There is the obvious “trust” issue about broken pledges which will be used as a stick to beat Lib Dems no matter what policy they are discussing, but even on the policy of tuition fees itself, what is to be the party position? If the party continues to oppose tuition fees it will have to contradict evidence it currently uses to say increasing them was okay, and if it decides to accept tuition fees it has to explain why it was wrong before. Perhaps the party can continue to want to “scrap unfair tuition fees” while claiming that the current fee structure is fair, so there is no contradiction? ;-)

  • @Helen:
    “1. There has been a rise in the number of young people this year applying to university, after a dip last year – I don’t regard this as a triumph for Nick Clegg or the coalition’s policies on education – if I was a young person and had to decide either to go on the dole or apply to college, I know what I’d do.

    2. Where have you been the last two years? I draw your attention to Nick’s ‘I’m sorry’ PPB as more ‘evidence’ of public humiliation.”

    1=That is not evidence; that is not even antidote based evidence, that is your feeling about a hypothetical situation. I could tell you my feeling about the situation, that does not mean it is representative or evidence of how people act.

    2=I can assure you have plenty of knowledge about that video; however, one must ask, did you watch it? Nick was not apologising for rising fees, he was apologising for making a pledge that he did not know if he could keep. There is a big difference. Fundamentally, he is saying, sorry, I should have foreseen that Coalition Government was a likely outcome of the election and thus make a clearer pledge. Furthermore, this is not evidence of damage to people going to University. It is evidence that of damage this issue did to the Liberal Democrat party.

  • These data do not have to show how they came to pass in order for them to demonstrate that the predictions of the critics of the policy were false. Maybe that the new system is much better for the least well off than the previous system has encouraged more to take advantage of it. Maybe the labour market had an influence. Maybe the number of people below the lower affluency threshold has increased and everyone made the same choices they would have irrespective of the fees. Regardless of the cause, what we do know is that the gap has not increased, which was one of the main justifications used for smashing up central London and throwing things at horses.

  • @Helen Tadcastle
    “The Independent reports that while there is a modest increase (3.5%) of applications for September, the biggest rise is from overseas applications from outside the EU (9.6%) while home applications have risen by 2.8%. That means applications are back where they were in 2010.”
    For anyone who what’s to check whether the assertion about 2010 is misleading, look at the UCAS report referenced by Mark.

    The UCAS report clearly states;
    “Application rates for English 18 year olds have increased by one percentage point to 35 per cent in 2013. This increase is typical of the trend between 2006 and 2011 and takes the application rate back to the 2011 level after its decrease in 2012.” (and 2011 application rate was above 2010)

    In figures from the report the 2010 application rate was 33.8% and the 2012 figure was 34.8%.

  • Lifelong education should be free at the point of delivery and funded from taxation not from loans taken out by the recipients. I had a free university education. So did Nick Clegg. Why should I want to deny that to today’s young people?

  • “The most deprived are applying more; there has been a levelling off in applications from the most advantaged groups.”

    Unfortunately, another way of looking at it is that the percentage applying from the most disadvantaged group had been growing by 1.1 points a year before 2011, but since then the rate of growth has halved.

    When you say the most deprived are applying more, you really should mention that the rate of increase had been twice as big before 2011.

  • I suspect that it will be 2 or 3 decades before the full effects of this policy can be judged – when today’s graduates, in middle income teaching jobs, etc., will still be effectively paying 9% extra tax on a sizeable part of their income, whilst influencing the educational decisions of their children. Unless we get rid of Clegg and his ilk, and change this appalling policy.

  • Peter Watson 31st Jan '13 - 11:42pm

    @Tristan “These data do not have to show how they came to pass in order for them to demonstrate that the predictions of the critics of the policy were false.”
    So perhaps Lib Dems should congratulate Labour for introducing tuition fees, and ask themselves what other policies of Labour we were wrong to oppose.

  • Mark, this is appalling analysis. You can only look at long term trends to to meaningful analysis. You can’t derive anything from short term fluctuations. There are too many confounding factors from the economy to demographics. For example this graph doesn’t show absolute numbers, but a proportion, which may be influenced by movement of older/wealthier entrants to university when the Coalition first changed funding arrangements and so on.

    Regardless though, are tuition fees now a good thing despite being against Lib Dem policy?

