Cookie policy: This site uses cookies to simplify and improve your usage and experience of this website. Cookies are small text files stored on the device you are using to access this website. For more information on how we use and manage cookies please take a look at our privacy and cookie policies. Your privacy is important to us and our policy is to neither share nor sell your personal information to any external organisation or party; nor to use behavioural analysis for advertising to you.

Do Labour’s sums no longer add up?

IPPR report implies that party’s £6,000 fees policy may prove unworkable. John Morgan reports

Labour’s policy to lower fees to £6,000 if it gains power would cost £1.7 billion a year at a time when it may instead need to cut billions from departmental spending, a report from a thinktank friendly to the party suggests.

The report has raised fears that Labour could enter the next general election with a funding pledge it will find impossible to meet.

There are also suggestions, denied by Labour, that the £6,000 policy is no longer “fully costed” because the government accounting rules regulating student loans have since changed.

When adopting the policy in 2011, Labour stated that, if returned to power now, it would reintroduce direct teaching grant to replace the university income lost by lowering fees. The policy was to be funded by raising corporation tax on banks and increasing loan repayments for higher earners.

But some figures in the sector fear that if the Liberal Democrats opt for a £6,000 policy to attempt to win back some of the student vote, Labour may be forced to include the policy in its manifesto – which will raise concerns among universities about the party’s ability to fund lost income with sufficient teaching grant.

This week’s report from the Institute for Public Policy Research – seen as crucial to Labour’s higher education policy development – offers five funding options.

In a section on the weaknesses of a £6,000 fee system, the report, led by Nigel Thrift, the University of Warwick’s vice-chancellor, says: “Under this scenario, the Treasury would have to fund an additional £1.67 billion in [Higher Education Funding Council for England] teaching grants.”

The IPPR report also argues that the Department for Business, Innovation and Skills, which will have a budget of £13.8 billion in 2014-15, “will have to make a further cut of £2.2 billion” over the following five years, “assuming the current pace of deficit reduction is maintained”.

Ed Balls, the shadow chancellor, has warned ministers that there will be no new additional spending allowed for departments in 2015-16 unless agreed by him and the Labour leader Ed Miliband.

A Labour spokesman said of its higher education funding policy: “The announced policy to lower fees to £6,000 is not ‘additional spending’ because it was costed at the time to be neutral overall to the Exchequer.

“IPPR, Million+ and others have shown that there are a number of additional models that allow for a £3,000 reduction in the headline fee that are similarly cost-neutral to the Exchequer and also maintain funding for universities.”

However, some suggest that Labour’s policy is no longer fully costed. It partly relies on reducing the proportion of loans never repaid, the resource accounting and budgeting (RAB) charge, by increasing loan repayments from higher earners.

At one time, the RAB charge was included within departmental expenditure limits (DELs). This meant that increasing loan repayments created extra space in BIS’ DEL to fund replacement teaching grant.

But government accounting rules were changed in 2010-11 and RAB charges on loans are no longer counted within BIS’ DEL.

john.morgan@tsleducation.com

Rate this article 

Click to rate

  • 1 star out of 5
  • 2 stars out of 5
  • 3 stars out of 5
  • 4 stars out of 5
  • 5 stars out of 5

0 out of 5 stars

Have your say

Remember you need to be a registered THE member and logged in to comment on stories. Please read our terms and conditions for posting guidance.

  • Print
  • Share
  • Comment
  • Rate
  • Save

Related images

  • Ed Balls, Labour Party
  • Print
  • Share
  • Comment
  • Rate
  • Save
Jobs