Will coronavirus make rocks melt in the sun? – Jonathan Simons

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The Covid-19 global health pandemic has placed Scottish universities under significant financial pressure. In common with universities in the rest of the UK, they are facing what is inevitably termed a ‘financial black hole’ from loss of conference and accommodation income this summer, and fears that international student numbers will drop dramatically for the academic year starting this Autumn – and potential for much longer.  Universities Scotland estimates that on a (plausible) drop of international student numbers of 50%, there would be a funding shortfall of £435m across the sector, which is more than 10% of all university income in Scotland.

Universities are already reacting. St Andrews’ Vice Chancellor has written to all staff warning them of a £25m gap. Aberdeen has frozen all construction work and staff recruitment and is predicting a significant fall in their £50m income from international students.

This crisis has also not hit a sector in rude health. Audit Scotland calculated that core funding from the Scottish government has declined by 12% in real terms in the last seven years. And the recent European Universities Association survey found the finances of Scotland’s universities to be in “sustained decline”.

It is implausible that the Scottish government could or would make up the gap from reduced income from international students. The last budget round cut university income further, and  as I write, it isn’t even clear they’ll make up the £90m spent on keeping university fee-free for EU students studying in Scotland at the moment

So either costs have to shrink significantly – which means either slashing student numbers, closing courses, or potentially even university mergers – or income has to rise from another source. And if we’re in a rocks melting in the sun moment, there are lessons from England – including what England didn’t do – which is how to raise income through introducing domestic undergraduate fees.

It’s difficult to compare performance of English and Scottish universities because of the way in which much Higher Education in Scotland is delivered, with 1 in 3 students studying at colleges, who do not report their data in the same way. But what we can say unequivocally is that, contra almost all the folk wisdom since the very first introduction of tuition fees in England over 20 years ago – folk wisdom which has been repeated with every subsequent change – the introduction of fees has led to more under privileged full time 18 year students going to university in England, more of them going to the highest tariff institutions, and more money to universities, putting them in a stronger and more independent position.

Whether we use the traditional measure of Free School Meals entry, or the more sophisticated Multiple Equality Measure developed by UCAS, we see a steady rise in the numbers going, and a falling of the ratio between the most and least advantaged attending the highest tariff institutions. This data is consistent back to 2006, which is when ‘top up fees’ of £3,000 a year were introduced.

This is because the student finance mechanism which supports tuition fees is actually very well designed. Here I’m talking about the most current system – introduced when top up fees were increased to £9,000 a year by the Coalition in 2012. Students pay no fees up front and are given loans for both tuition and maintenance. Loans are repaid on a sliding scale upon graduation and are income determined, with repayments of 9% of everything over the threshold starting at just over £26,000. If you earn less, you pay back less – so there’s no pressure to go into a high earning job if you don’t want to. Interest rates are charged – which upsets a lot of people – but the total sum owing does not change the monthly repayment rate. And after 30 years, all the balance is wiped. The total cost is actually split pretty evenly between the state and individual – latest estimates are that the state covers 45% of the cost of the loan system

It’s not a perfect system by any means. In particular, mature entry, part time study, and courses such as those for professions such as nursing have all suffered calamitous falls because the finance system wasn’t as generous for such students. Non-HE adult learning has collapsed even more.

It’s also not that politically popular. Although there’s relatively little public polling on the specific issue of tuition fees, most data shows that the general public would like to see fees reduced, as would students. Labour voters are strongly in favour of such a move, and welcomed Labour’s commitment in 2017 and 2019 manifestos to abolish fees, and internal Tory polling of younger voters in particular was one of the motivations behind the commissioning of the still-not-responded-to Augar report, which recommended a cut in headline fees in England to £7,500.

But learning from England – including England’s mistakes – what are some of the principles Scotland could look to adopt if they did want to introduce home undergraduate fees? Here’s a 4 point plan

Keep the same general principles as England’s system…

  • As noted above, the actual principles of the English system are well understood by students, including the poorest, and do not deter. Any fee system introduced in Scotland should keep the features of: no costs up front (ie don’t have the fee ‘flow through’ the student), income contingent loan repayment, a wipe off after 30 years
  • To make this work, Whitehall pays back a lot of student loans – around 45p in the £ – but is quite cautious about advertising this. The system is actually a good example of cost sharing and benefit sharing. A new Scottish system should build this principle of ‘partnership’ in from the beginning, not hide it like England does

…but change the way the system is described

  • Find someone who doesn’t like the English system of fees, but recognises that the whole thing can’t be paid for by the state. Ask them to describe their ideal model. It will probably sound a bit like this: nothing up front, financial support for students during study, and then with students only paying back once they’ve graduated, probably via an increased tax band or a dedicated graduate tax rate. Congratulations, you’ve described the current system!
  • A ‘pure’ graduate tax has several – pretty insurmountable – technical barriers to rolling out. It’s the main reason why several high profile announcements into introducing one quietly fizzle away. But there’s absolutely nothing to stop Scotland introducing a ‘capped graduate tax’ which has all the facets of the current system. Just don’t call it fees and loans. England’s failure to do this is probably, in my opinion, the single biggest failure of the policy in the last twenty years.

Focus on money available up front

  • Almost every student survey says the thing that causes hardship, and deters students, is not fee levels, but availability of money up front. It should be relatively easy to solve for this and (when one considers how the state pays it back over 30 years, borrowing at about 1%), not too expensive
  • Scotland should increase more generous maintenance loans – well above the English level
  • The grants for poorest students, which go through cycles of being introduced, scrapped, and reintroduced, should both be a core feature of the scheme, and more than tokenistic

Make totemic changes to the least popular bits of the English system

  • The bits of the English system which are generally felt to have worked badly are support for anyone who isn’t a full time, first time, 18 year old undergraduate. It’s fair that part time students, often working, have a different financial package. But Scotland should consciously design a system that supports all types of students, including adult learners
  • All public service degree training like nursing should be funded by bursaries and grants, not loans (even if there are still fees charged for them)
  • Additionally, all students graduating into a number of key public service provisions should have their loans paid off for as long as they remain in the profession – teaching, nursing, social work, policing and so on.
  • Interest rate charges cause angst among many graduates when they see their annual statements. It’s economically an odd thing to worry about, because it doesn’t change the monthly payment (though it does extend the payment term). But to the extent it’s affordable, Scotland could make a commitment to not charge interest on loans above the rate of inflation (or even the cost of borrowing the capital to pay for the loans)

There’s no doubting that anything even close to this direction of travel would cause an almighty political ruckus. But if Scotland wants to preserve its strong universities, now may be the time to take on the shibboleth of free tuition.

Jonathan Simons is Director of Education at the public policy consultancy Public First, and was formerly a senior civil servant working on education – including a period in No10 Downing Street under the Coalition in 2011 when the £9,000 fees were introduced. He can be contacted for constructive criticism or vituperative abuse at jonathan.simons@publicfirst.co.uk