“All staff with significant responsibility for research” will be returned to next Research Excellence Framework (REF) exercise in 2021, according to the ‘REF 2021: Decisions on staff and outputs‘ document released earlier this week.
In what will no doubt determine the future careers of many academics currently working in higher education, particularly in post-92 universities, “contractual status will identify the majority of academic staff who have a significant responsibility for research”.
The document does, however, recognise “that there are staff who have more significant responsibility for other activities, including knowledge exchange, professional practice, and scholarship”, and in these cases it will be left to “higher education institutions (HEIs), working with their staff and with guidelines, [to] identify who is in scope for submission among staff meeting core eligibility criteria”.
Perhaps not very reassuring for academic staff who have already witnessed the breakneck speed at which many institutions have restructured – University of Manchester, for example – with no consultation with recognised trade unions, in anticipation of market reforms that have not as yet directly impacted on institutions.
‘Category A eligible’ staff are defined as “academic staff with a contract of employment of 0.2 full-time equivalent (FTE) or greater, on the payroll of the submitting institution on the census date, whose primary employment function is to undertake either ‘research only’ or ‘teaching and research’”.
Furthermore, in a clause no doubt designed to stop institutions ‘importing’ star researchers just for the REF, “staff should have a substantive connection with the submitting institution”.
And finally, “for staff on ‘research only’ contracts, the eligible pool should only include those who are independent researchers, and not research assistants”.
Activists and trade unionists will need to be vigilant in uncovering the inevitable tweaks and outright revisions to existing employment contracts – in most cases this will be done indirectly, perhaps through revisions to progression frameworks and with a cash bonus to manipulate academics into moving onto new contracts.
Bath and North East Somerset (BNES) Council has expressed its “concern at the levels of pay inequality at the University of Bath and at the governance arrangements which have led to this pay inequality” in the latest episode of a highly public debate about the excessive pay of University of Bath vice-chancellor Dame Glynis Breakwell, which is now having an acutely negative impact on the university’s reputation.
At a council meeting which discussed a motion from Councillor Joe Rayment – which was supported by a majority of Labour and Tory councillors – the level of pay inequality at Bath University was referred to as “disgraceful”, the chair of the University’s Court was described as “dictatorial” and the “moral vacuum at the upper levels of the university’s governance” was denounced.
“Staff paid according to the higher education single pay spine have suffered a real terms pay cut of over 16% since 2009,” the motion pointed out, adding that “the latest available figure for the vice chancellor (chief executive officer) of the University of Bath was £451,000 for 2015-16 year. This was an 11% rise, compared to a 1% rise in that year for staff paid according to the national pay spine.”
The motion also noted that Breakwell’s salary was the “highest for any vice chancellor in the UK” and that the “pay ratio between the highest and lowest paid member of staff at the University of Bath was approximately 30:1”.
“The vice chancellor of the University of Bath also occupies a grace and favour house in the city, for which the University pays approximately £20,000 each year for running costs including: council tax, utility bills, and a housekeeper with such responsibilities as ironing bed linen and towels,” the motion added.
Furthermore, the University of Bath “provided its vice chancellor with an interest free loan of £31,489 with which to buy a car”, a claim that the motion said had been confirmed by the University. “No other member of staff has been eligible to receive such a loan,” it pointed out.
Since the scandal hit the public sphere towards the end of summer (HE Marketisation, 4 October 2017), it has had a definite and negative impact on Bath University’s reputation.
Aside from the BNES council coming out in protest at the bad name that the university is currently giving the city, Unison point out that four MPs have now resigned from the University, citing unacceptable senior management pay and inequality. “The MP for Bath, Wera Hobhouse, has also condemned university governors for the vice-chancellor “morally indefensible” salary, which she said had “brought the university into disrepute,”” it added.
Film director and University of Bath honorary graduate Ken Loach has also recently joined the fray, becoming “the first external speaker to publicly cancel an event at the University over the scandal”. Unison reported that “he joined students to demand the resignation of the vice-chancellor and senior governors, the introduction of a 10:1 pay ratio, cuts to student rents and governance reforms “to give students and staff more control” of the university”.
