Lib Dems, Tuition fees, and unhappiness

If any Lib Dem tells you that they are happy about where we are with university tuition fees, they are either so pathologically ‘on-message’ that they’ve forgotten who they are, or they just haven’t been paying attention for the last two months.

On the day George Osborne announced the results of the Comprehensive Spending Review, Nick Clegg did a phone conference with about 200 parliamentary candidates. The main item was tuition fees: Nick Clegg was also not happy.

However.

Not being happy is not a resolution to a problem — except when you are in opposition.

To recap: back twenty-two years ago when I was finishing university, there were no tuition fees, no student loans, and full grants for those (such as me) from low-income families. These were bright days, though only for a few: people from nominally higher income families — even when for various reasons the families were unable to contribute — did not receive full grants. And most people did not get to go to university at all.

Shortly afterwards, Margaret Thatcher’s government introduced student loans. Initially these were a financially good deal, and far better than the bank-rate loans that most students had already taken out. But they opened the door for a funding system which led to students mortgaging their futures to pay for their education. This was in keeping with the spirit of the times: from the mid-80s onwards, we became increasingly happy to fund our private lives from debt.

In 1997, Tony Blair came to power, with the stated ambition that 50% of people would be able to go to university. The funding mechanism for this was obvious: even with the massive investment into the public sector that the new government was planning, students would be expected to contribute to their cost of tuition by paying tuition fees, something that even Margaret Thatcher’s government had not introduced. Naturally, students would be able to pay for these fees in a variety of ways, but the availability of student loans meant that most students would pay for their tuition, alongside their maintenance, by borrowing money.

Liberal Democrats opposed this from the beginning, and one of their key pledges in the first government of the Scottish Parliament was the abolition of tuition fees in Scotland.

Times moved on, and Lib Dems reiterated this pledge at each Westminster election, including most prominently at the 2010 election.

Did Nick Clegg and the team really expect to be in government? And did they expect to be in government with the Tories? The answer is — some of them did. If that’s the case, why didn’t they spot what was coming?

The genuine answer — though it now seems such an accepted fact that it’s easy to forget where we were in May — is that the public finances were drastically worse than anybody (except perhaps Alistair Darling and Liam Byrne) was prepared to believe. In the words of Byrne’s famous note “There’s no money left.” Lib Dem minister later characterised this as “Labour made the biggest trolley dash in history, and left it at the counter leaving others to pay on election night.”

The problem left for Vince Cable and Nick Clegg was how to construct a fair funding mechanism for university students within the limitations of public finances.

Cable’s original solution was a graduate tax. I have to say, I’m not necessarily any more comfortable about a graduate tax than about loans for tuition fees. However, this was the solution on the table. Regrettably, as Nick Clegg discovered, this simple solution was neither simple, nor a solution. It wasn’t simple because it failed to take account of how international students would pay their tuition fees. There is naturally no possibility of taxing international students unless they stay in the UK. The obvious (and only) solution to that is to allow, and, indeed, require, international students to pay their fees up front — as they have always done. However, this in itself creates a very serious complication: legally, if international students are allowed to pay up front, then indigenous students must be allowed to pay up front as well. Clearly, if tuition fees are rising to as much as £9,000 a year, only students from particularly wealthy backgrounds will be able to afford to pay up front. But if other students would then go on to pay a graduate tax, the result is that we would be offering the wealthiest an opt-out on taxation later in life. Given that those from wealthy backgrounds typically have the best prospects of being high earners later in life, we would be introducing the most regressive possible form of funding higher education.

To choose this option would have meant honouring an election pledge, but violating the most fundamental principles of Liberal Democracy.

But that still leaves with the problem: Lib Dems still believe that tuition fees are regressive, they put off the brightest students from the poorest backgrounds (for whom the concept of such a fee is far more worrying), and they put a price on an education which ought to be free.

