John Holmwood, University of Nottingham

English higher education policy never ceases to surprise. First, the sector had to absorb the fact that the Department of Business, Innovation and Skills was seemingly unaware that for-profit providers could access students and their loans for sub-degree HNC and HND courses outside the UCAS application system (where numbers are controlled and, therefore, so too, are its ballooning potential costs). The Government had maintained a cap on overall student numbers because of pressures on the student loan system. However, it had forgotten its earlier rush to recognise courses at private colleges (400 since 2010 and growing) and was oblivious to the implication for its ability to maintain a cap on numbers.

That ‘loophole’, was rapidly closed by asking private providers to refrain from aggressive recruitment in the next application cycle. The episode had budgetary consequences for the Department of Business, Innovation and Skills which has overall responsibility for higher education. These consequences include potential compensatory cuts to the budget for widening participation. However, no sooner was this absorbed than the Chancellor announced in the Autumn Statement that the number cap is to be lifted after 2015. At a stroke, the cost of the student loan system is set to balloon again. Or is it?

What is going on? Should anyone be surprised by these turns of events?

It’s the market!

There was an earlier precedent for the introduction of de-stabilising market shocks into the system. This was the introduction in 2013-14 of the core-margin system where, despite an overall cap on numbers, universities would be able to compete freely for students with A-level qualifications of AAB and above (lowered to ABB+ for the following year). At a stroke, a zero-sum competition for students was created, destabilising established application patterns. According to the Minister, this had the benefit of allowing more students to get into their first choice of University (albeit, primarily those with high qualifications) because universities were allowed to recruit unlimited numbers at the upper margin.

The sting was in the tail. Those universities (and subjects) that lost out couldn’t compensate for falling numbers by recruiting less well qualified students if this exceeded their ‘core’ allocation. This disturbed the complacency of those Vice Chancellors who thought shifting from direct funding to leveraged-funding from students, via their loans, was a win-win situation. But, if a limited market was being created in one part of the system, it was choked off by strict overall number controls and the release of few students at the lower margin.

The removal of direct funding for arts, humanities and social science students, following the Browne Review, had been designed to create a level-playing field to facilitate the access of for-profit providers into the HE system. The cap on student numbers restricted the number of students available to them, hence their targeting of the loophole relating to HNC and HND students. 

The failure to establish a ‘proper’ market was also what led to a clustering of fees set close to the £9,000 cap. This, together with the ‘ generous’ repayment threshold of an  annual income of £21000 (necessary to get Liberal Democrat support) means a significant increase in student debt levels alongside a high estimated default rate on the loans. Most commentators suggest that the cost to future tax payers of the new fee regime will be greater than the system it replaced was to current taxpayers (who are, of course, one of the beneficiaries of the shift from direct funding to fees). And, of course, those future taxpayers will include the cohorts of debt-laden graduates under the new fees regime. All this notwithstanding, the Institute for Fiscal Studies identifies positive distributional consequences, though these are dependent on the stability of current arrangements and that is precisely what is now at issue.

As the proponents of the market in higher education emphasise, the completion of the market requires two things – the lifting of the £9000 fee cap and the removal of the cap on student numbers. These were the conclusions of the Browne Review from which Government was deflected by differences among the coalition partners and responses to student protests.

But surely this is neither politically possible, nor fiscally responsible? It is significant that the date for the lifting of the student number cap is after the next election. The Liberal Democrats are neutered in their ability to respond because they cannot draw attention to their broken promises made prior to the last election. But is it fiscally responsible, in the context of the recent shambles over the costing of the privatisation of the student loan book and the additional costs of HNC and HND qualifications, exposed by Andrew McGettigan (see his article in this issue)?

The conjunction of two powerful lobby groups

In fact, what is now being entered is part 2 of what McGettigan calls, the ‘great university gamble’. Public policy in higher education is being determined behind the scenes by two lobbying groups. These are Russell Group vice-chancellors and for-profit providers.

The first has its eye on the lifting of the fee cap and a truly international higher education environment in which home/EU students and international students pay the same fees. Given that there is no direct public funding of arts, humanities and social science undergraduate programmes, there is no ‘taxpayer subsidy’ reason for international students and home students to be charged different levels of fee. The current level of international fees are seen by many vice-chancellors as an indication of what the market might bear and, for most Russell Group universities they are significantly in excess of the current capped fee for home/EU students of £9000. In this way, the Russell Group is seeking to reinforce higher education as a positional good and their degree programmes as providing future value in the labour market.