  • Mark Inskip 1st Feb '13 - 8:13am

    @ Chris
    “When you say the most deprived are applying more, you really should mention that the rate of increase had been twice as big before 2011.”
    But that’s not what the figures show, year are the year by year increases for the most disadvantaged quintile;
    2012-13 = +1.1%
    2011-12 = – 0.2%
    2010-11 = +0.9%
    2009-10 = +2.7%
    2008-09 = +1.2%
    2007-08 = +1.0%
    2006-07 = +0.8%
    2005-06 = 0%

  • Mark Inskip

    Obviously I’m talking about averages, because the precise rate of increase is different each year.

    The figures are:
    2004: 10.7%
    2011: 18.6%
    Average rate of increase 2004-2011: 1.13%

    2013: 19.5%
    Average rate of increase 2011-2013: 0.45%

    You started from 2005 instead of 2004, but that had virtually no effect on the average rate, so I’m at a loss to see where your confusion could have arisen.

  • Tom Richards 1st Feb '13 - 11:39am

    Fantastic news. Although not altogether unexpected. I always thought tuition fees were a pretty good idea in themselves precisely because the evidence (in line with what the economics would suggest) suggested that they’d have this effect – and let’s not forget that the net effect of tuition fees is that the students who go on to be bankers pay for the students that go on to be social workers, a laudable end in itself.

    BUT the party went into the last election saying it would scrap tuition fees and then did the exact opposite when they got into Government. It might have been the right policy, but that means it should have been in the manifesto. Given that the opposite was in the manifesto, it was an enormous and unacceptable breach of trust with the electorate. Parties should stick by their manifestoes. Simple as that.

  • David Pollard 1st Feb '13 - 12:02pm

    I can’t agree more with Tom Richards

  • @Ian
    “Obviously this assumes that salary stays static and doesn’t take into account any changes in the repayment threshold which will rise in line with RPI.”

    Classroom teachers receive around 32k per annum for most of their careers. They will be in receipt of the full salary (unless they get promoted) from around the age of thirty until they retire. To base an argument on a starting salary isn’t convincing to say the least (I’m trying my best to be polite here). Your second point about wage inflation being lower than consumer inflation is equally unconvincing as it is a (pretty good) definition of a recession – i.e. people being able to buy less with the value of their labour – and you think this is a good thing! – over the long term it would also lead to enormous problems for balancing the public sector accounts.In fact it would be almost impossible to reduce government debt in a permanent recession. Your argument is thus – if we all keep getting poorer then graduates won’t have to pay their tuition fees back. Can you not see how this might be a massive problem for the government and our economy?

    Tuition fees remain a dreadful idea because:

    (a) between fee repayments and extra tax, graduates will pay far in excess to the government the value of the education they were given. This disincentivises hard work and learning. Not a good thing. Just because it hasn’t happened yet doesn’t mean it won’t in the future. The real test for the current system can only be determined in two to three decades time when the current crop of students realise how much worse off they are compared to their forefathers and their contemporaries who didn’t go on to higher education or how little they’ve got back in return for all their hard work.

    (b) the burden of payments across the graduate incomes deciles is extremely unfair on those on middle incomes. Those who earn little (hardly the point of going to university) won’t pay a thing and those on very high incomes will only pay a much smaller proportion of their lifetime earnings. Tuition fees are fiscally regressive – the opposite of a proportional or progressive graduate tax,

  • @Tom Pollard
    “and let’s not forget that the net effect of tuition fees is that the students who go on to be bankers pay for the students that go on to be social workers, a laudable end in itself.”

    Can you please expain to me how that works? Under a system of HE funded through progressive taxation, the bankers would contribute far more to the provision of social workers than they would under the current system of HE being funded through tuition fees, The marginal tax rate is far lower for high earners under tuition fees, which is kind of obvious really – they stop paying anything as soon as they’ve paid the fees back.

  • Sorry for prattling on, but..

    Most young students are going to still want to go on to HE if they think it will lead to a more meaningful job and increase the value of their experience of life by meeting new people, etc, regardless of the possibility of them not being financially better off than someone that doesn’t go to university. As such, admission numbers are a useless proxy for the electorates disdain for tuition fees. The only people the Lib Dems seem to convincing about fees is yourselves.

    I’d also like to say that I’m fed up of hearing the straw man argument about the fees not being paid up front. I’ve never come across anybody that thinks the fees are to be paid up front, although I have come across wealthy parents who are planning to do so for the offspring.

