In this ³ÉÈËVRÊÓƵ video debate, deputy news editor John Morgan is joined by David Willetts (Conservative peer, former universities and science minister and architect of the ?9,000 tuition fees system) and?Andrew Adonis (Labour peer, former education minister and architect of the ?3,000 tuition fees system introduced when he was?head of the Number 10 Policy Unit under Tony Blair).?

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This debate took place at ³ÉÈËVRÊÓƵ's headquarters in London on 12 September 2017. A transcript of the discussion is published below.
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Debate transcript

JM: John Morgan, ³ÉÈËVRÊÓƵ (chair)
AA: Andrew Adonis, Labour peer and former minister of state for education
DW: David Willetts, Conservative peer and former universities and science minister

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JM:?

England¡¯s ?9,250 tuition fee system has come under intense political pressure following the election. Labour is widely regarded as having scored significant impact among voters, particularly young ones, with its pledge to abolish tuition fees.?

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According to recent newspaper front pages, this has prompted Theresa May to ask her head of policy to examine potential changes to the system.?With a political storm underway, can the tuition fees system survive? And does it deserve to survive??

Joining us to discuss these questions is Conservative peer David Willetts, architect of the ?9,000 tuition fees system as universities and science minister, whose new book, A University Education, will be published in November.?

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And with him is Andrew Adonis, a former education minister in the Labour government, who, as head of the Number 10 Policy Unit under Tony Blair, was an architect of the ?3,000 tuition fees system introduced alongside public funding by Labour in 2006.?

Andrew is also a member of the House of Lords, who¡¯s been described by the Guardian as a ¡°one-man tuition fee Twitter storm¡±, bringing even greater media focus on to what he describes as the tuition fees ¡°cartel¡± operated by universities, and what he sees as the greed of vice-chancellors in their salaries.

So Andrew, starting with you. You¡¯ve written that fees of ?9,250 ¨C as they will be from this autumn ¨C are so politically diseased they should be abolished entirely. As someone who was a key force in introducing Labour¡¯s system of tuition fees, what¡¯s converted you to that view??

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AA:?

There¡¯s a category difference fees of ?3,000 with no real rate of interest which is what was introduced in 2004 and ?9250 with 6.1 per cent interest and my view is that the ?9,250, 6.1 per cent interest won¡¯t survive so one of two things will happen. Either the vice-chancellors take the lead in cutting them which is what I would do if I was them because I think that it might be possible to create a consensus for a much smaller figure, and if I was them ¨C because dynamic is what matters in policy and politics ¨C ?I would be cutting them by about ?1,000 a year for the next few years to diffuse the sense of crisis over the system, to create a growing sense of fairness, and to get students on their side. If they do that, I think they might be able to neutralise the growing political backlash against fees.?

If they don¡¯t do that I think what will happen ¨C as is happening in the United States at the moment with states abolishing fees and has happened across continental Europe and may well happen in New Zealand too ¨C is that politicians will abolish them.?

Now I personally hope that we can keep some level of fees, I think that ?3-4,000 is about right so you have co-payment between the state and the individual ¨C and if there could be a political consensus, as there was before 2010, behind that system that I think would be preferable. But I think the ball is now very much in the court of the universities themselves, and if they take a lead and start cutting the fees I think they may survive, if they don¡¯t I think? it is only a matter of time before they go.

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JM:?

David, Andrew has talked about what he sees as some pretty big flaws in the system you created there, and if we believe the newspaper reports the government is considering changes to the student loans or fees system in a bid to win younger voters. Nine thousand pound fees are a pretty big political problem for the government, aren¡¯t they?

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DW:?

Well, I would say first of all what Andrew is proposing would be a dereliction of responsibility of responsibility by universities. This is the money that pays for the education of students. It¡¯s like saying a head teacher should reduce the amount of grant they receive for the education of their pupils by a thousand pounds a year. This is what ensures that seminars aren¡¯t crowded, that there¡¯s new kit in the laboratories. So it would be appalling if we reduce the money behind students for education.

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The reason why we have this system is because over decades, when universities were dependent on public spending, they lost out. They lost out to more popular political causes, be it the health service or early stages of education and I just think that that is too big a risk for universities to bear.?