“When I started out as a zoologist, I became very adept at spotting elephants,” he said, “I think there are 451,000 elephants in this room that we’re not actually addressing.”
“We’ve all talked about raising profiles,” he stated, addressing Breakwell directly, who was sitting on the panel. “At the moment I don’t think the university can move on until you move on.”
“We’ve got to the point where the only people ringing us up are for information requests about this, that and the other,” he concluded. “When people become the story, they need to move on.”
The event was also protested by students, who turned up with a banner with ‘Resign Now’ spray painted on it. One student was forcibly ejected by security, which was filmed by other students.
Speaking at the protest, a student said: “We disrupted an event for staff members because we believe our demands are the same”.
“Both students and staff suffer from the senior management’s greed: many of our teaching and support staff haven’t had a decent pay rise in years, and they have also reacted to the recent pay scandals with outrage,” the student added. “In the end, a more democratically-run university means better conditions for both students and staff; whereas a university run like a business only profits an extremely small minority.”
“There will be a full, independent and rigorous Effectiveness Review of Council, conducted by a consultant selected according to procurement frameworks,” the University announced. “This will consider fully the operation of the Remuneration Committee to ensure it reflects developing best practice.”
However, unions have questioned the effectiveness of the Review itself: “what we don’t know is the composition of the committee that will be carrying out that review”, commented Michael Carley, University of Bath University and College Union (UCU) branch President.
“It might have an independent chair, but the kind of conclusions it will come to will largely be shaped by who’s on the committee and the kind of information they’re given,” he added. “There should be student and staff representation on that committee and neither the vice-chancellor nor the chair of the council should sit on it.”
“A major moment in the history of 21st century Britain,” Myers described the 2010 UK student movement, which lasted almost exactly a month from the smashing of Millbank windows in November to the ‘kettling’ of protesters in December.
Speaking at a Warwick for Free Education event on 31 October, Myers linked this short-lived outburst of student revolt to the contemporary emergence of a viable, anti-austerity alternative in the form of the Jeremy Corbyn-led Labour Party, which shocked the nation in the June snap election earlier year by drastically reducing Theresa May’s Tory Party majority in UK Parliament.
“More than anything [the 2010 student movement] fractured the consensus view in British politics that young people were disengaged, apathetic and out of touch with politics,” Myers argued. “[It] showed that it was the politicians who were out of touch with young people.”
“The political class did not listen,” he added, “and now they are suffering the consequences.”
Occupations and kettles
The student movement began exactly a week after David Cameron – then Prime Minister of the Lib-Dem-Tory Coalition government – announced at Prime Minster’s Questions on 3 November 2010 that he intended to triple university tuition fees in England to £9000 and cut the Education Maintenance Allowance (EMA).
In response, the National Union of Students (NUS) and the University and College Union (UCU) called a national demonstration in Central London, which attracted 50,000 mainly students and lecturers, far more than the 20,000 expected by the Metropolitan Police.
The protest itself did not go quite to plan, as students broke off from the police-approved route that was supposed to take people in an orderly fashion from Whitehall past Downing Street and Parliament Square, ending with a rally at Tate Britain.
“A small group attempted to occupy – against the wishes of the NUS leadership – the headquarters of the Tory Party,” Myers recounted.
Protesters began to gather outside the Conservative Party headquarters at Millbank, with some finding their way into the building and even making their way onto the roof, catching police completely unprepared.
Events seemed to take a turn for the worse as one protester – Edward Woolard – appeared with a fire extinguisher, which he then threw at the police below. The move was countered with instant disapproval by the crowd watching on, who were eventually ‘kettled’ by the Territorial Support Group called in to help the overwhelmed police.