  • Peter Watson 1st Feb '13 - 1:03pm

    @Mark Pack
    I do wonder whether the requirement from 2013 for nursing to require a university degree may be a significant factor here, possibly negating any claims made about tuition fees having an effect. In terms of applications, nursing is now the most popular degree course and numbers have increased hugely over the last few years as diploma courses are phased out. Additionally, since 2010 scottish nursing applications have been handled by UCAS . In the data provided by UCAS, it appears that nursing applications have been explicitly excluded from time-series analysis of application rates by age but not by background.
    Obviously there is no reason to assume that student nurses come from a more disadvantaged background than other groups (or to assume that they do not), but if the fee and bursary structure for nursing is different then this might also have an effect because of the size of that new group. I would certainly want to be assured that the time-series data being presented here is genuinely comparing like with like, and other factors are excluded or highlighted, before I would have any confidence in some of the conclusions being drawn about the effect (or lack of one) of increased tuition fees on application rates for different social backgrounds.

  • The argument about tuition fees has NEVER been about disadvantaged students being put off applying. It’s just another straw-man. It’s about whether the proportion of HE funding paid for by the graduates themselves and the distribution of payment across different income groups is fair.

    Keep talking about your straw men if you want to, but it’s not going to do anything to persuade voters that the new system is (a) what they voted Lib Dem for or (b) fairer than the last system.

  • “The LEA paid the fees and potentially paid living costs.”

    If the LEA paid the fees, he got a free education. In precisely the same way that school pupils do.

  • Liberal Neil 1st Feb '13 - 1:47pm

    In itself it is good news that the new system does not seem to have put young people from deprived backgrounds off overall.

    I think it is likely that this because the amount graduates will pay back each month will be lower.

    For those of us who believe that higher education should be funded from progressive general taxation it won’t change our view.

  • Mark Pack

    What is your position on this, Mark? Are you saying that the new system is fairer than the old and therefore the 2015 Manifesto should get rid of the ‘abolish tuition fees ‘ policy and replace it with the current one?

  • Michael Parsons 1st Feb '13 - 3:25pm

    No-one has mentioned the £3million p.a. repayments Univerisities appear to be getting from students entering the sex-trades part-time to meet costs; nor that “degrees” seem to have expanded to include what used to be professional apprenticeships – accoutancy, teacher training colleges, nursing, some engineering and Art College courses; so perhaps we are not comparing like with like;and of course if you are are young and unemployed (or only have low-paid prospects) and someone offers £9000 on uncertain repayment terms what the hell? Freedom is having nothing left to lose.
    But of course the real corruption is the abandonment of the liberal arts and humanities and science to calculations of “gain”. Unles we look forward to new epitaphs: here lies Nick who attached 20 000 rear car wheels, David who planted 6 000 olive trees etc. I think I’ll stick with Gray’s Elegy, me.

    But Knowledge to their eyes her ample page,
    Rich with the spoils of time, did ne’er unroll;
    Chill Penury repress’d their noble rage,
    And froze the genial current of the soul.

    Full many a gem of purest ray serene
    The dark unfathom’d caves of ocean bear:
    Full many a flower is born to blush unseen,
    And waste its sweetness on the desert air.

    Some village-Hampden, that with dauntless breast
    The little tyrant of his fields withstood,
    Some mute inglorious Milton here may rest,

    What do we see? Tainted debt.

  • Tom Richards 1st Feb '13 - 3:32pm

    @Steve – in answer to your question (how is it that the new system redistributes from bankers to social workers)?

    So, according to this http://www.payscale.com/research/UK/Job=Social_Worker/Salary the median social worker salary is about 25k, and the median investment banker salary is about 50k . From my experience the social worker thing sounds a bit high, and the banker salary a bit low, but let’s run with it anyway as it’s the best data I can find. And let’s make the simplifying assumption that they earn that for all 30 years until it’s written off (obviously they’ll usually earn less at the start an more at the end but this gives us a rough idea). I’m assuming £27k in tuition fee loan plus 16.5k in maintenance, so total loan is 43.5k

    Social worker pays 0.09x(25-21)=£360 a year (1.5% of income). For 30 years that’s £360×30=£10,800, then it’s written off.

