Thursday, 12 December 2013

The curious case of the generous Chancellor

Amidst all the talk of continuing budget cuts and austerity in last week's Autumn Statement, delivered again by Chancellor George Osborne (above), there was one curious giveaway: an announcement that there will no longer be any limit on the number of students universities can admit. Now, the fact that such a barrier still existed will have been a shock to any members of the public still convinced of the old, silly myth that governments had pressganged ever-greater numbers of young people into Higher Education when quite the opposite situation has pertained for many years. But I digress.

The real shock here was twofold. For one thing, the Government had been privileging 'top' universities in its progressive liberalisation of the sector's controls on numbers, allowing them to take unlimited numbers of students with ABB or higher at A-Level. Now it's 'reverse engines', and everyone can have as many students as they like: a concept met will ill-disguised fury from the Russell Group of the most selective institutions, and the cause of much shock and confusion among academics and administrators.

But more importantly for a blog on public policy, the real question mark must be: why announce this now, when it's so expensive? The Government's new student loans system is already set fair to leak 40 per cent of all its initial outlays, and that figure will probably rise until nearly half of all the money shelled out by the taxpayer never comes back in student loan repayments. And the Department of Business, Innovation and Skills has recently had to slam on the brakes over private college expansion and European Union student finance because it's so strapped for cash.

The answer? It appears that the Treasury think that the sale of the remaining parts of the old student loan book will plug the gap - except that of course that'll be a once-and-for-all sale, which will only support the extra monies flowing into universities up until 2018/19. Neither do we really know what the net income to the Treasury will be once we tot up all the future losses involved in foregoing all those repayments. The Treasury appear to have made a series of elementary accounting errors there, by the way, which we will ignore for now. You'd think it was impossible, except after the spreadsheet debacle over Virgin's West Coast mainline train services bid, almost anything seems believable in Whitehall these days. Anyway, the headline here is simple: after 2018/19, the taxpayer is on the hook for yet another £700m of spending following last week's announcement.

Another thought? Well, just selling off the loan book can't be all there is to it. Not even this profligate government could possibly be so incompetent. There must be a long-term plan to constrain costs in the back of the cupboard somewhere. 'Public Policy and the Past' would suggest that the funding hole will be met in two ways: firstly, a complete liberalisation of the market in Higher Education after the next election, designed to drive down costs (except that it wouldn't, but that's another story). There'll be a massive expansion of private colleges, which might well in the end drive spending upwards, but there you are. Maybe the Russell Group will be allowed to charge what they like (up to, say, £24,000 per year in some subjects) and still get access to state sector research money, even if they would then have to be barred from the state loan system for undergraduates. And, more importantly, there will almost certainly be a revision of the post-2010 university finance system, already underway at the margins for poorer students. Interest rates on the loans might be raised, or the repayment period shortened. Only then does this move make any sense.

Otherwise, the puzzle of the generous Chancellor will hang in the air for some time to come.

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