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Uncapped fees rather than graduate tax for students

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Universities should be allowed to set their own fees for students, Lord Browne’s review of higher education funding has proposed.

The review has sided with increased student fees rather than recommending a graduate tax which would have seen students charged repayments on their loans according to their tax status.

There would, however, be some form of income assessment when it comes to deciding how much students repay on their loans under Lord Browne’s plans.

The Browne report effectively removes the cap on student fees in England, currently set at £3,290.

Should the government accept the findings of the review, then fees for some courses at the more popular universities could rise to as much as £12,000 a year.

Under the new funding scheme, the government would guarantee to underwrite fees up to £6,000 a year, but universities would be free to charge any amount above that figure.

Universities that charge more than £6,000 will face a tapered levy on the fee in order to support poorer students, but even those institutions asking for £12,000 would be able to retain as much as three-quarters of the fee.

Students will continue to receive loans from the government and would not be required to start making repayments until they reached an income of £21,000, up from the current £15,000.

Students would be able to borrow £3,750 a year, with those from families earning less than £25,000 entitled to an additional £3,250 in loans.

However, graduates would be expected to pay a higher level of interest on the government loans, which would be set at the government’s own rate of borrowing and topped up by inflation.

The present system of effectively interest-free loans would be dropped and replaced with a tiered regime of loan repayments, determined by earnings.

Any future student earning £21,000 would be expected to pay interest of 2 per cent over inflation on their debts.

Any debt that has not been paid off after 30 years would be written down by the government. The present time period for debt repayments is 25 years.

Speaking in a radio interview, Lord Browne argued that a lot of people won’t pay back anything like the amount the government has given them: “The bottom 20 per cent of earners would pay back less than they do today and only the top 40 per cent of earners would pay back the full cost.”

The review argued that there should be no single fixed price for fees and that different amounts would be charged for different courses.

This could open the way for public funding to be removed completely from most of the higher education system, with the only tax-payer funded grants aimed at the most essential subjects, such as medicine, science and engineering.

The review also made clear that universities would be expected to compete in an open market for students and that courses need to be competitive. Some institutions that fail to attract sufficient numbers of students could go out of business, the report suggested.

Universities would be required to produce “student charters” that would provide information about the quality of the degree courses on offer and employment rates for those students who have graduated.

The report envisages a 10 per cent increase in the number of university places over the next three years.

Lord Browne said: “Our higher education system is world-renowned, but too often it enshrines the power of universities and not the power of students. These reforms will put students in the driving seat of a revolutionary new system.

“Under these plans universities can start to vary what they charge but it will be up to students whether they choose the university. The money will follow the student, who will follow the quality. The student is no longer taken for granted; the student is in charge.

“We have been guided by three principles: participation, quality and sustainability. Any student who has the academic potential should be able to participate in and benefit from higher education.

“Students do not pay anything upfront. Only graduates pay according to the level of their earnings. Under our proposals, the bottom 20 per cent of earners will pay less than today and only the top 40 per cent of earners will pay back close to the full amount.”

Responding to publication of the report, Vince Cable, the Business Secretary, commented: “This report is the culmination of months of diligent enquiry by Lord Browne and his panel of experts. They have taken evidence from a wide range of people including students, the higher education sector and business.

“We will judge their recommendations against the impact on student debt, ensuring a properly funded university sector, improving the quality of teaching, increasing social mobility and attracting a higher proportion of students from disadvantaged backgrounds.”

The Minister for Universities, David Willetts added: “The current system of funding for higher education is no longer fit for purpose. Any new funding settlement must promote world class competitiveness in teaching and research, with better quality for students.

In a later statement to the House of Commons, Vince Cable went on to say: “The government endorses the main thrust of the report. But we are open to suggestions from inside and outside the House over the next few weeks before making specific recommendations to Parliament, with a view to implementing the changes for students entering higher education in autumn 2012.

“More detail will be contained in next week’s Spending Review on the funding implications. But as a strategic direction the Government believes the report is on the right lines.”

Business response

Commenting on the review, David Frost, director general of the British Chambers of Commerce, said that, although student fees may dominate the headlines, the real issue at stake is in ensuring that universities and colleges are delivering the skills that businesses need to drive the UK’s economic recovery.

Mr Frost continued: “Currently, too many students are graduating from degree courses without the technical or applied skills they need to succeed in the business world.

“We believe that Lord Browne’s review goes someway to address this, as universities will need to make the case for higher costs by demonstrating how their courses will help their students succeed in the economy. The funding protection offered to vital but expensive courses in science and engineering will also give business piece of mind that the proposals will deliver the skills they need.”

Richard Lambert, the CBI’s director-general, described the review as making a major contribution to the debate about higher education in England.

The CBI welcomed the emphasis placed on the importance of student choice and added that the recommendations are progressive in nature, with graduates on the lowest incomes repaying less than those on high salaries.

Mr Lambert pointed out that the review recognises the critical role for continued public investment in courses that are of strategic importance to our society and economy, including high-cost areas like science and engineering.

He said: “The proposed new funding body will also have the capacity to support other disciplines that meet the needs of business, such as languages.

“Higher education is a public good, but one that generates significant private benefits in the shape of higher earnings for graduates. So there is much room for debate about the proper role of public and private funding. Lord Browne’s review has struck a clever balance between the two, and creates a valuable platform for the coming political debate.”

But Mr Lambert warned against using the Browne report as a means of offsetting very deep cuts in the spending review.

He concluded: “One key question, though, is how it will map into the coming cuts in public spending. There is speculation that these could take out more money from the system than is being proposed by Lord Browne, and that the trajectory of cuts will not give universities the time to rebalance in the way that the review has proposed. That would be seriously short sighted, and could cause lasting damage to higher education in England.”