However, this provides an opportunity for the proponents of full-on marketization of student loans. The Russell Group argues that its graduates are most likely to meet the £21,000 income threshold and are less likely to be defaulters on the loans. They can, therefore, potentially afford to take on additional debt. The RAB charge on loans – the forecast of the amount that will not be repaid and its presentation as a charge against the returns to the fund deriving from repayment – is currently measured across the loan book as whole. However, the possibility of calculating course-specific and institution specific RAB charges enables the possibility of creating separate loan books and privatising those that show a higher return. This means that the public purse will be left with the responsibility for the less-favourable loan books (although as McGettigan argues in this issue, the privatisation of favourable loan books represents a short-term gain for present taxpayers against a future loss of revenue). The Russell Group may prefer more public funding, but their lobbying for the lifting of the fee cap, and acceptance a market-based fee regime, contributes to a different outcome.

The second lobby group, for-profit providers, has its eye on something else, namely the removal of the student number cap. Here the Government is gambling that there will be a reduction in fees when for-profits are allowed to enter and access these students without restraint. Pearson, for example, benefit from being the provider of HNC and HND examinations through Edexcel, but they are also preparing to supply full degree programmes to exploit the possibility of savings through new technology and massive open online courses (MOOCS), as part of a coming avalanche of change. They have divested of their textbook division, to establish themselves as curriculum providers through online courses. Their delivery will be closer to an online course handbook with ‘click-throughs’ to further reading (courtesy of open access, of course), short lecture and film clips and data and other interactive research resources. Expect this to be supported by face-to-face casual tutors. And expect it to cost £6000 in fees, or, more likely, less.

Full opening up of student numbers is what has happened in Australia since 2009. It is possible that the Chancellor, in declaring the removal of the cap, had in mind the introduction of a minimum tariff score for students to qualify for loans, as recommended by the Browne Review. Either way, the game is on.

Dramatically increased competition from for-profit providers will cut a swathe through other institutions, transforming the higher education landscape. Wider public benefits of higher education are not funded under the new arrangements and have to be maintained by revenues that are under threat from competition by institutions that have no interest in those benefits, only shareholder interests. A race to the bottom-line of low cost, teaching only, provision is the new logic of that part of the system where education cannot be sold as a positional good.

Here a new opportunity arises. With a two-tier system slotting into place and a polarisation in fees, it looks possible to address two issues. Graduates of Russell Group universities who estimate that they will repay their (even bigger) loans, will have no interest in supporting the loan costs of other students less privileged than themselves. They will have an interest in the income payment threshold being reduced from £21,000 in order to reduce the defaults from graduates at institutions where the students are judged less likely to be high earners. 

In this context, however, the Government will need to be able to ‘sell’ that reduction in the income threshold to those students who will be most affected. The trick will be to show that their overall debt will be less because fees will have been reduced to £6000 and below.  In this way, the debt averse attitudes of students from less advantaged backgrounds will leave them at the mercy of the marketing campaigns of for-profit providers selling sub-prime training, just as is the case in the USA.

In short, if the lifting of the student number cap pushes the fees down to below £6000 and Russell Group fees go up to around £13000 (or more – some vice-chancellors have their eye on the fees charged at US ivy-league institutions), then the balance of risk in the student loan book falls and the government is likely to think that it can probably get away with reducing the income threshold for repayments. At the same time, proposals within the Labour Party by John Denham, that fees can be cut by the provision of more two-year courses and other efficiencies, fall into a trap that has been carefully prepared.

Slouching towards Browne

All parties are now proposing, whether intentionally or not, the end to public higher education and to a socially inclusive public interest in higher education. The Robbins commitment was to grant-supported public higher education, challenging the rationale behind private secondary education and elite social reproduction, but now higher education is being re-modelled in the image of private secondary schools and in the same interests.

The recommendations of the Browne Review are moving ever closer to fruition. It is just the fee cap that remains to be lifted. When that comes, expect it to be accompanied by expressions of concern for the high levels of debt faced by students from disadvantaged backgrounds. Also expect it to be accompanied by the extension of fee-based regimes across all post-16 education. The doors to social mobility will then be firmly shut and there will be different kinds of education for different kinds of young people.


John Holmwood is professor of sociology at the University of Nottingham. He is currently President of the British Sociological Association and is co-founder of the Campaign for the Public University. He is editor of A Manifesto for the Public University (Bloomsbury 2011), available free online and author of a recent article in the International Journal of Lifelong Learning, ‘From social rights to the market: neo-liberalism and the knowledge economy’ available here on open access.