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Lord Willetts is a Conservative peer and Executive Chair of the Resolution Foundation. He is a former Member of Parliament for Havant and former Minister for Universities and Science. His latest book is ‘A University Education’.

My earlier article for ConservativeHome explained the difficulties with a single funding pot for tertiary education. But it leaves the question – what should the Government do about university fees? Every serious review for more than 20 years has reached the same basic conclusion: it is right and fair to expect graduates to pay back towards the cost of their university education because on average they earn more than non-graduates (£32,000 a year, as against £22,500 for non-graduates). But this is nothing like a commercial loan: it is available to all students and is repaid through PAYE as a percentage of earnings above a high threshold.

Jeremy Corbyn is the great opponent of graduate repayment and wants to replace fees with £11 billion of public spending per year. Less affluent taxpayers would have to pay for the education of people who are usually much better paid than they are. Karl Marx himself said: “If higher education institutions are also ‘free’ that only means in fact defraying the cost of education of the bourgeoisie from the general tax receipts.” Marx was right – and one does not get to say that very often on ConservativeHome.

So the basic principle is right. But my excellent successors have to deliver it in a way that is politically acceptable. A lot of the politics comes from the fear that student debt is like an overdraft or a credit card debt and reduces the amount you can borrow for a mortgage. But the mortgage lenders understand it is not a debt like that – instead it is a fixed outgoing linked to earnings. I think really parents and students are worried about the difficulties young people face getting on to the housing ladder which is what we should really focus on.

I ask friends in the Commons if they have ever had a constituency case of a graduate complaining about the cost of these repayments (it is currently £30 a month for a graduate earning £25,000 and that will be the new threshold bringing their repayments down to zero). Most MPs rack their brains to think of a single case of a graduate saying they cannot afford the repayments. If anything, the practical politics is around the interest-rate charge and the possibility of the size of the debt rising even when you are repaying. This is not a crucial feature of the system. It was added to make it more progressive – collecting more money from affluent graduates. It could be reduced or removed altogether.

An alternative option is to cut the fees. But this is the money which pays for a student’s education. So we would be back to the bad old days when university funding was cut remorselessly (per capita spend per university student is now just back to about the same level in real terms as it was in 1990, when spend per primary and secondary student has roughly doubled in the same period). We would be into the really difficult politics of courses closing, lectures getting more crowded and labs once more lacking up-to-date equipment. Cutting the funding for their education is a peculiar way of trying to win over young people. We could replace the lost fee income with public spending, but I do not detect any appetite on ConservativeHome or elsewhere to increase public spending on Higher Education. Limited public spending should be going on programmes for other types of learners which cannot so easily be financed out of loans and repayments.

Some of the critics say we should cut the fees for “bad” courses and “bad” universities. Trying to set fees course by course or university by university is a massive new intrusion in our universities when one of the reasons they perform well is precisely that they have high levels of autonomy. Moreover, universities come in many shapes and sizes and I argued in my previous article that the Oxbridge model is not the only way of being “good”. What about a university taking recruits with lower A levels and from a wider range of social backgrounds, which trains them for the industries in its region? Coventry University, for example, trains automotive engineers for the Midlands automotive industry, just like Germany’s much admired technische hochschulen. They are not some special case – half of English university students are doing practical vocational courses linked to jobs in particular sectors.

Those university-trained automotive engineers may not earn as much as an Oxbridge-educated lawyer, but why does that mean there should be less money to educate them? Moreover, they probably come from less advantaged backgrounds. Most people support the pupil premium in schools – why should we do the opposite and have a negative student premium in universities? Quite a few people tell me that there should be different fees for different university courses at different universities but then they have widely diverse opinions on which fees should be higher and why. The Government would find itself embroiled in endless controversies trying to defend why some universities and courses lose out to others.

I believe in the stimulating power of competition. The quality of university education suffered partly because the funding was cut so much and partly because they weren’t competing with each other. The reforms I brought in promote real competition. It is not competition on fee levels, because there are no up-front fees and repayment terms are so generous. (Someone who said ‘I can’t afford £9,000 to go the university I like, but am going to save money and pay £8,000 for somewhere else’ would be failing to understand the basics of the system.) But there is now very intense competition for students. When universities were financed out of public spending, governments controlled spending by controlling the number of places. Each individual university was allocated a set number of students. When the shift to fees and loans took university finance out of public spending we were able at the same time to get rid of number controls. Since then popular universities have grown dramatically whilst others which can’t attract the students have shrunk.

We now have, in effect, a Higher Education voucher with the special feature that it is repayable if you earn a decent income. That is a great supply side reform and one of the many risks with Corbyn’s proposal for bringing universities back into public spending is that he would take us back to the bad old days of number controls. They are a barrier to social mobility because it is the marginal students from tougher backgrounds who lose out – it is why Scotland’s “free” system has a lower proportion of university students from disadvantaged backgrounds than England.

The edusceptics have objected at every stage of the growth of Higher Education from five per cent participation to 50 per cent. But people’s aspiration for more education is admirable and cannot be suppressed. In my new book on universities I try to explain how universities work and what they do for the students who go there. Just about every benefit that is claimed for the early years of education – who have done a fantastic job of making their case – is equally true of the years at university as well. We should be proud of the fact that so many people go and their lives are transformed for the better as a result. So the basic model makes sense but let’s tackle specific grievances such as the interest rate and then put all our energies into a better deal for young people who do not go to university.

67 comments for: David Willetts: The tuition fee system makes sense. The challenge now is to make it acceptable.

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