Reducing tuition fees sounds progressive – but is it a bad use of £3 billion?

There are better ways of using £3 billion for the benefit of disadvantaged young people than cutting university tuition fees, says Helen Barnard.

Last week the Labour Party announced that it plans to cut the maximum that universities are allowed to charge in tuition fees from £9,000 to £6,000 per year. This sounds progressive – reducing the cost of higher education must benefit those least able to pay it? Sadly, it isn’t.

The current system of tuition fees is actually more like a graduate tax than actual fees. Students take out loans to pay for tuition, which they do not have to repay until they earn more than £21,000. Only graduates who earn more than £35,000 will repay the whole amount. The Institute For Fiscal Studies estimates that reducing ‘fees’ from £9,000 to £6,000 will cost £3.2 billion and will mainly benefit mid- to high-earning graduates who would otherwise have been repaying all or most of their loans. The Labour Party has also announced that it will increase the maintenance grant available to students from low-income backgrounds by £400. This will be very welcome for those families, but is a small proportion of the cost of the fee reduction.

Proponents of the fee reduction argue that the actual money may go to better-off graduates but that there is a psychological benefit: young people from poorer backgrounds may be put off going to university by the idea of accumulating large debt. There are three problems with this argument:

  1. There is no evidence of a fall in university applications from poorer families since the higher fee was introduced.
  2. Even if poorer students are put off, there is no evidence that these students would be much less deterred by fees of £6,000 than £9,000.
  3. If this is a serious concern it could be tackled by changing the system to an explicit graduate tax (overcoming some issues with Treasury accounting rules), rather than calling them fees or loans.

The biggest factor preventing young people from poorer backgrounds from going to university is that the majority do not get good enough results at school to even attempt it. Only around a third of young people from poorer backgrounds get five A*-C GCSEs, compared to around two thirds of those from richer families.

If around £3 billion is to be raised from reducing pension relief for the better off, there are many ways it could be used that would have a better effect on disadvantaged young people. Here are a few possible uses:

  • Increase the Early Years Premium and ensure that it is used to raise the qualifications (and pay) of those working with young children from low-income backgrounds.
  • Fund high-quality careers advice for young people from disadvantaged backgrounds.
  • Ensure that the funding of FE and Sixth Form colleges is supported rather than being further eroded (better-off young people mostly go to school sixth forms, those from poorer backgrounds to colleges).
  • Improve the quality of apprenticeships, especially in the service sector, and strengthen traineeships that enable young people with poor results to access a good-quality apprenticeship
  • Increase the Work Allowance within Universal Credit to enable workers on low incomes to keep more of what they earn.
  • Reverse last week's little-noticed but significant cut to the Adult Skills Budget. The cut will especially hit people working in low-skilled, low-paid jobs who want to progress by acquiring new qualifications.

Three billion pounds would not cover all of these worthy causes, but any of them would be a better use of it than reducing tuition 'fees' for well-paid graduates.