Kettling is a police tactic for controlling large crowds during demonstrations or protests which involves the formation of large cordons of police, who then move to contain a crowd within a limited area. Protesters are left only one choice of exit or are completely prevented from leaving, with the effect of denying the protesters access to food, water and toilet facilities for an arbitrary period determined by the police.
This tactic came under fire at the later 9 November demonstration, when protesters again descended on Parliament Square as Parliament voted on the tuition fee rise, and were promptly kettled by the police for most of the day. Eventually police moved protesters onto Westminster Bridge where adults and children stood in the freezing cold for over two hours.
During the protest, police also hit demonstrators on the head with batons, resulting in tens of people being treated in a St John’s Ambulance ‘field hospital’. One protester – Alfie Meadows – had to go to hospital after being hit, requiring emergency brain surgery.
Oh, Jeremy Corbyn
Myers pointed out that, following the 9 November demonstration, Theresa May – at the time Home Secretary – praised in a speech to Parliament the “great bravery and professionalism” of the Metropolitan Police “in the face of violence and provocation”.
Theresa May also claimed that while “a cordon was placed around Parliament Square”, those “who remained peaceful and wished to leave” were able to do so. This claimed was later contradicted by journalists who has also been part of the police kettled by police.
“Some students behaved disgracefully” May went on, adding that “the protests were infiltrated by organised groups of hardcore activists and street gangs bent on violence”.
“I want to be absolutely clear: the blame for the violence lies squarely and solely with those who carried it out,” May concluded. “The idea – that some have advanced – that police tactics were to blame when people came armed with sticks, flares, fireworks, stones and snooker balls, is as ridiculous as it is unfair.”
In contrast, both John McDonnell and Jeremy Corbyn defended the actions of students, arguing that the protests had been a legitimate response to a series of inhumane and irrational policy decisions made by the Coalition government under the banner of ‘austerity’.
It is not surprising that young people today trust Corbyn, Myers pointed out, as he was “the only person in Parliament who raised his voice to speak for the students and question Theresa May”.
“There is something about 2010 that shows there is a major generational cleavage that is ripping the heart of British politics open,” he concluded.
Past, present and future
Myers is currently travelling the country promoting his book ‘Student Protest: Voices of the Austerity Generation’, which is available now from Pluto Press.
His intention in writing his book on the student movement was, on the one hand, to “create a document that would allow [the experiences of those involved” not to be lost to oblivion” and, on the other, to create both a “tradition” a “tool” for “new generations of students” in their struggles for free education and change in society.
The demo in London today was organised by key players in the 2010 student movement, the National Campaign Against Fees and Cuts, which is calling “for an end to tuition fees, for living grants, and for an education system that serves people not profit”.
A BBC Panorama investigation – which will air tonight at 7:30pm on BBC One – has found evidence of fraud at one of the UK’s largest ‘alternative providers’, the Greenwich School of Management (GSM).
Only the latest in a series of scandals related to higher education reform – the subject of this blog – the Tory utopia of a market in HE seems to be slowly crumbling along with its general credibility in UK Parliament.
The BBC documentary, which shows dodgy education agents at such publicly-subsidised providers offering to get “bogus students” admitted into a government-approved private so they could “fraudulently claim student loans” for a £200 fee, as well as offering to “fake attendance records and to provide all their coursework” for another £1,500, seems to confirm these fears.
How big is the problem?
According to the funding body for higher education – the Higher Education Funding Council for England (Hefce) – as of 13 March 2017 there were 115 alternative providers with specific course designation, which means students at these providers can access support through the Student Loans Company (SLC).
Student loans represent not only an investment by individual students, often supported by family, but also on the part of the public who will have to bear the cost of up to 45% of these loans due to non-repayment (see HE Marketisation, 29 October 2017)
Loans for tuition fees grew from £36 million to £175 million, during the same period, peaking at £236 million in 2013. According to BBC figures, “about £400m-a-year is received by 112 private colleges through the student loan system”.
Including other alternative providers that do not have access to SLC funding, the Higher Education Statistics Agency (HESA) estimated earlier this year that there currently over 700 alternative providers in England.