    Banker pays 0.09x(50-21)=£2610 a year (5% of income). We can see he’ll pay it off in 43500/2610=17 years. Over the 30 years he’ll have earned 1,500,000 in income, and paid back 43500, or 3% of his income over the period.

    So the banker pays more in cash terms, and pays a greater percentage of his income over the period – in other words, it’s a progressive system.

    So it’s basically a hypothecated progressive tax. And it’s progressive before you even consider that graduates typically earn a lot more than non graduates – and non gradutes aren’t paying it. Of course, there’s another argument to be had as to whether you should be hypothecating taxes in this way at all – some people might think everyone should have a stake in a universal service like education. But an argument for another day/post, perhaps!

  • Anthony Hawkes 1st Feb '13 - 3:43pm

    We went into the last election with a promise to get rid of tuition fees. As far as I know that is still policy.

  • Tom Richards 1st Feb '13 - 3:43pm

    And, incidentally, as I understand it, it costs a lot more than £10,800 for the university to put a student through a 3 year degree course – particularly if it’s something (say in the sciences) that needs a lot of specialist kit. So the bankers/general high earners are, essentially, paying for the social worker/lower earners. Equally, those choosing to do courses like history or philosophy which are relatively cheap to run are essentially cross subsidising those who do courses like medicine that are pretty expensive.

  • Anthony Hawkes 1st Feb ’13 – 3:43pm
    “We went into the last election with a promise to get rid of tuition fees. As far as I know that is still policy.”

    The 2015 Manifesto is being prepared now and the Higher Education Group is looking at Tuition Fees for the Manifesto. What will they recommend I wonder? Perhaps this thread is ‘softening ‘ everyone up to think that perhaps the new system is ‘a jolly good thing’ really.

  • @Tom Richards,

    The first example you show is for someone that earns less than the average graduate starting salary of ~26k throughout the entire 30 year lifetime of the loan repayment period.

    So, let’s take this example: A classroom teacher earns ~£30,400 per annum on average for the 30 year repayment period (ignoring inflation and interest rates as you did).

    0.09x(30400-21000)=£846 or 2.8% of income

    A banker/lawyer earning an average of £100,000 per annum for 30 years will pay off their loan, so we can only look at the percentage of total income.

    27000/(30*100000) = 0.9% of income over the 30 years.

    Regressive. Very regressive in fact. The classroom teacher’s tax rate is over three times as high.

  • @Tom Richards
    “So the bankers/general high earners are, essentially, paying for the social worker/lower earners. ”

    They’re not really paying for anything if they’re extracting economic rent through massive government bailouts of a fraudulent industry. The amount of tax they pay could well be less than the unearned wealth they have extracted from the taxpayer & consumer.

  • @Tom Richards
    “and let’s not forget that the net effect of tuition fees is that the students who go on to be bankers pay for the students that go on to be social workers, a laudable end in itself.”

    As they would if paid out of general taxation, assuming of course the taxation system is appropriately progressive.

  • Tom Richards 1st Feb '13 - 5:33pm

    @Steve Yep it would, but you’d have to do something quite radical to make it as progressive as tuition fees. Assuming you’re not going to pay for it by cutting spending elsewhere, you’d have to do a tax rise. I guess the natural place to do it would be income tax.

    So let’s say (for example) you put a penny on the basic rate. Assuming the 10,000 personal allowance, that would mean someone on £11,000 would pay about 2% of their income on income tax + (non existent) fee repayments, someone on 25k about 12.5% and someone on 50k about 23%. Compare this to tuition fees where income tax +fees means someone on 11k pays about 2%, 25k about 13.5% and 50k about 27.5%. So tuition fees much more steeply progressive than basic rate change.

    Alternatively you could put down the threshold for the higher rate – but you’d have to do it a LOT (by my reckoning to about 20-24kish) to create a system as progressive as current income tax system + tuition fees.

    So it’s not impossible for the tax system to be more progressive than tax system + fees – but it’s pretty difficult (mostly because personal allowance for income tax is going to be 10k, personal allowance for fees is 21k!)

  • @Tom Richards
    Well I suppose I would have started with the ‘fully costed’ plans in the 2010 Manifesto rather than your position. I also would not want it to be more progressive then the tuition fees example you give. You see I believe the friend of mine who earns £60K plus running a plumbing company should also pay toward the education of the surgeon who successfully removed a Tumour from his brain. And he should pay more towards that then the Senior Nurse earning £40 K with a degree. But less than the surgeon himself who probably earns well in excess of £130K.

