Think tank calculates that UK tuition fees reform might not save any money at all

A recent report paints a worrying picture of the funding landscape within British higher education. Think tank the Higher Education Policy Institute (Hepi) suggest that the government’s ‘cost cutting’ undergraduate funding reforms may in fact cost more than the scheme it replaced.

In 2010 the UK government announced reforms that cut funding for teaching by 80%, with the shortfall to be made up by tuiton fees, which can now cost up to £9000 a year. Instead of being paid up front, the fees are in effect taken out as loans, paid from the government straight to higher education institutions with graduates then paying this loan back once they are in employment. However, Hepi’s report warns that several of the assumptions made when the system was drafted were ‘highly uncertain and unrealistic’.

The assumptions regarding the size of loan taken out and the average earnings, say Hepi, will both increase the proportion of loan outlay that will never be repayed. The government currently estimates 32% of loans will never be paid off but, the report claims, the real amount may be several percentage points higher. In addition, because tuiton fees are included in the calculation of the consumer price index, the larger loans could have a knock-on effect for state benefits and pensions, further adding to the cost to the public purse. ‘To put a figure on the extent of that shortfall would entail making predictions about what is unpredictable,’ concludes the report ‘but it is likely to be substantial.’

The report suggest that one way to meet this shortfall is further cutting public funding of higher education, which it admits will disproportionately hurt science subjects and research. However, in an article today, the UK’s Minister of Universities and Science, David Willetts, refutes the report’s conclusions, arguing that Hepi’s report ‘assumes the worst outcome for taxpayers on pretty much every variable it assesses, while ignoring other variables altogether’.