HEPI summarised the wide range of business models that such providers are based on: “‘catch-up’ for profit; sub-degree colleges; generalist colleges, serving both undergraduates and postgraduates; small specialist, not-for-profit colleges; exclusively postgraduate small specialists; for-profit providers focusing on international students; for-profit distance learning; and campuses overseas”.
“Alternative providers are hard to classify because they have different legal forms, different objectives and different target audiences,” HEPI commented. “They provide a diverse range of academic offers and have a variety of organisational arrangements.”
“They have also been subjected to extensive external pressures in recent years,” it added. “Many have closed or merged, while some have grown dramatically, fueled by the availability of more student loan finance for their students.”
Hunt is here referencing the new Higher Education and Research Act (HERA), which makes it easier for such alternative providers to become designated providers with access student loans, or in some cases become fully-fledged universities – a title protected by the Queen.
‘We do not believe that plans to increase the number of alternative providers can go ahead until we can quantify the risk to public finances and our universities’ global reputation from a rapid expansion of private for-profit education,” Hunt added.
Hunt also pointed to a history of “scandals with for-profit companies in US higher education, like Trump University”, which were not taken into account by Tory HE reformers, but “must surely serve as a warning to our government”.
Problems in the US
In a two-year investigation by the Senate Committee on Health, Education, Labor, and Pensions into for-profit universities in the US higher education system, known as the Harkin Report, it was reported that:
Federal taxpayers are investing billions of dollars a year, $32 billion in the most recent year, in companies that operate for-profit colleges. Yet, more than half of the students who enrolled in in those colleges in 2008-9 left without a degree or diploma within a median of 4 months.
Many for-profit colleges fail to make the necessary investments in student support services that have been shown to help students succeed in school and afterwards, a deficiency that undoubtedly contributes to high withdrawal rates. In 2010, the for-profit colleges examined employed 35,202 recruiters compared with 3,512 career services staff and 12,452 support services staff, more than two and a half recruiters for each support services employee.
This may help to explain why more than half a million students who enrolled in 2008-9 left without a degree or Certificate by mid-2010. Among 2-year Associate degree-seekers, 63 percent of students departed without a degree … During the same period, the companies examined spent $4.2 billion on marketing and recruiting, or 22.7 percent of all revenue.
Publicly traded companies operating for-profit colleges had an average profit margin of 19.7 percent, generated a total of $3.2 billion in pre-tax profit and paid an average of $7.3 million to their chief executive officers in 2009.
He found that, despite having a student body of about 500,000 students, the University of Phoenix only had a completion rate of 9% in 2011. The university was also the subject of a controversial documentary ‘College Inc’, in which three Nursing graduates described their expensive diplomas as “worthless” because the course only “aspired” to professional accreditation, and could not be used to get a job in a hospital
Another US Government report found that the University of Phoenix pressured its staff to meet recruitment targets, encouraging the enrollment of unqualified students as long as they got “asses in classes”.
Despite all these problems, even during the 2008 Financial Crisis the Apollo Education Group turnover increased by 25% during the period 2008 – 2010, with top executives taking home $6m each in 2008, Hotson pointed out.
However, in 2008, the US Federal Court jury found the Apollo Education Group guilty of “knowingly and recklessly misleading its investors” and were forced to pay $280m in reparations, Hotson reported.
Carl Walker gives background to the recent Senior Management Survey and summarises the results in a guest post for HE Marketisation. Of interest to activists and trade unionists resisting the negative impact of marketisation on higher education institutions across the UK (and beyond), the survey found “widespread dissatisfaction with senior management practices across the HE sector with staff believing that this has negative impacts on their students, their health and well-being, and their ability to do a good job”.
The full results – including for each of the institutions represented- can be found here
Dr Carl Walker, a psychologist from the University of Brighton, is one of the academics coordinating the project. He can be contacted at firstname.lastname@example.org if you have any questions.