    Most importantly I do not want a nurse or social worker earning £25K to pay more than someone who has a non degree oriented job earning the same amount. Society as a whole benefits from those with degrees and society should pay for them. Individuals do benefit, but a progressive tax system will ensure that those earning most contribute most.

  • Steve Way – very good points you make!

  • Ed Shepherd 2nd Feb '13 - 8:31am

    @ Ian Sanderson (RM3)
    ” I had a free university education. So did Nick Clegg.”
    ” I doubt it about Nick Clegg. He is two years older than my son was and like my son (and I) had middle-class parents. And I remember the financial arrangements for my son well. They were the same as they were for me in the 1950s. The LEA paid the fees and potentially paid living costs. However the living costs were means tested and so the parents paid a “parental contribution”. For my son that was ALL his living costs.”
    You prove my point. As I said, Nick Clegg had a free university education. He and his family did not have to pay tuition fees. His living costs will have been means-tested and because of his family’s income he might not have received anything to cover living costs. This debate is about the tuition fees which have been trebled under this government. Nick Clegg got his tuition fees paid for him despite coming from a wealthy family and being guaranteed a well-paid job on graduation. He got a free degree. I think all people are entitled to a free degree, as well. Student living costs are a separate issue. NC’s appearance on “Desert Island Discs” is very instructive on this aspect.

  • The problem is a banker earns so much more than a teacher, that he will always always pay off his loan, while a teacher is unlikely to do so. Once the debt is paid off, his earnings will keep going up, which compresses the percentage stat of his earning being lost, if he loses more in flat numbers. However, as the teachers wealth is not enough to pay off the debt the per cent will not be compressed as he never stops paying until the 30 year mark. So the cap is the problem, if we want a truly progressive version of this system, then we need to remove the floating charge (or loan) system altogether and just have a graduate tax. (Of course, no will support that, but here is what I mean.)

    So if we take how much the teacher earns in his say, 40 years working life and look how much he pays. We get
    30,000 x 40 =1,200,000

    Now his repayments are:
    0.09/9000 =810
    810X30=24,300

    Total of his wealth after loss=1.200.000-24,300=1175700 (or about 2%)

    However, Banker wealth is:
    100,000 x 40=4,000,000

    Now his repayments are :
    100,000-21000=79,000
    9 per cent of 79,000=7110 per year
    7110 x 30=213300

    As he only has to paid up to full 43.500, so actual wealth gain is still massive:
    4,000,000-43,500=3956500 (or about 0.01 of his wealth is lost.)

    However, without the cap, even if stop at 30 years, he will have only gained:
    4,000,000-213300=3786700 (He has lost about 5% of his wealth. So he has lost much bigger per cent of his wealth, but still earned lot more, so still has an incentive do so.)

    The problem is the cap, so if we want a truly progressive system, we actually need a graduate tax, without a cap on amount you repay. Of course, I know this insane and no will support it, but this would be a truly progressive system. (If my maths is wrong, please do tell me, my maths is very poor.)

  • “we’ve seen the gap in applications between the most advantaged and the most disadvantaged areas of the country drop sharply”

    3% over two years is a sharp drop?

  • @Tom Richards 1st Feb ’13 – 3:43pm

    “as I understand it, it costs a lot more than £10,800 for the university to put a student through a 3 year degree course – particularly if it’s something (say in the sciences) that needs a lot of specialist kit. So the bankers/general high earners are, essentially, paying for the social worker/lower earners”

    How much more does it cost? It certainly can’t be as much as they charge to do the degree, otherwise the system as you described it simply won’t work. At a broad estimate, I’d say if it really does cost a lot more than £10,800 for a university to put a student through a 3-year degree course, then the fees system is extremely bad and several points made to justify it are plainly untrue.

    “Equally, those choosing to do courses like history or philosophy which are relatively cheap to run are essentially cross subsidising those who do courses like medicine that are pretty expensive.”

    No, that’s very unlikely. Subjects like history, philosophy, theology etc. don’t have high-earning job prospects. This will affect repayments in the long term (so, they’re less likely to be paying back the full amount) and demand in the short term. Obviously the former means they likely won’t be subsidising anything (in fact, as you probably realised right after you posted, it’s more likely that the science graduate will be subsidising the history graduate). But the latter reduces any chance of subsidy there too: the nature of the market will dictate that either fees in those subjects have to be set very much lower to attract enough students to make the course economically viable, or that those courses will be scrapped altogether.

