The Labour leader, Ed Miliband, has confirmed that should they win the next general election student tuition fees will be cut by one third, with the gap being funded by a reduction in tax relief for middle-class pensioners, although there will be a small increase in the living grants (£400). Naturally, this announcement has refuelled the debate that was discussed in an earlier post on this blog. Following Mr Milibands confirmation, however, one has to question whether this policy is really the way forward for higher education.
Challenges attached to the policy change
There is no doubt that the policy change will have a positive financial effect on students from lower income families, which will make it easier for them to enter into higher education and thus improve their career opportunities. However, unless the gap in university revenues resulting from this measure is restored through an increase in public funding, it could adversely affect the quality of higher education. Alternatively, it could result in universities trying to offset the revenue reduction by increasing other costs payable by students, such as rent and other living costs. If this occurs, a significant proportion of the benefit of reduced tuition fees will be lost.
Additionally, it could also result in universities increasing their intake of foreign students, thus reducing the opportunity for UK students (see earlier post). Furthermore, one could potentially argue that, in the longer term, students will actually pay the extra £3,000 through increased taxes on pensions, which means the additional cost is simply being offset by time.
Are there alternatives?
There is perhaps a better way. Rather than reducing tuition fees, if the government were to increase the living cost grants by a realistic amount, say from the proposed £3,800 to £6,800 for poorer students this could be almost be self funding. By relieving the financial pressure that these living costs have on parents, even those in the middle class, this will improve their disposable income which, in terms of the economy, increases their spending power and thus the revenue collected by the treasury.
It would be interesting to hear your views on this debate.
Paul is writing team manager for Re&d Ltd www.readessays.com