Laurie Wilcockson puts forward some policy alternatives for Labour after the party announces that it does not intend to abolish tuition fees.
Keir Starmer looks set to abandon his commitment to abolish tuition fees. Honestly? It might not be the worst idea. Yes, it’s a huge misstep in terms of comms, and not a great look for the leader of the Labour Party (especially when he committed to it in his leadership campaign), but there are actually far more sensible, doable policies which would benefit young people far more for far less cost: chiefly, a re-evaluation of the entire loan scheme. If this were to be a trade-off with those, I would be prepared to forgive him the U-turn.
For starters let’s recognise the shortcomings of doing away with tuition fees. Firstly, if you were to get rid of them in their entirety, there are twelve years’ worth of graduates who have still accrued immense debts, £27,000-27,750 per person, in tuition costs. If you remove tuition fees, do you then absolve all of them of that debt? Furthermore, once you have done so, what alternative model is there for funding universities? Degrees already cost universities, on average, more than the £9,250pa cap on tuition, with the loss universities make, generally about £4,000, generally subsidised through international fees Thiswould be unsustainable in a post-tuition-fee world, and universities would therefore need to receive at least £9,250 per student in funding directly from the government. If the government was going to incur a cost of, realistically, over £10,000pa for half of all young people aged 18-21, that would be a huge drain on public finances that could be put elsewhere, especially when forgiving the multi-tens-of-thousands-of-pounds debts of an entire generation. These are all potentially workable, but they are nonetheless considerations worth taking seriously.
Next it is worth considering that in 2016 the post-Coalition Conservative government abolished maintenance grants, replacing them instead with loans. These amount to as much as another £27,000 per person for a three-year degree depending on their household finances.
In theory, there is no disadvantage to these loans for lower-income students, as repayments start at the same threshold as tuition fee loans.. The problem here is that the maintenance loan is unequally targeted. It is judged according to household income, so that those whose parents are able to help fund them will receive half as much loan (and therefore half as much debt). In theory there’s an equity here. The government saves money by not handing out as much to those from wealthier families. What this doesn’t account for, meanwhile, is the interest that comes with these debts.
The problem is, those with more debt will have far more to repay due to the high rate of interest. I’ll give you an example of how this system works. I began my three-year degree in the autumn of 2020, and the amount of debt I ‘loaned’ from Student Finance England stands at £48,504.62, about £8,000 more than the minimum. Bearing in mind that I only received the last of that money this month, I have already accrued an extra £230.49 of interest. Once I graduate, I can expect to see a 6.9% interest rate (2020 RPI +3%) on the total sum, which will then sit at £48,735.11.
For those unable to visualise the extent of this, were I to hypothetically never repay my student loan, by the time of its forgiveness thirty years after I received it, it would have accrued to over £380,000. Someone on the minimum would only hit around £320,000, while someone on the maximum could hit nearly £440,000; the difference is significant.
One might seek solace in the fact that my student loan will be forgiven in thirty years. However for students starting from 2023, the forgiveness threshold will rise to forty years, ten more years of what is for them, essentially a 9% graduate tax, and with repayments starting from an income of 25k rather than the current 27k. Furthermore, while the interest has been theoretically decreased from RPI+3% to just RPI, the ONS have RPI at 20.2% for March 2023, compared to 3.9 when my loan was assessed. If this RPI turned out to be consistent (which, in fairness, is not at all likely), someone loaning the maximum amount of loan could theoretically accrue a debt of around 170 million, presuming they did not pay into it.
If I were advising Keir Starmer, I might suggest the following edits to the loan system. Restore the maintenance grant (although keep it based on household incomes); bring loan interest down to RPI for all debtors, future, current and former students; and return the forgiveness threshold to thirty years. As an interested party, it is only fair that I show how these changes would affect my debts: instead of my maximum debt sitting at £300,000, which will never be repaid, it would instead be just slightly under £130,000, and in reality it would be even less since I would actually be repaying reducing the amount the interest would then apply to. In other words, I would realistically be able to repay my debt without needing to become a ridiculously high earner, and the government would make back its investment in my education so long as inflation returns to normal levels. He might also consider raising the compulsory payments threshold, rather than lowering it as the government has. This would cost the state relatively little, but it would put more cash directly in the hands of young graduates looking to save money, buy a house, or start a family.
In sum, then, should Keir Starmer have u-turned on a long-term policy of writing off tuition fees? Politically probably not. But if done correctly, it could be the smarter move from an incoming government looking to restore confidence in fiscal responsibility.
Laurie Wilcockson is a History student at the University of Cambridge. He was formerly Deputy Editor-in-Chief of The Cambridge Student, and is an occasional contributor to East Anglia Bylines. He grew up in rural Norfolk, and discovered a passion for political journalism when he found himself at the wrong end of the 2020 A Level Algorithm Fiasco, and had to fight for his place at university. He tweets at @LaurieWilcocks1.