Category: Advocacy

Andrew McGettigan

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Optimism is in short supply amongst academics, so I apologise in advance for this blog, but recent, overdue announcements mean that the sector is going to endure a period of austerity now that the government has decided that it is only willing to bear a much lower cost for English undergraduate provision: the implications of what has been set out go beyond teaching to challenge the conditions for research in subjects like History.

 

Reforms to student loans aim to steer students towards professional & vocational subjects

At the end of February, we received the long-awaited official response to the Augar review (published in May 2019, but commissioned by Theresa May in early 2018).

With an end to one form of uncertainty, sector management and policy bodies expressed unseemly relief as it became clear that the maximum undergraduate tuition fee chargeable to home students would be frozen at £9250 for another two years. Augar’s recommendation of a reduction in the basic per student “unit of resource” (fees plus teaching grants) had overshadowed the last 12 months; rumours suggested that it was receiving serious consideration; instead, the Department for Education and Treasury will simply allow inflation to erode the value of its undergraduate financing in the short-term — with no promises for the future.

You would have difficulty finding any acknowledgment from those same sector representatives about the trade-off, since it falls not on cash flowing into their institutions, but comes from the pockets of future university leavers and existing borrowers. For those starting in 2023/24, the repayment period on loans will be extended to 40 years before write-off and the repayment threshold will be lowered to £25,000 before increasing in line with inflation.[1]

This has the effect of vastly increasing the amounts repaid by lower and middle earners. You will have heard much more about the decision to drop the interest rate, but this move will only benefit higher earners: those who would currently repay more than they borrowed.

The government had the gall to suggest that this new settlement was “fairer” and even “just”, but the head of the normally sober Institute for Fiscal Studies labelled this “truly horrible” in its distributive effects. Its modelling suggested that: “Low-to-middle-earning graduates could be made about £20,000 worse off over their lifetime by the changes; the highest earners could benefit by £25,000.” See: https://ifs.org.uk/publications/15955.

The loan scheme aside, the deal gets worse once you realise that there was no announcement about reform of student maintenance support.[2]

These reforms are cynical, but they are also consistent with a desire to “nudge” applicants away from the default of a three-year, full-time degree in subjects such as History and to encourage students to take shorter technical, vocational and professional courses.[3] With the reduction in interest rate and the extension of the repayment period, it will make more sense to reduce one’s exposure to debt and, as a result, one- or two-year courses gain in attractiveness. Income contingent repayment terms originally meant that the headline tuition fee could not function as a “price”, since it did not signal clearly to those who took out loans what they were likely to pay. That is not now the case.

These reforms will begin to change decisions about university beyond the changing popularity and experience of A-level History. In the very short run, there will probably be a late rush to apply this year or to cancel deferrals as for the majority it will be much more expensive to start in 2023/24 than to do so sooner. But after that, I would expect choices to shift the other way.

 

How far will History’s fees go as inflation bites?

There is a further dimension to consider. As the maximum undergraduate tuition fee continues to be frozen at £9250 pa, university management is likely to become less keen on “classroom” subjects, such as History: so-called Band D subjects which receive no additional teaching grant to supplement the undergraduate fee.

As a subject, History’s undergraduate funding benefited in 2012 as the new £9000 fee represented a large increase on the circa £6000 received from fee plus grant in the preceding years. But since then, there has only been one increase, to £9250. Vice-chancellors are now limiting their complaints to sniping over the likely real terms value of the 2023/24 fee compared to 2011/12 (contrast their silence over what graduates will have to repay in future).

Early in the last decade, from the perspective of university management, it made financial sense to recruit increasing numbers to business, law, arts, humanities and social science subjects (Band D): there was a clear surplus to be made, which could then be used to cross-subsidise other activities like higher-cost subjects, capital development and staff research time. As the value of the fee continues to decrease in real terms, that surplus vanishes and the priorities of university top brass – capital development and STEM – mean that unfunded research time becomes a general problem.

That is, in a hypothetical History department where recruitment had stood up over the last decade, inflation would mean that original surpluses gradually reduce to break-even and could, over time, come to be seen as loss-making — depending on how central costs are distributed (think increasing energy prices). At institutions where recruitment is not so strong, the question will be whether fees cover departmental costs and, in particular, the component of staff salaries devoted to research.

 

Further Casualisation? Further Internationalisation?

In this financial context, the viability of a History department’s research culture will now largely depend on the institutional ability to ramp up casualisation further or increase the recruitment of international students (for whom there is no limit on what universities can charge). In practice, there is limited scope for increased international recruitment in some subjects, which will, in any case, be monopolised by the “big beasts” in the sector. In a report this month, the National Audit Office pointed out that “many providers’ medium- and long-term financial forecasts depend on assumed continued growth in overseas as well as domestic student numbers”.