Of course there should be public spending alongside the graduate repayment scheme, and there is ¨C it comes in several forms. It¡¯s everything from funding for high cost subjects, through quite rightly meeting the costs of those graduates who don¡¯t earn enough to pay back which is a very progressive way. So there is a mix of public and private spend, but the fundamental principle that graduates, if they¡¯re in well paid jobs, repay is the right principle. Of course, you can ¨C within that ¨C adjust the system, and I have in the past said that I thought that every parliament, there should be a review when you cannot tear the whole thing up and start again, but you can absolutely look at anything from the repayment threshold, the interest rate, the cash available for students. All that is part of the day-to-day, year-to-year business of managing a higher education system but within the framework of graduate repayment.

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JM:?

The IfS report recently made some pretty damning criticisms of maintenance grants and the decision to retrospectively freeze the repayment threshold ¨C those things happened after you left government but presumably you would agree those were incorrect decisions?

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DW:

Well I think there is an issue about graduates from lower income backgrounds leaving university with more debt than graduates from more affluent backgrounds ¨C I understand that issue. I think on the repayment threshold, I don¡¯t agree that that was quote ¡°retrospective¡± ¨C that is absolutely the way in which the system adjusts. Nobody envisaged, when we set the ?21,000 repayment threshold that we had then determined it for the next 30 years, that¡¯s absolutely where in the light of social, political judgements, people can up-rate the repayment threshold, reduce the repayment threshold¡­

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JM:?

It was stated at the time that it would go up in line with earnings¡­

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DW:?

Yes, but what happened was, of course, the ?21,000 threshold which was always very generous ended up being more generous because earnings didn¡¯t grow as much as was forecast. But look, that¡¯s a relatively second order point. All these things are adjustable ¨C where I disagree with Andrew is I actually think the framework is a good framework for students and universities. It ensures they have a well-funded education without number controls, and if we bring back public spending on the scale Andrew wants it, we¡¯ll have number controls back, and as we have number controls back it¡¯ll be the people from the most disadvantaged backgrounds who lose out and we will end up ¨C paradoxically because I actually agree with Andrew about the importance of competition ¨C we¡¯ll end up with less competition, because the way in which you deliver number controls is you allocate to each university a number of places. That was the old system we inherited, and it¡¯s a great prize that we don¡¯t do that and that¡¯s actually where the competition is to be found. They¡¯re competing or students.

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AA:?

We¡¯ll have number controls back anyway. It¡¯s only a matter of time, and I think a short period of time because the one thing that is absolutely not surviving the system is 6.1 per cent interest ¨C I mean that is so politically toxic that I can¡¯t see that Conservative MPs would be prepared to go into the next election with that. Now, bringing the 6.1 per cent interest down to RPI interest is ?3 billion a year because of course the interest rate applies to the generality of students including the maintenance loans ¨C not just the fee loans. So it¡¯s a hugely expensive reform.

Now the treasury ¨C because the only reason they agreed to David¡¯s request to lift the cap on numbers was to have a substantial real rate of interest as part of the deal ¨C in return for scrapping that real rate of interest they will absolutely go back to number controls. So that will happen either next year or the year after, whenever the interest rate comes down.

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DW:?

This is incorrect from every point of view. First of all the figures involved in the interest rate are nothing like what Andrew said¡­

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AA:

No, they are.

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DW?

..and also, as a matter of history, to say nor is his explanation of how we got it. [It¡¯s] important, actually, to collect more money from more affluent graduates [it was brought as a] progressive measure, but it¡¯s not a fundamental feature of the system.? ???

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AA:?

It is ?3 billion a year because it is three percentage points of interest on the whole generality of the student loan book, not just on the fee loans. So that¡¯s going to happen anyway.?

In terms of David¡¯s points about this being a dereliction of duty, the universities made a huge windfall out of fees. All the modeling on fees was done on the basis that they would be ?6,000 and only exceptionally go up to ?9,000 ¨C David said that in the House of Commons, as did Vince Cable at the time. In fact what happened is that every university went up to ?9,000 and now ?9,250 for the entirety of their courses so they made a very big windfall.?

Universities are also extremely inefficient. They barely use their [estate] for four months of the year. David when he was minister made no progress at all in getting them to introduce two-year degrees which should have happened a long time ago, and could enable the costs to come down substantially.?

It is not just vice-chancellors who are overpaid, but the senior management teams of universities are bloated and massively overpaid and if you cut that back by about half, which is what would happen in any other efficient public sector organisation, and reduce the salary bill, in each institution that would give you between ?5 million and ?10 million to play with. You could cut the fees substantially without affecting the quality of education.?The problem for David is he wasn¡¯t minister for the universities, he was minister of the universities ¨C everything they wanted him to do he did.?