For myself, I regret Tony Blair’s decision to attempt to persuade half the population to go to university. I recognise his attempt to even up society, to make university education not merely something for the elite. But the economics of university education will always be that employers use it as a way of sifting applicants. When just 10% went to university, and employer could reasonably set ‘relevant degree required’ as an entry requirement when looking for ‘top’ 10% applicants. We can argue about whether or not this was ‘fair’, but employers had a range of measures to rule out applicants with good qualifications but no aptitude for the job, and to allow in applicants who had the aptitude but not the qualification.

I am going to sound like a Daily Telegraph reader (or, heaven help me, a writer) when I state what everyone knows: that employers began to sift applicants based on the degree they took and where they took it. This had always taken place to an extent, but became virtually universal as the numbers of graduates rose. ‘Trad-grads’ — people with traditional degrees in English, history, languages, the sciences and so on — typically from the pre-1990s universities were the graduates employers sought after. Degrees in the much-maligned Media Studies and such were largely reviled in the right-wing press, but just as frequently disregarded by employers.

Was this fair and was it right? Almost certainly not. Was it inevitable? Almost certainly so. As a way into better employment, extending university education in this way could not provide more high-paying jobs than actually existed.

While I don’t agree with the ambition of extending university education to 50% of the population, I do agree that we need an increasingly educated workforce to compete internationally, and our aspiration as society should be to create more opportunities for more people to benefit from education. But 50% was several steps beyond what we could afford.

If it were up to me, I would have only extended universities to what we could afford without charging tuition fees — because I am personally convinced that they psychologically discriminate against those from deprived backgrounds who already face substantial family pressure not to invest themselves any further in education.

And yet we cannot go back in time. We are left with four possibilities:

  1. Keep tuition fees where they are or abolish them, and pay for it from the public finances
  2. Introduce a graduate tax, allowing the wealthiest to escape it by paying upfront
  3. Unlock tuition fees to allow universities to charge more, as the available public funding decreases, funded by student loans
  4. Reduce the number of university places to a level we can afford while keeping tuition fees as they are, or abolishing them.

The first we can simply not afford. This is massively regrettable. It is unfair.  But it is where we are.

The second is the least fair of all options. It would embed inherited wealth as the principal determinant of later earning for a generation, and possibly for eer.

The third is marginally less unfair, since wealthy families can still pay the fees without taking out a loan, and Oxford, Cambridge and other universities able to command a premium fee will become substantially less attractive to students from a deprived background. It’s argued that to retain our number two status in the world for top universities we have to fund them like American universities, but, equally, we also need to attract the brightest students from all backgrounds. If Oxbridge becomes an exclusive club for the children of the wealthy, it will not remain in the top ten for undergraduate education, no matter what it does for research.

What of the fourth option? To me this is the best, but for it to be anything other than a heartbreaking dashing of hopes for tens of thousands of teenagers, it cannot be introduced quickly — certainly not with a speed that would solve the financial problem.

Where does this leave us? Do students have a right to feel betrayed by the Lib Dems? Yes, but also no. Manifesto pledges are made seeking a mandate for government. When no mandate is provided, parties must adjust their programme. Deep down almost everyone recognises that the coalition is a coalition of compromise. There is no underlying affinity between Conservatives and Lib Dems, and there never will be. But the fact that Lib Dems actually signed a pledge on this issue and no other must leave many voters — especially where Lib Dem MPs were elected — furious.

Should Lib Dems be unhappy? Yes. Absolutely definitely. We are in a coalition, not a marriage (no matter what Harriet Harman thinks). We find ourselves in a position where we cannot do that one thing we most wanted to do. We do not have to like it, and if we find ourselves justifying it, then we are beginning to lose the values that make us distinctive.

Should Lib Dem MPs support the tuition fee rises? This must be a matter for the conscience of each MP. Should an MP vote against the common good, no matter what pledge they made? Should an MP abandon their election pledge because it is expedient? Each MP will have to make their own decision.