The risks, moral as well as geopolitical, of building a “business model” of charging as much as you can from as many students as you can recruit should not need stressing. But without international students, there is a difficult question about how “unfunded” research can get done.[4]

The sector is financially uneven. The median income for established universities is between £200-£250million per year, but some receive less than half that and others are more than four times larger. Oxford and Cambridge bring in over £2billionsome years. The bigger, more prestigious institutions will increasingly be able to dominate the market for international students and reinforce their historic advantages. Along with these size disparities, there are significant variations in financial performance that are masked by aggregate sectoral figures: worrying numbers of institutions are running persistent and sizeable deficits.

As management come to view unfunded research time as a drain on limited resources, a new binary system will likely emerge, one which sees fewer institutions operating with sustainable research in the arts, humanities and social sciences than was even the case before 1992.

While the squeeze on unfunded research will be apparent across the board, pre-92 universities offer contracts with higher amounts of time for research.[5] Some of these have not fared well in the last five years since undergraduate student number controls were fully removed. High-profile cases include SOAS and Goldsmiths. Wholesale review of research time would potentially be as destructive for them as the current pension dispute. As a result, some institutions may become more prone to consider closing departments seen to be underperforming financially, rather than recognise that they have become teaching-led institutions.[6]

Things could move very quickly in the next few years, and it is important that representative bodies like History UK establish a picture of what is going on in relation to research time, contracts and student and staff recruitment across the sector. While the government talks up efficiencies and market competition, it is important to establish what is being sacrificed to that end. Whatever form the next round of struggle takes, it needs information as ammunition.

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Andrew McGettigan writes on higher education financing and university finances. His book The Great University Gamble: money, markets & the future of higher education (Pluto) appeared in 2013. He is an expert on student loan accounting and university business models. Although he mainly works on private commissioned reports, his writing has appeared in London Review of Books, the Guardian, and the Observer as well as the industry press.

 

Notes

1. Those who started after 2012 have “Plan 2” loans, the current repayment threshold is to be frozen at £27,295 pa for two years before increasing in line with RPI. Borrowers are required to repay 9 per cent of earnings over that threshold. Outstanding balances are written off 30 years after leaving university. Interest accrues at between RPI and RPI plus 3 percentage points depending on earnings. See: https://www.gov.uk/repaying-your-student-loan/what-you-pay.

2. Once again, the family income threshold determining access to additional maintenance support has been frozen. It has been stuck at £25,000 since 2008! In a separate earlier analysis, IFS pointed out: “had it risen with average earnings, it would now be around £34,000.” (https://ifs.org.uk/publications/15940). And that would roughly double the number of students in receipt of extra maintenance cash today. Coupled with a below inflation increase in loan entitlements (2.3%!) and ballooning rents, it means that current students are being treated very poorly. In effect, the result is more students trying to earn in term-time, studying less and relying more on commercial lending and, according to the IFS, facing “genuine hardship”. A whole chapter of the Augar report has been ignored. Instead of using higher loan repayments to increase support for those studying today, potential future funds have been sucked out of the sector. At the end of March, with the Chancellor’s Spring Statement it became clear how the future savings on higher education — by making former students pay more back — had enabled many of the measures that were announced.

3. The government is preparing to transform the financing further in 2025, when the Lifelong Learning Entitlement is meant to be launched. At this point, loans will be available for individual modules. The Office for Students is backing a fully fledged pilot in 2022 with some individual modules now designated for student support at 22 institutions. None is a History course. See: https://www.officeforstudents.org.uk/advice-and-guidance/skills-and-employment/higher-education-short-course-trial/.

4. The Office for Students even recently concluded that the improved ability of London institutions to “recruit globally” represented such a significant benefit that it was no longer appropriate to recognise the “extra costs of operating in London” via the London Weighting grant payment for home students. As a result, the latter — in 2020/21 worth an extra £240 per History student per year in inner London (£150 in outer) — was abolished with a stroke of a pen at the start of 2021/22, saving the OfS £64million per year, which was then funnelled into subjects considered “strategically important”. See: https://www.officeforstudents.org.uk/publications/consultation-on-recurrent-funding-for-2021-22/.

5. The national contract originally negotiated at post-92 universities seems to present research time as “personal development” and suggests it is done outside of the maximum 38 weeks of term-time and roughly 9 weeks of leave. (See: https://www.ucu.org.uk/article/1970/Post-92-national-contract). The latter is not agreed at all post-92s and will also come under increasing strain, with Falmouth and Staffordshire even proposing to employ all new staff at subsidiaries to avoid local government pension schemes.

6. The government’s preference for “strategically important” subjects has been laid down in recent years; there is no guarantee that this won’t also play out in funding decisions resulting from the latest REF.