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DW:?

There¡¯s so much to try and disentangle ¡­ I won¡¯t have time to correct all of the points. About the windfall. It wasn¡¯t a windfall. What happened is: compared with the other stages of education, as we know, for decades, resource per student fell. When Andrew brought in the ?3,000 fees, what he did was he stopped the decline. But it remained the case that resource per student had fallen when for other stages of education it had increased.?

This was extra money to reverse a decline. It didn¡¯t even really bring the resource per student back up to the levels of the 1970s. Of that ?9,000. ?1,000 goes on access programmes, some of it goes to fund the borrowing that is necessary as the capital programmes are lost, it was a modest reversal of a long term decline in funding per student and students had lost out as a result of that. The idea that vice-chancellors salaries, the idea that somehow the money you save on that is anything like matching the scale of the loss of funding which Andrew is proposing. There¡¯s one group of losers from this, and that is going to be students.

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AA:?

You shouldn¡¯t get yourself into the position, David, of defending every vested interest inside universities, because¡­

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DW:?

I am defending students.

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AA:?

You¡¯re not defending students. Students don¡¯t want to be paying ?9,250 in fees I can assure you.

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DW:?

It¡¯s a graduate repayment scheme¡­

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JM:?

If I can interrupt just for a moment. In that context, one of the key points you¡¯ve raised [Lord Adonis] is about what you call the cartel of universities¡­.

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AA:

It¡¯s manifestly a cartel.

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JM:

¡­on the reason why universities all charge the ?9,000, you¡¯re blaming universities but isn¡¯t one of the key points that the nature of income contingent loans means there will never be any so-called price competition. If there is a fault, it¡¯s with the policy design of the system. This wasn¡¯t the universities fault ¨C they were behaving rationally.

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AA:?

Well you can have your own view about whether universities engaged in a cartel. My own view is that they did, because, I mean, we all know how the universities work ¨C they all meet in Universities UK the whole time, they exchange notes all the time, a whole lot of private conversations take place¡­

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JM:

Cartel is quite a serious word.

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AA:

It¡¯s what happened. I mean, they¡¯re all discussing all the time what they are going to do with fees. However, the issue is, once it became clear when fees went up to ?9,000, that despite the assurances which David gave to parliament at the time there weren¡¯t going to be fees substantially lower than ?9,000 at any institution, what should then have happened is that the government should then have intervened. If I had been minister, doing David¡¯s job, I would have intervened and required fees to be lower in respect of courses which were lower value, and in respect of courses which are a higher cost which is precisely what happens in Australia. Actually, our system is mirrored on Australia and my original intention in 2004 is that we would introduce a system very similar to Australia¡¯s with three tiers of fees.

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DW:?

Let¡¯s just correct two of the points. There isn¡¯t time to correct all of them, let me just correct two of these points. First of all, in terms of the cartel ¨C no. As you implied in your question, it¡¯s because the repayment terms are so generous and because quite rightly students don¡¯t pay up front, that the distinction between ?7,500 or ?8,500 is not what matters. What matters is a student having a well-funded, properly-delivered education.?

The competition, which is now intense, is because we don¡¯t have the system Andrew wants, we were able to get rid of number controls, as a result of which, universities are competing for students ¨C and they are competing on the quality of their offer. Because now, some universities are gaining students, and others are losing them. That¡¯s how we get the competition.?

Also, he wants these low value courses. And I¡¯ve now had quite a few of these [discussions] with Andrew in the last few weeks, I know what he means, he means courses at less prestigious universities whereas if this was secondary education we were talking about, he would proudly be calling for a pupil premium¡­

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AA:

Yes - paid by the state, not paid by the graduates. There¡¯s a big difference between those two [things]...

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DW:?

¡­one of the many reasons for having even fees is precisely so there is proper resource behind students who are at less prestigious institutions, often from more disadvantaged backgrounds. If those graduates don¡¯t earn so much, then quite rightly. The generality of tax payers don¡¯t collect the money off them. That is the best way of achieving the objective that actually Andrew and I have in common. Far better to do it by helping at the graduate level than trying to predict through some kind of micro controls which are the courses you want to fund. Do it through helping graduates.

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AA:?

