Fee education

Interview: Bill Rammell MP

Bill Rammell ©Claudia Daut/Reuters

A basic problem with delivering a better higher education system is funding. Since the Second World War higher education, just as secondary and primary schools, has been considered as a public good, and so in most OECD countries the service had to be delivered free of charge to students through taxation.

However, tighter public budgets and stiffer global competition for talent have led to a renewed interest in student fees as a possible way of raising more funding. The issue poses several tricky challenges, about access, equity, student finance, debt, and so on. Little wonder the debate has become rather heated in several countries.

One country that is introducing higher fees for higher education is the UK. It started to do this for full-time undergraduates in 1998 and will introduce further changes from September 2006. What have the effects been and what are the challenges? We asked Bill Rammell, Minister for Lifelong Learning, Further and Higher Education in England, to explain.*

OECD Observer: Why has the UK decided to introduce fees for higher education?

Bill Rammell: Tuition fees are not new. About half of all the students in the system–part-timers, postgraduates and students from overseas–have always paid fees at the “market rate”. Since 1998 full-time undergraduate students have progressively been supported through government-subsidised loans rather than grants for tuition fees. Fee income generates £3.5 billion ($6.2 billion) a year for English institutions which is 25% of the total money they receive from all sources. By the time the changes we are introducing in 2006 have been fully implemented in 2010, we estimate institutions will be raising an extra £1.3 billion a year.

Why go further? First, because those who benefit from higher education should help meet the costs. Getting a degree is associated with extra earning power in later life. Graduates in England earn well over £100,000 more than someone with just A-levels. Second, higher education is a global business and in order to compete successfully institutions need to diversify their sources of funding. Fees can help, but so can raising income from employers and philanthropic donations.

The key issue for government is to make sure the new arrangements do not deter students from non-traditional backgrounds from participating in higher education. So we are introducing a new package of student support which abolishes up-front fees, replaces loans with grants for poorer students and makes institutions recycle some of the extra income as bursaries for less well-off students. Crucially, students only start paying back once they are earning above £15,000 a year, so someone earning the average graduate starting salary of £18,000 would repay around £5.19 per week. In short, we have produced a “something for something” deal–higher fees, but also much more support for students who need it.

Some see fees as part of a trend to transform higher education into a global business, rather than a public service. What is your view on this? Can authorities achieve balance between maintaining competitive higher education systems and delivering a widely accessible, affordable service?

The short answer is yes. Higher education has to be both a global business and a public service. Some recent analysis has estimated that the overall higher education system in the UK is big business, worth more than £40 billion ($70 billion) to the economy, including over £2 billion in export earnings and responsible for the creation of about 600,000 jobs. But this does not mean that it has somehow stopped being a public service as well.

On the new fee and student support arrangements, we are confident that overall they will safeguard access and help increase and widen participation. I’ve been greatly encouraged by the way institutions have taken so many more students into higher education. We now have more students in higher education than ever before–200,000 more than there were in 1997. Many more lives are being transformed by learning, many more people are realising their full potential and contributing much needed expertise to the country’s social and economic fabric.

Will public funding continue to be an important part of the UK’s fee-paying system?

Yes. We have pledged to maintain in real terms government grants per student in the current spending period.

But even before the new fee and student support arrangements have been introduced, it is worth noting that the government is already becoming a “minority shareholder”, so to speak, of higher education institutions. Only about half of the total money the sector now receives comes as core government funding. A quarter already comes from all types of tuition fee income and the remaining quarter comes from the business institutions carry out for research institutions, public authorities, charities and other employers.

The fact that higher education institutions do not need to rely on the government for all their funding is a tribute to their success and their attractiveness to students and employers. So we should not worry if over time public funding continues to be reduced as a proportion of the total funding the higher education sector is able to generate. That is happening now, and not just or even mainly because of fees. The success of institutions in working with business is equally important. However, it is also the case that no higher education institution could afford to do without public funding, and that will continue for the foreseeable future.

*Mr Rammell introduces a seminar on “Who should pay for higher education?” at the 2006 OECD Education Ministerial Meeting in Athens, 27-28 June 2006. See www.oecd.org/edumin2006

©OECD Observer No 256, July 2006

Economic data

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