But, with that, we are left with one final distinctive of the Lib Dems. It is a party where MPs are always allowed to make their own decisions on issues which they themselves regard as matters of conscience — whether or not the party whips define them as ‘conscience issues’.

  • Ariana

    Martin, thank you very much for a sensible, calm explanation of the tuition fee situation and its background. The solution on offer is apparently the least worst option given the universities’ desire to charge up to £12,000/year and the government’s lack of funds. It is similar to the graduate tax – with deferred payments tailored to earnings – but allowing upfront payments which will presumably benefit universities.

    I do feel sorry for the Lib Dems having to pick this fight at this time; I’m surprised they couldn’t manage to kick the issue into the long grass given the political stakes for them, but I suppose other measures like the pupil premium and the 10k tax allowance were given priority on the list of things to fight for. It isn’t just the lack of funds, but the prioritisation of what funds are available that people often lose sight of.

  • http://www.facebook.com/profile.php?id=501443881 Paul Zukowskyj

    Hi Martin,

    A good analysis, yet one that, along with many others, has what I’d consider a gaping hole in it. Your first option, pay for HE from general taxation is always described as ‘unaffordable’ and yet we’re not making the same claim for FE or school education because the cost is less important to our society than the outcome, a given level of education accessible to all.

    The argument for HE is the same, if as a society, or indeed a party, it is a core value and something we really believe in, we could find the money.

    School and FE education combined costs WAY more than HE does. To fund all HE entirely from the public purse would probably cost 8bn/yr. Cut Trident’s 40 yr cost of 100bn and we can pay for all HE for the next 12 years. The welfare/benefits costs are 220bn/yr. Cut by just 3.6% we could fund HE fully. We’ve found the money for the pupil premium, it’s broadly what HE would cost to fund, why can’t we do the same for HE education? Is it somehow less important?

    Therefore the key question for me is one of priority. We’ve always said education was pretty much our top priority, yet we’re now buying the argument that it’s too expensive. I simply can’t agree. I’ve asked a number of people I know who are around retirement age whether they’d rather have means tested state pensions and means tested bus passes if it meant their kids and grandkids could have the life opportunities they did to get a HE education free at the point of delivery and to a person they said yes.

    Yes there are difficult choices, but nontheless there are choices. Nick and Vince have made a choice to make HE students pay. It’s one I don’t accept as being right for our society and its future.

    Paul Zukowskyj

  • John

    Martin – I am a Labour supporter but find a lot of what you have said interesting.

    Like you, I had a free uni education although a bit earlier – in the 60s – and also had a mature student grant which I could actually live on as I’d worked for 5 years before going to uni.

    I came from a poor background and was the first-ever in my family to go to uni and the first to go beyond age 15 at school. Uni was a life-changing experience for me and then for my three children who all went to uni and received good degrees with one going on to do a PhD.

    So I get very uneasy about the financial burden being put on today’s students. I have searched my soul on this one and believe that in the current economic climate that the funding of universities have to be a mix of student contribution and state funding.

    But I genuinely believe that LibDems have lost sight of what is happening here and becoming lost in the fairness issue of what students should be paying.

    The real issue here is that the Tories have decided to slash state-funding for unis and leave it to students to make-up all of the shortfall. I don’t think this is fair and nothing will persuade me otherwise.

    They have made an ideological decision and are pushing it through and the LibDems have either totally missed what is going on or are giving it the Nelson telescope treatment and trying to prove how nice they are by fiddling about with concessions for the poor while the whole structure of UK unis are under threat.

    I was left bewildered watching Cameron tell Chinese students that UK tuition fees were being raised and that would make it cheaper for foreign students to attend UK unis. Foreign students, often from a privileged background in their homeland, traditionally paid Higher fees because they would usually go home and work and not pay UK income tax after graduation.

