Vice-chancellors fear £2bn funding gap as Labour hones tuition fees policy

Labour is thought to be testing a funding plan to lower tuition fees to £6,000, as concerns grow among vice-chancellors that the policy could leave universities with an income gap of about £2 billion a year.

Measures being considered by Labour to fund the policy are understood to include asking some higher-earning graduates to pay bigger interest rates on their loans and making them continue repayments even if they settle the debt early.

Lowering fees to £6,000 would also mean lower write-offs on student loans – delivering savings that could contribute to higher direct funding for universities, the party believes.

The funding plan is thought to currently be under examination by the team around Ed Balls, the shadow chancellor, who is undertaking a “zero-based” spending review across all areas of government. Labour’s costing for the policy is understood to be about £2 billion – but it believes that its funding plan would leave the policy close to cost-neutral.

The party has not yet decided whether to enter the election with a commitment to lower fees to £6,000.

But vice-chancellors have been told privately that the £6,000 fee policy is “the direction of travel”. If that does become policy, it will most likely be announced at the Labour conference in September.

A Labour government would have to decide when to implement the policy. But there is a possibility that it could provide a “rebate” on fees for those who start courses the year before the policy is implemented.

Such a move would address the fears of vice-chancellors that the announcement of the timing of the £6,000 fee policy could lead to a drastic fall in recruitment for one year as students delay starting their courses until fees drop.

Liam Byrne, the shadow universities, science and skills minister, has told vice-chancellors that a Labour government would make up any funding gap with the £9,000 system, reintroducing direct teaching grants so that universities are not left with a cut in income.

But vice-chancellors, who have not yet been presented with Labour’s more detailed funding plan, are not convinced.

Bill Rammell, the former Labour higher education minister who is now the University of Bedfordshire’s vice-chancellor, said he was “worried about [the] durability” of any pledge to cover the funding gap. “I’m not the only former minister who learnt from experience to be wary of Treasury promises for particular spending priorities,” he said. “Priorities change with time.”

He suggested that Labour should offer a guarantee to universities to protect funding per student, to be checked “annually by the independent Office for Budget Responsibility”.

Sir Christopher Snowden, the Universities UK president and University of Surrey vice-chancellor, said: “I have raised this directly with Liam Byrne and written to Ed Balls, to make it clear that if there is a move to £6K, there has to be not only a guarantee that the financial gap is made up, but also the recognition that we have to come to a model that is more sustainable going forwards.”

john.morgan@tsleducation.com