  • @ Tom Richards 1st Feb ’13 – 5:33pm
    “Assuming you’re not going to pay for it by cutting spending elsewhere, you’d have to do a tax rise.”

    Why? As you implied in your calculations above, is fair to assume that almost all students are currently paying their fees through student loans (rather than paying them up-front from personal wealth). Which means the government is paying for university tuition out of general taxation – it just isn’t counting it as current spending (because it has the, possibly fantastical, belief that this money will be paid back in the future).

    So the cost of higher education must be contained within current spending, we’re just keeping it off the books. That means there’d be no need to cut spending or to put up taxes – the money is already there and already being spent. The only difference would be that if we scrapped tuition fees, we’d no longer be able to hide that expenditure. So it’s the same as PFI – it won’t cost us any more than it is now, it’s just that the government would have to be honest about how much it is spending.

  • daft h'a'porth 2nd Feb '13 - 11:26pm

    Dunno what ‘everyone’ you’re thinking of; personally my viewpoint on them is that a) dumping debt on your descendents for the sake of dodgy accounting is a pretty unacceptable thing to do, and b) it’s a huge barrier that makes university pretty much unavailable for most ELQs, including those who have messed up their first attempt and have to start over, thus meaning that those who make one mistake or end up highly trained for an industry that goes away are fundamentally screwed for life.

    I realise that nobody on this site is particularly bothered about issue b (apparently fairness doesn’t extend to second chances) but I don’t think it’s been addressed, let alone disproven, by your graph.

  • Old Codger Chris 3rd Feb '13 - 3:51pm

    What about families who are not “deprived” but still struggle to make ends meet? And why should family circumstances – good or bad – determine the fee?

    Liberal Al is right. The logical system would be a tax payable by graduates if and when they can afford it. This would also avoid Debt.

  • That everything in the party is judged in terms of the relative effects on the rich and the poor, as if the poor are sitting at home worrying specifically that they are not keeping up with the Joneses, rather than judged on whether it actually tries to improve people’s lot is one of the reasons I am no longer a member.

  • Peter Watson 4th Feb '13 - 12:47pm

    Interestingly, I noticed on the front page of the Daily Express on Saturday that they are running a competition to win £26000 to help pay off tuition fees debt.
    This suggests that the coalition government still has a lot of work to do explaining the system, or simply to be trusted on the subject.

  • Tom Richards 4th Feb '13 - 4:01pm

    Right, so a response to a couple of the comments on this (haven’t had an opportunity to look at this since Friday – sorry to be slow!)

    @Steve Your lifetime calculation for the banker is a different one from what I did – I was assuming maintenance loan as well which makes it 1.5% over the 30 years. I take your point that it is still higher than the teacher on 30k (although about the same as our social worker on 25k).

    On the 30 years (ie lifetime) measure, you pay gradually pay a greater and greater percentage of your earnings up to 36k (assuming, as we have, you earn that flat rate over the 30 years). After that it falls because of people paying it off early. In terms of yearly repayments, they become a higher and higher percentage the more you earn. So it’s unambiguously progressive between 0 and 36k a year earners over the 30 years, and on the yearly measure up to any income.

    Re 2010 manifesto, fair enough – I agree it’s a bit of a straw man to assume it would be an income tax hike – mansion tax might be one way you could raise some of the cash, which would, I assume, mostly hit the very rich.

    Re your Nurse vs Plumber vs Surgeon point, I suppose it ultimately comes to what you see as more important – the person on 60k paying less than the person on 130k (under Coalition system they pay the same) or people on below 21k paying nothing at all. Problem with doing something like a graduate tax is it means there’s an extra burden on those who graduate onto low incomes. I agree that it’s not ideal that someone on 60k pays the same in cash as the one on 130k – but I think it’s far, far less important than making sure that people on below 21k pay nothing, and people on below average (ie sub 26k on your figures) pay less than people on above average incomes, which they do under the new system.