    I never supported Labour’s 50 per cent figure because I believe that anyone with the necessary ability should be able to attend uni and not be excluded for lack of money and I don’t know that a fixed percentage would necessarily achieve this.

    It also leads to the difficult area of basically worthless degrees that don’t appear to provide some graduates with positive work skills or abilities or even lifeskills which would assist them in the career of their choice.

    Yes, I know all the arguments about the whole enrichment that the uni experience can bring but for me and my working class mates it was mainly work, work, work – we were there to find the key to unlock a door to let us escape from grinding poverty. Those who didn’t work hard fell by the wayside. But it was worth it.

    Is it still worth it? I’m not so sure. Central Scotland Customer Services Centres are stuffed full of advisors with degrees, masters and doctorates earning pretty poor money which isn’t going to significantly increase.

    So I think the increased fees will affect the supply/demand equation for places and I believe demand will fall no matter what financial safeguards are built-in for poorer students.

    Would-be students are no different from their parents in many ways and there’s no doubt that the recent UK household trend is to save and reduce debt because many are frightened about the cuts and what is coming down the track.

    My kids went to uni safe in the knowledge that I had a secure, well-paid job and was able to help them financially when necessary.

    Things are different now for a lot of people and I think we have to remember that no matter what financial provisions are put in place for poorer students they have little trust in politicians and are well aware that a few years down the line they could be hit with higher interest charges and lower repayment periods if it is deemed in the national interest.

    The whole area is in need of an in-depth review as the things that really need addressed are what we want from universities and what graduates should be getting from them.

    I weep at the courses covering my area of work – there used to be two colleges in Scotland that provided training. Now every uni and lots of FE Colleges offer not just diplomas and degree courses but PhDs in the area. It’s an absolute joke as they are annually turning out substantially more than the industry can absorb and it’s obvious that what is going on is a bums on seats exercise either to keep lecturers in jobs or maximise fee income.

    I am highly regarded in my profession and I weep at the quality of a lot of the courses and those presenting them. But most of all I weep at the conning of young people into taking degrees and getting into debt to get a degree which not open the door to a secure and fulfilling future but often leads to disengagement and loss of confidence and self-esteem.

    Don’t get me wrong, I still believe a majority of students are still working hard and a lot do well but there is no doubt that statistically those from wealthier backgrounds do better and the current proposals will, I fear, reinforce that.

    I think the longer the LibDems remain in the coalition the more they will come to understand and possibly sympathise how Labour failed in some importants areas.

    But there will be no change of heart from the Trories – they know who they represent and who they want to reward and they will march on rgeradless of those who are crushed by their policies and when the LibDems cease to be of any further use they will be cast aside.

  • John

    John

    I also wanted to mention the Guardian story about the March 2010 decision by the LibDems to change the tuition fees policy in the event of a post-election coalition government.

    What I can’t help wonder is whether those signing the pledge were aware of the policy change and therefore knew the pledge was worthless in the event of the LibDems joining a coalition government.

    Or were those signing the pledge unaware of a secret policy change?

  • Martin Turner

    I read the Guardian article as well. The headline was very alarming — but the document they had didn’t seem to support the headline. All three parties were avoiding talking about a possible coalition, and all Lib Dem candidates were strongly briefed against discussing it in public. This wasn’t because of likely policy changes, but because each party was putting forward a manifesto for an election win, and to admit we were looking at coalition would have been as good as admitting that we weren’t serious. I know that all possible coalition combinations were looked at, and it’s only reasonable that the people looking at them should look at what they could and could not get out of a particular coalition deal. I’m fairly certain that this is one reason why Clegg et al also talked to Labour. It’s probably also a reason why the Tories were willing to offer a lot of things, knowing that there were still big sacrifices for the Lib Dems to do a deal at all.

