As we approach the final stages of the undergraduate admissions process for 2104-15 it is worth noting the outcome of the deliberations of the Business, Innovation and Skills Committee tasked with examining the student loans system (see report here). They argue that a record of inaccurate debt forecasting and failure effectively to collect student loans threatens the continued existence of the current student loans model. I mentioned in the last blog that the Chancellor has removed the cap on student numbers for 2015-16 and beyond. This was a very welcome development for Universities since in effect we are able to recruit as many students as we are able to attract, thus allowing us to grow certain disciplines strategically. However, the report questions whether the current loans policy is affordable, and may result in a multi-billion budget gap. So barely a month later I’m writing this blog in the knowledge that the concept of uncapped numbers might be under threat.
Under the present system for students resident in England, the Government loses around 45p on every £1 it lends. The Committee supports the removal of the student numbers cap as a worthy aspiration but raises concerns that the Chancellor’s linking of this policy to income raised from the much publicised sale of the ‘student loan book’ could result in an additional burden on the tax-payer. Given the uncertainty around how much could be realised through this sale – the Government’s own commissioned analysis indicates that the sale would only raise £2bn rather than £12bn originally forecast – the Committee has asked the Government to show how the £5.5bn required between now and 2018-19 will be raised.
On the face of it this is a worrying development. There is no sign (to date) that the Government will back-track on its plans to remove the cap on student numbers, but the question remains how the gap in funding will be made up. There is concern that this will be achieved by raiding other income streams, such as the research budget. This would be a very unwelcome development that ‘robs Peter to pay Paul’. The research budget is effectively reducing year-on-year through erosion by inflation, and any further reduction, which would be dramatic to make up the shortfall, would seriously jeopardise the world status of the UK research base.
Then there is the possible impact of a general election in 2015 on education policy. If student fees are lowered, the question arises from where this additional shortfall would derive. Of course, lower fees would mean a lower level of debt, but there is no guarantee that any reduction in fees would be matched by a larger block-grant. The tripling of student fees a few years ago was, and remains, deeply unpopular with undergraduates. It is not always appreciated however that the increase in fees was matched by a dramatic decline in the level of block-grant support, so Universities did not suddenly become cash-rich.
So we need to proceed with caution. Dave Ramsey, our Faculty Management Accountant, has developed a tool to allow us to undertake ‘sensitivity analyses’ of student numbers (amongst other things). This will allow us to analyse the risks of failing to meet our planned student cohort for the forseeable future due to circumstances that are not under our control (and most circumstances seem to fall into this bracket!). We won’t be taking any unnecessary risks until the external environment becomes more certain.
This will be the last blog for this academic year – happy holidays everyone!