As we know, the National Student Survey (NSS) is an annual survey for all final year undergraduate degree students at institutions in England, Wales and Northern Ireland. However there is much that students don’t know or see about how a university is organised, and the many factors that set the context for the experiences that they have.
The National Senior Management Survey (SMS) was developed as an anonymous audit for university staff around the UK to complete about the practices of their senior management team. It seeks to mirror the NSS and so is an overall audit of senior management practices across the sector. This audit was designed to move the gaze from the narrow metrics of staff performance to the senior management teams who set the conditions through which staff performance becomes possible. In so doing it seeks to ask questions of the current trajectory of higher education in the UK and to broaden debate about what universities should and could be for our students.
Findings are being disseminated as widely as possible and a league table of university performance has been be produced. The audit was designed by a small group of academics around the country. It was designed to ensure a good balance of positively and negatively valenced questions so as not to be leading. The audit survey was represented electronically on an independent BOS account and was accessed via a weblink. The project sought to get the views of as many academics across the UK. As such a multi-method dissemination strategy was used. This included:
Contacting the University and College Union (UCU) and asking them to put it on their email list
Contacting education interest groups online to ask them to represent it to their members
Snowball sampling via social media
Contacting education media outlets and asking them to let people know about the project
As well as creating an initial league table, the findings give a problematic picture of the higher education (HE) sector in the UK. We produced a league table based on staff satisfaction with management that includes 80 universities (we had too little data for the remainder).
The very top scoring university has 37% of staff satisfied with management, the average across the sector is 11% of staff satisfied with senior management and several universities at the foot of the table don’t have a single member of staff satisfied with management.
70% of academics say their SM don’t give them enough hours to support their students
Only 21% of academics believe their SM positively impacts how they can support students
67% of academics believe that NSS and module feedback scores are not being ethically used to encourage staff performance
Only 8.8% of academics believe their managers deserve the salaries they are paid
Only 12.6% of academics believe their senior management favour holding down tuition fees
Only 16% of staff believe their senior management encourage a supportive working environment
15% of staff feel respected and valued by their senior management
80% of staff work evenings and/or weekends to fulfil their roles
78% of staff are not satisfied with the way their university is managed
Implications and future
The implications of this work are clear. There is widespread dissatisfaction with senior management practices across the HE sector with staff believing that this has negative impacts on their students, their health and well-being, and their ability to do a good job.
Moreover, despite the overload of accountability metrics experienced by the sector, none hold account the senior management teams who direct so much of the policy and practice in HE. We believe that there needs to be a serious conversation about HE management practices and about effectively holding management to account in order to protect our students, our staff and the academy as a whole.
Our team are currently seeking to analyse the almost 2000 qualitative accounts that staff gave. We are seeking to embed the league tables in a variety of online university sites (Unistats,Whatuni etc.) as well as contacting HEFCE and the HEC to establish a dialogue about broadening accountability measures in the sector. We will also wrote to the vice chancellors of each university to ask for their response to their staff satisfaction and make suggestions for good practice and possible changes.
In light of the announcement that tuition fees may soon be capped at £9,250 and the student loan repayment threshold raised to £25,000 (HE Marketisation 29 October 2017), the Higher Education Funding Council for England (Hefce) has revised its financial forecasts for the HE sector for the next three years, warning that the ambitious growth plans of many English universities may be unsustainable in the long term.
Overall, in its revised predictions, Hefce said that the sector will see a loss of “£113 million in 2018-19 and £333 million in 2019-20” as a result of the proposals, with sector surpluses down “from 2.1 per cent of income in 2018-19 to 1.8 per cent of income and from 3.4 per cent of income in 2019-20 to 2.4 per cent of income”
At the same time, “borrowing levels are expected to exceed liquidity levels in all forecast years, by £577 million at 31 July 2017, increasing significantly to £5 billion at 31 July 2020.”
“While this does not raise an immediate viability concern,” Hefce adds, “the current trajectory of increasing borrowing and reducing liquidity is unsustainable in the long term.”