    I would love to blame Margaret Thatcher and her cronies for the tuition fees, but the truth is that they were a Blair policy, and the necessary price to put through his 50% ambition. As you point out, the result is call centres staffed by employees with Masters and Doctorates. Getting the Blair system back into a semblance of affordability is going to be a huge task, and I wonder if anyone is really willing to stomach the unpopularity of it. Students are very angry now because of the prospect of higher fees. How would they react if the number of places were to fall sharply?

    What baffles me and troubles me most abou this is that Labour who created this mess and walked away are now trying to use it as a way of taking the moral high ground.

  • Sk84Goal

    Hi Martin,

    You have missed out the most important part of the debacle. That of the personal signed pledge. It is not about manifesto promises or comments in debates or stories in newspapers it is about wether we can trust politicians to honour the written oaths they make.
    If not, then what can we trust and if we have no trust we have no democracy.

  • Sk84Goal

    Hi Martin,

    You have also missed out the most simply solution.
    Most higher rate tax payers went to university. Isn’t it time they payed via the tax system?

  • Martin Turner

    Well, most higher rate tax-payers would argue that they are already paying higher rate tax. But, yes, that is a subset of one of my four possibilities: we could just pay tuition costs out of either higher taxes or cutting elsewhere. The problem is, nobody really knows if we are doing the right things to the economy right now. With the Ireland experience looming round the corner, this is not a good time to take a risk on the guess that taxes could stand to go up a little — in addition to the forthcoming VAT rise.

  • Martin Turner

    It all depends on what you want to trust politicians to do. If you want to trust politicians to stick to their words even when proven wrong, then, yes, they should do that. If you want to trust politicians to own up when they were wrong and admit it, and get on with doing the job, then, no.

  • ChrisE

    I appreciate your analysis.

    But I’m getting really fed up with Clegg selling this under the progressive banner. Now there is simple, possibly too simple answer here. We could increase corporation tax to the G7 average and raise £3.9bn in revenue and would allow the UK to abolish tuition fees altogether. I wouldn’t go that far, but an argument could be made that the wider social (and indeed economic) benefits of affordable higher education could be costed. But then again, the coalition really hasn’t been interested in responding to the massive public mandate for re-distributive measures. It’s a cliche, but the bankers really haven’t been squeezed enough. The cuts are falling upon the lower and middle incomes.

    But, anyway, the fact is that nobody has any idea how progressive the tuition reform will be.

    Initially it appeared a stretch to call something progressive when someone on £27,000 pays back more for their degree than someone on £60,000 or more because they accumulate more interest. Then there was talk of a tapered interest rate- the IFS’ initial reflections on the announcement said this tapered interest rate was more progressive, but added it would be “more complex and it is not clear how this would be implemented, nor which measure of earnings would be used to calculate a graduate’s interest rate, which could add to administrative burdens”.

    Then we find that all of the figures that the IFS had been given by the govt in order to make the ‘progressive judgement’ were in fact incorrect. So the IFS said they would need more time to re-check.

    Then there is the national bursaries scheme- which is part of the murky claim that access will not be restricted for lower incomes students. Willetts has said that this is still under discussion.

    Also ‘under consultation’ is the idea of levy to deter very rich students paying off their loan early- thereby avoiding the huge interest payments that their less well off peers will incur.

    So the whole ‘progressive’ debate is slightly up in the air. There is also the much wider question of how much debt-defaulting will cost. I’m not sure anyone knows.

    What is clear is that, which ever way you look at it, the Lib Dems have stabbed students in the back. They have done so either because they are guilty of child-like naivety or because of duplicitous and cynical power-politics. Either way, there will be a severe cost for the Party.

    And I say this as someone is not a student and could even benefit from increased tuition fees. But I will never vote Lib Dem again.

    And while we are at it, kudos to Charles Kennedy and Ming Campbell- who at least seems to have a conscience.

  • Martin Turner

    Wait to see how Lib Dem MPs vote before you write off the party. Remember — Labour invented Tuition Fees, and the Tories would be unlikely to be champions of a plan to help the disenfranchised.

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