By Rob Cuthbert, Editor, SRHE News
How much would it really cost to write off student debt?
Jack Britton, Carl Emmerson and Laura van der Erve of the Institute for Fiscal Studies published their ‘Observations’ on How much would it really cost to write off student debt? on14 September 2017: ‘We showed before that scrapping tuition fees for new students would increase borrowing by £11 billion a year. It has more recently been suggested that debt accumulated by graduates under the £9k a year tuition fee regime should be written off. If that policy were implemented immediately it would have almost no effect on government debt in the short run, but due to reduced future repayments from graduates, would increase debt by around £20 billion by 2050. If implemented after an election in 2022 the cost would be much higher, adding around £60 billion to debt in the long run. Suggestions that debt would rise by £100 billion are wrong. £100 billion is the outstanding value of all tuition fee and maintenance debt since 1998 – it is not the answer to the question: what would be the impact on public debt of writing off fee loans accumulated under the £9,000 tuition fee regime?’
‘With all else held constant, the main beneficiaries of this proposal would be high earning graduates, with low earning graduates standing to benefit very little. Under the current system, high earning graduates make the highest student loan repayments and repay the largest proportion of their debt. If a significant part of the debt were to be written off, their total repayments would therefore be reduced most. Low earning graduates, on the other hand, are forecast to repay very little of this final part of the loan; indeed around one-third would see no change at all to their student loan repayments as a result of the policy as they will never earn enough to clear even their maintenance loans.’
Andrew McGettigan blogged on 13 July 2017 about the Office for Budgetary Responsibility (OBR)’s biennial Fiscal Risks report, which showed that total student debt had now reached more than £100billion. The OBR used the term ‘fiscal illusions’, coined by the International Monetary Fund, to describe ‘any transaction that improves or worsens measured fiscal aggregates without genuinely affecting the true health of the fiscal position in the same way. An example would be the effect of financial asset sales on PSND, where they lower the measured aggregate without improving fiscal sustainability.’ Student loans are one such ‘illusion’. However McGettigan argues that student loans are overvalued by government because it uses discount rates which are too high, meaning that any loan sale would actually crystallise a loss he estimates at potentially £3billion, because it would not reflect true interest and discount rates. The projected sale of student loans by the government is now officially rated ‘amber’, which is between ‘probable’ and ‘in doubt’. Not ‘at risk’ – that would be ‘red’. Glad we’ve got that cleared up. McGettigan blogged about it again on 2 August 2017, pointing out that £20million has now been spent or budgeted for the costs of the sale.
Is Nick Timothy right about graduate salaries?
David Morris of WonkHE mused on 17 August 2017 about the latest question provoked by the summer’s university bashing, with former Downing Street Advisor and Conservative manifesto author Nick Timothy getting in on the game in the Daily Telegraph. ‘Timothy’s argument … broadly follow[s] the line of thinking articulated in his now largely abandoned manifesto, questioning the value of university expansion … Timothy is … influenced in his thinking here by Professor Alison Wolf … [on] the question of whether unbridled expansion of university courses driven by universities’ willingness to supply, applicants’ willingness to apply, and the government’s willingness to provide funding no matter what, is necessarily an efficient way of allocating our available nation resources for tertiary education. Wolf has made a very sophisticated argument that it is not.’
What next for England’s troubled universities?
Observer journalist Tim Adams wrote a long and winding piece on 24 September 2017: balanced, well-informed, and didn’t actually manage to answer the question.
All you ever wanted to know about UK think tanks, in one place, thanks to Eddie Copeland, an independent writer on government innovation, data and technology. 80% of think tanks are in London, although thinking is allowed elsewhere. Nick Hillman of think tank HEPI was optimistic, in a qualified way, about Brexit’s implications for HE when he spoke at a conference in London on 15 September 2017. Elsewhere in the wonkiverse there was the entertaining and informative nonsense of the WonkHE Power List, with judges including SRHE Fellow Robin Middlehurst.
Higher education for public value: taking the debate beyond New Public Management
Bruno Broucker, Kurt De Wit and Jef C Verhoeven (all Leuven) had an article in Higher Education Research and Development (online 5 September 2017): ‘Many higher education (HE) system reforms in the past decades have been built on the paradigm of New Public Management (NPM). However, these reforms have not allowed HE to fully take its value for society into account. In recent years a growing call can be heard to orient the HE sector towards more collaboration, a focus on a larger set of socio-economic objectives instead of on performance alone, less pressure, more trust and legitimacy. In this article, it is stated that NPM has not sufficiently enabled the creation of public value (PV) by the HE sector. This article provides (1) insight into the flaws of NPM, (2) an understanding of PV for HE and (3) a new model to study HE reforms built on the concept of PV.’