    @LiberalAl Interesting point re the cap – I suppose I reckon it’s a similar point to the one I made to Steve. If you remove the 30 year cap, then low earners would have to pay more in cash, as well as high earners. If you mean removing the 43.5k fee cap (as I think you do) then actually think you make a pretty valid point (given that the 30 year time cap is in place) – I guess this is what the Browne report had in mind. Although there might be issues around the cost to the exchequer – as universities would have always have an incentive to charge higher fees as they’d know the taxpayer would end up paying the bill (as almost nobody would ever pay them off themselves!)

    A graduate tax would mean compared to the Coalition system (broadly), people on incomes between 0 and 30k ish (ie up to average) paying more, people on above average (roughly 30 – 50kish) paying less, and people on 50k+ ish paying more (that’s in cash terms, over their lifetimes). That’s slightly dependent on how high you set the tax (it’d presumably be about 2%), but wherever you set it, that’s the general impact: the below average, poorest, and the very richest graduates lose out, the above average earners win. As I say, when choosing between the systems, you have to weigh up whether it’s more important that the lowest earners pay less or that the highest earners pay more. If you want the lowest earners to pay less, tuition fees are better. If you want the highest earners to pay more, a graduate tax is better.

  • Tom Richards 4th Feb '13 - 4:14pm

    Just noticed comments from GS…

    @GS – think we’re talking past each other a bit here – was probably me being unclear. I’m saying that given every course charges the full fat 9k per year tuition fees, then presumably the university makes a ‘profit’ on the cheaper courses which can be used to offset the ‘loss’ on the more expensive courses. Re your point, nice thing about fees is that if, as you suggest, philosophy students are perfectly rational, they’ll know that they’ll have lower earnings, and thus will have to pay back proportionately less for their course. So, if you take that (admittedly quite classical liberal) view on things, there’s no reason why philosophy courses shouldn’t continue to exist. Actually, if people were purely optimising for lifetime earnings, they’d all be doing economics, medicine or engineering anyway – so we know this isn’t true from experience!

    Tuition fees are indeed a loan, but they’re a loan which the Government knows it’s going to be able to at least partially recover. So, in the long run, tuition fees are cheaper. As a result, simple accountancy means that if you want the more expensive (scrapping tuition fees) option, you’d have to either 1) borrow more, 2) raise taxes, or 3)cut spending somewhere else. And in the long run you’ll have to pay back 1) – so your only long run options are 2) or 3).

  • Old Codger Chris 4th Feb '13 - 4:18pm

    Tom Richards – Surely the impact of a Graduate Tax on various levels of post-graduate earnings would depend on the detail. There could be a threshold greater than the Personal Allowance etc before any Graduate Tax was paid. And it could be levied at (say) 1, 2 or 3 percent depending on the level of earnings.

  • Tom Richards 4th Feb '13 - 5:28pm

    @Old Codger Chris – fair point. But I guess you’d have to do one or the other (lower repayments/tax rates from 9 to 2 or raise threshold). Say you raised the threshold to 21k (like the current fees), then you’d have to make the graduate tax above that threshold much higher than 1-2-3% (as they have with tuition fees at 9%). I would imagine the impact would be rather like the impact of removing the 30 year limit on repayment of fees (everyone pays more) – although, again, devil is in the detail I guess – you could probably make it so above average earners paid more so that, say 21k to average earners paid less, average to highest earners paid more.

    It’s a bit fiddly, so I would imagine it’d be much harder/more expensive to administrate, for what I would imagine would be a marginal improvement – but I’m completely speculating really, truth is I don’t know how much structures like that cost to set up!

  • Tom Richards 4th Feb '13 - 5:30pm

    Would be fascinating to see the modelling BIS/the Treasury did at the time – which I presume they did – anyone fancy FOIing it? Or know whether it’s been released?

  • Tom Richards 4th Feb '13 - 5:53pm

    For what it’s worth, only gov’t public stuff I can find on the graduate tax is here – still interesting but unfortunately from 2003!

    http://bis.gov.uk/assets/biscore/corporate/migratedd/publications/w/why%20not%20a%20pure%20graduate%20tax.pdf

  • AlanPlatypus 4th Feb '13 - 10:57pm

    @ daft h’a’porth

    So right about the ELQ policy. Sadly most Lib Dem members, while remarkably vocal about ‘free’ degrees for first time graduates, will happily throw those that need to retrain to the wolves. The ELQ policy is a dark cloud on the horizon, it will have major impact on society in the future.

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