Response to the Browne review of university funding

12 October 2010

Russell Group Director General Dr Wendy Piatt said:

“We support the urgent and necessary reforms outlined by the Browne Review. These recommendations could make or break our world-class universities. That’s because, bluntly, our leading institutions will not be able to compete with generously-funded universities in other countries if they are not able to secure extra funding. The proposals offer a very good deal for students and a fair and progressive way forward which protects low-earners. Unless we ask graduates to make a bigger contribution, they – as well as society as a whole - will be short-changed. This is the stark choice the country has to wrestle with. Our graduates need to compete with the best in the world, and we would be letting them down if we didn’t ensure they get the very best education.

Lifting the cap

"By removing the cap in England, the expert team led by Lord Browne has rightly recognised that a substantial increase in graduate contributions is the only viable and the fairest way to secure this vital investment. Increasing and varying the contribution made by graduates is the fairest option because it reflects the link between what a student gains from a university education and what they give back.
 
“Second only to the US, the UK punches well above its weight in the quality of its higher education. But our international competitors, fuelled with huge cash injections from their Governments and the freedom to ask for higher graduate contributions, have begun to outpace us. To remain in the higher education premiership, we have to give our universities access to vital additional investment - otherwise we will be relegated to the third division.

The pivotal role of next week’s Comprehensive Spending Review

However, the Russell Group Director General also flagged how expected funding announcements in next week’s Comprehensive Spending Review (CSR) will be pivotal to the ultimate success or failure of the Browne proposals:

“The true impact of Lord Browne’s recommendations, and the extent to which fees will have to rise, will not be completely clear until we know the result of the Comprehensive Spending Review (CSR),” she said. “If it brings still more cuts to teaching and research budgets when the sector is already absorbing £1 billion of the previous Government’s cuts, today’s proposals may still prove insufficient. 

A fair and low-risk repayment system for all

“It is really important to understand that student loans are a world away from conventional ‘debt’. Under Browne’s system, there is no upfront payment for any student, and graduates are only asked to start making repayments when their earnings reach £21,000. Even then they would only contribute a fixed proportion of their income (9% of income above £21,000) so their payments should never become unmanageable. 
 
Additional protection for the poor and low-earners

“Students from poor backgrounds and low-earners are particularly well-protected in this system: for example if, for whatever reason, the graduate is unable to pay off the loan within 30 years it is written off. In short, the repayment system provides students with the most generous loan they are ever likely to be offered.

“It is fair that most graduates are asked to pay a real rate of interest as this subsidy is extremely expensive for the Government. But it is also a good idea to make interest charges for low earners as low as possible.”

In addition Dr Piatt stressed that Russell Group universities would ensure measures resulting in more funding went hand-in-hand with a commitment to fair access and widening participation.

“Our universities already plough millions of pounds into bursaries and outreach work with schools,” she said. 

But she emphasised the overwhelming evidence showing that fees have not deterred young people from applying to university:

“It’s absolutely essential to recognise that participation in higher education from all socio-economic groups has actually increased since fees were introduced in 2006, and applications have rocketed. Whilst it seems counter-intuitive, the hard evidence shows that financial considerations are not the most important factor in determining whether a student will go on to attend a leading university. The real barriers to university entry are underachievement at school, misinformation, lack of confidence and low aspirations.

“However, a generous and progressive repayment system is expensive. England already spends considerably more of the higher education budget on student support as opposed to teaching, and there is a danger that the teaching budget will continue to take second place.”

Rejection of a graduate tax

“Finally, we are pleased that the unworkable concept of a graduate tax is rightly rejected by the Review. All the many downsides of a graduate tax that we outlined to Lord Browne’s review explain why no other developed country has backed such a system. Browne’s recommendation of graduate contributions underpinned by loans has all the advantages of a graduate tax without the shortcomings.

A final warning about cuts

“A final word of warning: there is a danger that much of the increase in graduate contributions will simply be a substitute for Government funding. If that happened only a substantial rise in graduate contributions would avoid universities being left facing exactly the same financial struggles.”

Notes to editors

1. A degree is an excellent investment. The financial return on a degree has been calculated at around £160,000 although this varies according to both the institution attended and course taken.  This is the gross additional earnings of a graduate, over someone with 2 A-levels, in today’s money terms, for someone studying a representative undergraduate degree. This is a premium of 23.5% over someone with 2 A-levels. Source: Universities UK, The economic benefits of a degree (2007). 
2. In 2008-9 alone Russell Group universities in England spent £66.5 million of their additional fee income on bursaries. This represents an average of £4.2 million per institution with some of our universities spending as much as £9 million. Overall, this amounts to over £1.5 million more per institution than the sector average.  Over 31,000 students from the very poorest backgrounds attending Russell Group universities received bursarial support averaging £1,523. This is nearly five times the minimum bursary of £310 required by OFFA.  Overall, about a third (31.8%) of Russell Group university students received a bursary or scholarship.
3. OECD data shows that the UK already spends over half (53.2%) of its public expenditure on HE on subsidies to students – one of the highest proportions across OECD countries.  This proportion is higher than in the US, Germany, Sweden, Norway and Australia.  The subsidies include scholarships, student loans and other transfers to households.  The UK spends the lowest proportion in the OECD on HE institutions (46.8% is spent on institutions).