Lowering Tuition in the UK

So, the UK Labour Party has decided that if it gets elected this spring (odds: probably just less than even), it will bring tuition fees down from their current maximum of £9,000/year to a maximum of £6,000/year.

Progressive, right?  Not in a million years.

As I pointed out back here, the weirdness of the UK system of fees and income contingent loans is that fees have risen so high that very few people – about one in five – are expected to pay it back given how the repayment system is set up (no payments on income below £21,000 [C$40,300], and 9% on the everything above it).  The rest – 80% or so – are expected to see at least some of their loan forgiven.  So if/when tuition gets reduced, those who were not expected to repay more than two-thirds of their loans will not see any benefit.  All that happens is that the debt they wouldn’t ever repay gets paid to institutions in advance, rather than lent to students and later forgiven.  Neither will universities be any better off: all that’s going to happen is that public funding will replace government funding pound for pound.

The benefit, in fact, would only accrue to those who were expected to pay more than two-thirds, and the largest benefit would go to that 20% who was expected to pay off their loans in full – i.e. the very best-off graduates (they don’t quite get off 100% scot-free; some part of this gain will be clawed back through higher interest rates on wealthy graduates).  This is why the BBC ended its Sunday interview with Labour higher education spokesman Liam Byrne, by asking the pointed question: “why propose something that benefits the Goldman Sachs graduate more than the social work graduate?”

Fair question – and so it was no surprise that Byrne ducked it, and stuck instead to his talking point that “the present system is unsustainable”.  I think by this he meant that the exchequer will spend ever greater amounts in future on forgiving loans – but if that’s the rationale, it’s hard to understand how bringing those payments forward makes it any more sustainable. And indeed, it’s worth remembering that the cause of the unsustainability (i.e. all that loan forgiveness for lower-earning graduates) is the thing that makes it at least somewhat tolerable and lightly progressive.

Now, one shouldn’t give the ruling Tory party too much – or indeed any – credit here.  The current fee/loan system was more or less designed by mistake; the Tories were under the delusion that very few universities would jack up fees to the maximum £9,000, and so the size of student debts (and hence loan forgiveness) came as a complete surprise to them.  If they could do it again, they’d undoubtedly make it far less generous to lower earners – and indeed, now seem intent on doing so by stealth, by freezing the repayment threshold and allowing inflation to erode its value.

None of this, of course, is to say that more public funds wouldn’t be welcome in the UK.  The question is, if you had a couple of billion to spend, as Labour now seems to want to do, would you: a) give it to institutions so they can improve the education they provide?  b) give it to students from lower-income backgrounds by reducing their tuition upfront (as the UK did between 1998 and 2006)? or c) hand it over to the richest tranche of graduates?

For some reason, Labour’s answer is c).  And on the politics of it, it’s hard to say they are wrong – in a poll taken over the weekend, 60% of UK voters say they back Labour’s policy.  And of course it’s easy to understand why; if you’re not paying attention (and let’s be honest, most people aren’t), you might think the tuition fee policy was actually going to make life easier for all students.  And who wouldn’t vote for that?

Apparently UK politicians – like Canadian ones – seem to think it’s better to play populist games with tuition rather than to actually do things that help low-income students.  That’s deeply unfortunate, but unfortunately not surprisi