Hefce also warns that this increase of debt alongside reduced surpluses to cover these liabilities may cause lenders to “restrict the availability of finance”, putting “significant elements of the sector’s investment programme at risk”.
Meanwhile, Hefce has reiterated its previous warnings about stagnating student number growth, despite a rise of 7% in applications for the October deadline compared to the previous year, according to UCAS data.
“The declining population of 18-year-olds, the potential impact of Brexit on student recruitment, and the increasing availability of alternative post-18 educational options such as degree apprenticeships present challenges,” Hefce point out.
“Some higher education institutions [HEIs] may find it difficult to achieve their recruitment projections, and will therefore need to manage the financial risks of any negative variations in their growth ambitions.”
Speaking to HE Marketisation, the representative body for UK vice chancellors, Universities UK (UUK), said that the forecasts “are predicated upon a number of unknowns and future events, not least the result of the Brexit negotiations and the proposed review of student funding in England”. Therefore, it “would not speculate about the possible impact of these (and other possible unknown factors) on [its] members and liquidity levels”.
Nevertheless, to meet the challenges posed by the Hefce forecasts, its members would “continue to invest in higher education” and “develop their strategies accordingly”, UUK stated.
Furthermore, in order to “thrive” in the “competitive environment” of UK HE, “universities will also have to continue to ensure they are as efficient as possible and that every pound of investment helps maximise their contribution to the UK’s economy and society,” it added.
“Universities are used to managing change and periods of uncertainty and will meet these from a position of strength and resilience,” UUK concluded.
The Russell Group – made up of 24 “leading” UK HEIs, including the Oxford and Cambridge Universities – told HE Marketisation that it has “argued” consistently for “sustainable and stable funding” which would allows its members “plan for the future with confidence” and continue to “deliver world-class education and research”.
Interestingly, Universities Alliance, the mission group for ex-polytechnics and ‘modern’ universities – the HEIs which in many cases have the most aggressive and ambitious growth plans – refused to comment on Hefce’s warnings.
In a bid to regain much-needed popularity with young and middle-income voters, Theresa May announced at the Tory Party conference last month that she intended to raise the student loan repayment threshold to £25,000 and freeze tuition fees at £9,250.
However, the Institute for Fiscal Studies (IFS) has pointed out that the combination of these two reforms, while representing “a significant giveaway to graduates” – who will save on average £10,000 over their lifetimes – will “increase the long-run government contribution to the cost of providing higher education by around £2 billion per year.”
For the already unpopular incumbent Tory government, the ‘cost’ of HE reform is increasingly not just financial, but also political. Questions are once again being raised as to whether the fees and loans regime in fact saves the public any money, and it is becoming increasingly difficult to sell the reforms to students who currently leave university with an average debt of £50,600.
Flattering the deficit
Speaking at a Treasury Select committee meeting on the 18 October, Andrew McGettigan pointed out that the IFS forecasts wouldn’t be the end of the story: “I would be
expecting further announcements to be made, perhaps at the Budget,” he said.
The story began in 2010, when the UK coalition government – made up of the Conservative Party and Liberal Democrats – “took a huge gamble” with a suite of higher education reforms, including a new system of £9000 ‘maximum’ fees and equivalent “income-contingent” student loans, aimed at introducing a market in the sector.
As McGettigan explained in his influential (2013) book on the reforms, The Great University Gamble, these reforms took their place within an “overarching narrative” of ‘austerity’. Austerity proposed that swingeing cuts to public spending had to be imposed “to restore economic health” after the 2008 Financial Crisis, which left the UK government with a “large and increasing public sector deficit”.
However, higher education institutions, through the new fees and loans system, were “spared austerity”, McGettigan pointed out at the Treasury committee meeting.
Figure 1 shows how the £9000 fees and loans system not only mitigated the effects of drastic cuts to government-funded Higher Education Funding Council for England (Hefce) teaching grant, but also increased the income of English higher education institutions overall compared to 2010-11, before £9000 fees were first introduced.
