“Those who earn the most will pay over the odds.”
Deputy Prime Minister Nick Clegg, Prime Minister’s Questions, 10 November 2010
Cathy Newman checks it out:
Nick Clegg left no room for doubt yesterday when he said the richest would pay over the odds for their university tuition. He’s desperate to persuade his rebellious backbenchers that the decision to let universities triple their fees wouldn’t penalise the poor. The Lib Dem leader has made much of the fact that he and his colleagues have altered Lord Browne’s report on university funding to make it more progressive.
But tonight, FactCheck has learnt that the deputy prime minister is on rather shaky ground. The Institute for Fiscal Studies has done some excellent number-crunching of the government’s proposals, and found that the rich will be better off than they would have been if ministers had adopted Lord Browne’s recommendations.
The analysis:
Lord Browne proposed abolishing the current £3,290 annual cap on university tuition fees, leaving universities to charge up to £12,000 a year. To cover the cost of their fees, students would take out a government-backed loan which would not have to be paid back until after they graduated and started earning over £21,000. It would then, under his proposals, be paid back with interest, calculated using the Retail Prices Index plus 2.2 per cent. Any universities charging students more than £6,000 would be penalised and would have to pay some of that income back to the government.
Ministers, by contrast, said universities shouldn’t be able to charge more than £9,000 at most. But the government decided universities wouldn’t be penalised if they wanted to raise their fees above £6,000. They also proposed a more generous loans scheme for students. So graduates earning £21,000 would have to pay back the loan, but no interest. As graduates earned more, they’d pay more interest, rising to RPI plus 3 per cent at £41,000.
The IFS says the government’s changes to Lord Browne’s report, far from making life more progressive, will actually leave the richest graduates slightly better off. So the top 60 per cent of graduate earners will benefit. That’s because under the government’s proposals, almost all graduates will escape paying interest until their earnings start to climb. Under Lord Browne’s plans, remember, interest of RPI plus 2.2 per cent kicked in when earnings reached £21,000.
Haroon Chowdry, senior research economist at the IFS, told FactCheck: “There’s a chunk of middle and higher earning graduates who would face a lower interest rate under the government’s proposals than under Lord Browne’s. The highest interest rates, applied to those earning £41,000 or more would penalise only a very small number of graduates.”
The IFS analysis also found that “the main loser of the Government’s proposed system is the taxpayer”. If all universities charged the £9,000 rate, as a survey by the Higher Education Policy Institute found today, then the IFS calculated that the government’s proposals would only save the government around £770 per graduate compared to the current system and cost the government “potentially billions of dollars of savings” they could have made under Lord Browne’s proposals.
Cathy Newman’s verdict:
That spells trouble for the deputy prime minister as he tries to convince Lib Dem backbenchers to back the higher tuition fees in a Commons vote before Christmas. MPs and ministers I spoke to today said they’d been reassured by the tweaks the government had made to Lord Browne’s funding reforms. They believed the whole package had been made more progressive.
But the findings from the IFS seriously undermine Nick Clegg’s attempts to win round his party. His claim in the Commons yesterday now looks decidedly fictitious. No wonder the whips are making plans to offer Lib Dem backbenchers a free vote and to allow Lib Dem ministers to go AWOL the night they’re supposed to troop through the division lobbies.