But we need to be clear. What David now says is it¡¯s the best of all possible worlds to have all universities charging ?9,250 for all courses. If he had said that in the House of Commons in 2012, his reform would not have passed. His reform only passed because of the assurances he gave to parliament that fees would be related to the value to the gradates, that they would not all go up to ?9,250, he said [it] would only be ¡°exceptional¡± ¨C exceptional was his word ¨C for universities to charge more than ?6,000 in respect of any course ¨C and it was on that basis that very reluctantly he managed to dragoon parliament into voting for this reform. If he¡¯d been honest about what he was doing, his reform would not have passed through and we wouldn¡¯t be in this mess.

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DW:?

I don¡¯t accept that. But what I do accept is this¡­

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JM:?

It is true that you wanted price competition, when you were speaking in the Commons in 2010.

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DW:?

There is something - and that is, for 10 years, the model had been price competition. I inherited a way of thinking where price competition was what we were after, Andrew as still after price competition.?It is absolutely true that in the summer of 2010 I was expecting price competition. By early 2011 ¨C and I fully accept responsibility for what I said in the Commons ¨C I released that given what we had ended up with as a repayment system there wouldn¡¯t be price competition, and I increasingly think that the pursuit of price competition is not the right form of price competition in universities.?

What we have got is competition in a different form, which was introduced subsequently, on numbers. That¡¯s the way to get the competition. But I fully accept my responsibility ¨C I thought there would be divergence of fees. There wasn¡¯t ¨C but I understand why there wasn¡¯t.??

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JM:?

If we can move onto a final question about the future. It does seem as if Labour has changed the terms of the debate with Jeremy Corbyn¡¯s pledge to abolish fees. How do you think the funding situation will pan out in the short to medium terms? What¡¯s going to happen next?

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AA:

I think it crucially depends upon whether vice-chancellors, who are paid these vast salaries, whether they do their job and lead or whether they have the leadership done for them. If they lead, I think they can maintain some level of fees and they can have better funded institutions. If they fail to lead ¨C and they haven¡¯t been very good at leading this debate, indeed they have gone into hiding essentially because they¡¯re not prepared to justify their salaries ¨C if they fail to lead then a minister who is less the servant of universities than David was will actually do a reform to them and that reform, I think, will be the wholesale removal of the current fees and loan system as is happening across the world and we¡¯ll be back into universities regarded ¨C I think maybe correctly ¨C as public services, and not as quasi-businesses which are ripping off students.

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DW:?

That would be a terrible future for higher education. I was, of course, the servant of students. I am proud to be the servant of students, and I think that this system works in the better interest of students than the system in the past. It means they have a better funded education and a very progressive repayment.?Of course you can look at repayment, we all see the issues that are around on, for example, interest rates ¨C that is different from trying to tear the whole structure down.?

I think there is actually a challenge for Labour. And I speak now as the chair of a Think Tank, the Resolution Foundation, which focuses on people with lower living standards. At the last election Corbyn was willing to spend ?11 billion a year helping graduates ¨C many of them in well paid jobs, certainly on average earning more than non-graduates ¨C he was not willing to commit to anything other than a price freeze on the tax credits which hold down the incomes of low-oncome working families.?

The irony of where Corbyn is taking the Labour Party Is he is one of the most regressive party manifestos I have seen. He is focusing on graduates. He¡¯s not got much to offer on the NHS, he¡¯s not offering anything on tax credits. This is a guy who actually, when he starts confronting the question of what are the priorities for the use of public sending ¨C which is the crucial political decision ¨C he can say he wants to spend more, but spending more on this as a political priority would be, I think a very peculiar decision ad not socially progressive.

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AA:?

I greatly respect David, but¡­

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DW:

That¡¯s always a bad start.

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AA:?

..for a minister in the last Conservative government to have these crocodile tears about the fate of the poor I don¡¯t think really works. The fact of the matter is the system is grossly unfair at the moment ¨C the university finance system. He is right, it is indeed the substitute for some [other] element of public spending ¨C the thing to do is to cut the element of spending that is excessive at the moment, which is considerable, return that to the students and you get more of a sense of.

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DW:?

No you are cutting the resource for students in order to reduce repayments by graduates and that is really regressive, and they lose the quality of the education, and it is the most affluent graduate who gains the most. It is not progressive in any sense.

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JM:?

Unfortunately we have to leave things there. We¡¯ve gained some extremely well-informed insights into how we came to get here and what the future might hold. Thank you both very much for joining us.?

ENDS

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