The new system also “flattered the deficit”, McGettigan pointed out, in that tax-payer subsidy for higher education no longer came out of the government’s current account – as it did with direct public funding through the Hefce teaching grant – but is shifted 30 years into the future when the loss of the loans is finally accounted for.
Income-contingent loans – initially introduced in 1998 – are not like the “mortgage-style” pre-1998 loans or like those in the US, for example, which expect a fixed monthly repayment until they are fully repaid.
“Monthly repayments are determined by the current income of the borrower not by the total amount borrowed,” McGettigan explained in The Great University Gamble. Furthermore, graduates do not start repaying until they reach an income threshold, originally £21,000 for the £9000 post-2012 loans, now increased to £25,000.
Over the threshold, graduates pay interest at the retail price index (RPI) plus 3%, irrespective of how much they borrow.
The post-2012 loans also get written off after 30 years. “In this way, the loans have a built-in subsidy to protect future low-earners. As a result, between 20 and 30 percent of graduates are modeled [at the time of writing in 2013] to be better off than before,” McGettigan added.
In terms of the tax-payer subsidy for HE, it is this 30 year write-off period that is most significant. Projections of how much this write-off will cost are constantly being revised, and with these revisions, tweaks are applied to the terms and conditions of the loans.
For example, in 2015 the percentage of the value of student loans expected to be lost through the 30 year write off went up to 45%, edging uncomfortably close to the 48.6% figure that would signal that the new system would as a whole cost more than the previous model of direct public funding.
As a result, the government froze the repayment threshold at £21,000 taking the ‘RAB charge’ (the government accounting term for the projected cost of loans) back down to between 20-25%.
This temporarily quelled the increasing political outrage at the fees and loans system and took some of the wind out of the sails of HE reform critics that had used the RAB charge figure to argue that the reforms were unsustainable, and that the sector should return to the direct funding model.
However, the focus then shifted to the way that the government could tweak the terms and conditions of the loans, tweaks that also acted retrospective on post-2012 loans already taken out.
Consumer rights expert Martin Lewis pointed out at the time that this would not be acceptable with any kind of private loan and that: “This is about how young people can trust politics, when people can retroactively change a contract, if they are lied to in contract? It is an absolute disgrace.”
Predictably, then, with the proposed £25,000 threshold rise, the debate has shifted back to the question of sustainability.
According to the IFS: “Increasing the repayment threshold to £25,000 significantly increases the expected long-run taxpayer cost – by £2.3bn for this cohort, from £5.6bn to £7.9bn.”
The £25,000 threshold also puts the RAB charge back up to 45%, once again dangerously close to the 48.6% figure referred to above (Figure 2).
At the Treasury committee meeting, McGettigan pointed to other flaws in the market model of HE. The fact that students didn’t pay the headline £9000 fee up front as a result of the income-contingent loan system meant that the price mechanism – so important for the functioning of a ‘real market’ – could not function.
“Because we have an income contingent repayment loan scheme, the tuition fee is not a price,” he pointed out. “It is not that it is not price sensitive. It is not a price.”
McGettigan argued that as the monthly repayments are the same for different graduates no matter how much they earn, the decision of whether or not to go to a particular university based on price – assuming that universities did start charging different fees – is a moot point.
“In terms of what repayments you are likely to make as a graduate, you may see no difference, particularly now that the repayment threshold is over £25,000,” he added. “If you are meant to be a cost-sensitive, informed consumer, there is no difference.”
HE expert Helen Carasso, who appeared at the Treasury committee alongside McGettigan, also argued that because students pay the same irrespective of how much they borrow, it also makes no difference in terms of price whether they go to a £9000 or £6000 university. From a student point of view, it is rational to go to a university that has more funding and the £9000 price tag signals “premium” quality in the absence of any other meaningful information.
