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Don’t scrap the university funding model – find ways to improve it


4 min read

University funding has led to some of the tightest parliamentary votes.

The vote on the Blair government’s fee proposals in 2004 saw the largest rebellion on the second reading of any Bill since the War with its majority cut to five. And the fees vote of 2010 saw the largest Liberal Democrat rebellion of the Coalition with the government’s majority falling to 21. 

The problem which higher education faces is the opposite of policy churn

Paradoxically however, despite being so politically fraught, higher education funding is also an area of cross-party consensus. All three political parties when faced with the challenge of how to finance higher education in England have ended up backing fees with loans and graduate repayments. The three major reports on the subject over the past 25 years – from Ron Dearing, John Browne and Philip Augar have all backed that basic model. Higher education just is not a priority for public spending, even for education secretaries who come into office believing that it is the early years which really matters. But at least there is an alternative way of funding higher education. As graduates tend to earn more than the average tax-payer it seems reasonable to expect them to pay back for the cost of their education when their earnings go over a threshold set high enough to protect low earners. 

In many other areas of policy there is worry about policy churn as politicians lurch around. But in higher education the model has been pretty much unchanged – apart of course from the actual level of fees – for 20 years now. 

Some critics think there is an alternative: a graduate tax. But it faces insuperable obstacles. There is no register of the nation’s graduates so it would have to be phased in as we recorded who was becoming a graduate. That means it would take a decade or more to become viable and is no answer to the question of how to fund higher education now. It is also very hard to defend taxing someone more highly through their life just because they have been to university. One of the many strengths of the current model is that people are paying back for a service they have received so there is a cap on the total amount due. A graduate tax would be a high and lasting penalty for British graduates going into well-paid jobs so there would be a clear incentive to avoid studying here and go abroad instead. The truth is that three serious independent reviews and six successive prime ministers have not been able to find an affordable, viable alternative to the fees and loans model.

The problem which higher education faces is the opposite of policy churn. It is that we have got completely stuck with fees unchanged for 10 years – apart from one increase to £9,250 secured by Jo Johnson alongside his introduction of the Teaching Excellence Framework. There is scope for genuine and legitimate political disagreement about the calibration of the scheme: 

• The level of repayment thresholds sets the balance between graduates paying back and taxpayers paying for the loans that are written off. What is the right balance here?
• Interest rates are probably the most disliked feature of the system as some graduates can see their debt rising but they are a progressive feature to collect more repayments from high earning graduates before they pay off their loans. So are interest rates good or bad?
• How low do we cut the real resource for educating students – if we wouldn’t freeze the cash to fund individual school students year after year why do we do that to university students? Can we index fees to protect the funding for university education?

These are real and genuine political issues. The system should be flexible enough to reflect different judgements on them. We should open up these issues for lively political debate instead of wasting time and effort in a fruitless pursuit of a completely different model. 


Lord Willetts, Conservative Peer and minister for universities and science 2010-2014

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