The government, hellbent on introducing a market, failed to learn from experience, McGettigan added. In 2004, when the government introduced £3000 fees, all universities took the opportunity to charge the maximum.
In 2010, the government expected the Office for Fair Access (Offa) to regulate variable fees, limiting the number that could charge the maximum through the granting of “access agreements” and fines if conditions for such agreements were not met.
Writing in 2011, however, Channel 4 fact check found that “since Offa was set up in 2002 it hadn’t flexed its muscles once. Not one university’s fee proposal had been refused.” Despite 13 of the 16 Russell Group universities not meeting benchmarks at the time, no fines had been imposed.
McGettigan pointed out that the price mechanism also relied on the entrance of ‘alternative providers’ – teaching only for-profit colleges and universities – which would be able to charge much lower fees because they didn’t have the overheads of existing institutions.
But these ‘challenger institutions’- of which there are currently 112 in English HE receiving public money through the Student Loans Company – went for a completely different market.
“The feeling was that you could run a degree in business or law for £4,500 or £5,000, make a bit of profit, but offer something that would undercut the established provision. Therefore, there would be a downwards pressure on prices elsewhere. That did not happen at all, because by and large the most aggressively expanding of those institutions did not compete for the kind of students who were applying to universities.”
Both McGettigan and Carasso concluded that the system had become too complex, with even economists and politicians struggling to understand it. In this situation, there was little hope for students as ‘consumers’ making informed decisions.
“We are talking about signals that are being sent out here to people who cannot unpick them,” Carasso argued. “It is not because they are financially illiterate.”
“If it is too complex to understand, it is a problem,” she added . “We need to be clear, as the people making the policies, what we are doing, how we are doing it and why we are doing it.”
As with the original discussion around the sustainability of the fees and loans system, the idea of a graduate tax has returned. As McGettigan pointed out, the income-contingent loan system is a lot like a graduate tax, with the added benefit to government that loan repayments can be collected even if graduates move overseas.
The problem with moving to a graduate tax now would be that the government would have to fund universities directly – pushing the cost of HE back on to the expenditure part of the government current account – and try and recoup the cost at a later date. This would significantly undermine the Tory project of austerity, which is already faltering.
Labour’s pledge to “abolish university tuition fees” and make HE “free here too” would have the same effect. Additionally, if they do intend to abolish the existing debt, the total cost of existing loans – over £100 billion – would go straight onto the Public Sector Net Debt (PSND).
Although the total cost wouldn’t be much more, as the savings of the fees and loans system are diminishing every year, it would be politically a risky move to create such a spike in the PSND, seeing as after the Financial Crisis the Coalition government managed to convince people that the deficit was a purely a result of New Labour’s fiscal extravagance.
To deal with the looming student loan debt, the government plans to sell more of the loan book off to private loan companies – it has already sold all of the pre-1998 mortgage-style loans at a £12 million profit.
But McGettigan explained that the government made a profit on these loans “because they had a completely different structure”. “Those loans were not collected through PAYE. You had to be chased by the Student Loans Company. The private sector, which was largely a collaboration between a debt collector and a bank, decided they had more efficient debt collection mechanisms than the Student Loans Company, so they were prepared to offer a price that was above the Government’s valuation.”
However, post-1998 income-contingent loans are not so straightforward, and the unknowns regarding how much of the value of the loans will be repaid means that the risk of investment in these loan portfolios must be hedged against through complex financial structures, exactly like the “sub prime” mortgages that caused the Financial Crisis.
“Now we are looking at a securitisation, with various flavours on offer,” McGettigan added. “They are going to offer you a price lower than your fair value.”
Even so this is attractive to the government: “A large part of the drive for the sale is to change that PSND figure. These loans are going to increase markedly over the next few years.”
The challenge for government here would be to convince the public that it had got “value for money” on the fees and loans system, once again through complex accounting tweaks.
The saga continues, with each tweak to the increasingly complex student loan system created unintended political consequences. For activists and trade unionists, there will be many more opportunities to draw attention to the failures of marketisation.