students, so that spending on means-tested student grants in Scotland fell that ... Michael Russell MSP, then Cabinet Se
STUDENT FUNDING IN THE UK: POST-DEVOLUTION SCOTLAND IN A UK CONTEXT Lucy Hunter Blackburn British Educational Research Association 2015
Abstract Within the four UK nations, there are currently six different student funding regimes in use for home students, depending on where students come from and where they study. These different funding regimes are often cited as evidence of substantial political differences between the various UK nations. This is particularly true of the Scottish Government’s policy of “free tuition”, commonly claimed to underpin a more socially just approach to student funding than found elsewhere in the UK. The paper considers the current funding arrangements for full-time, first-time students from across the UK, comparing in particular the support available for student living costs and the total expected final debt, for students at different levels of household income. These comparisons present a challenge to some of the common rhetoric, revealing that Scotland’s distinctiveness within the UK lies particularly in its treatment of students from higher income backgrounds and its uniquely regressive distribution of student debt. Comparing the differences between the three devolved nations, all subject to similar legal and funding constraints, further brings out the importance of local political choice in determining how benefits are distributed within each jurisdiction.
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STUDENT FUNDING IN THE UK: POST-DEVOLUTION SCOTLAND IN A UK CONTEXT Introduction Within the four UK nations, there are currently six different student funding regimes in use for full-time, first-time home students, depending on where students come from and where they study. These different funding regimes are often cited as evidence of substantial political differences between the various UK nations. This is particularly true of the Scottish Government’s policy of “free tuition”, commonly claimed to underpin a more socially just approach to student funding than found elsewhere in the UK. Yet comparisons of these systems which go beyond fees and look more broadly at the impact of student funding policy on students at different levels of household income present a challenge to some of the common rhetoric. Comparing the differences between the three devolved nations, all subject to similar legal and financial constraints, moreover brings out the importance of local political choice in determining how benefits are distributed within each jurisdiction. Background to the different regimes The UK has arrived at its current set of student funding regimes by a complex process. While the three devolved governments all now have the same broad powers over the funding of living costs and the setting and funding of tuition fees, they have acquired these at different speeds: political devolution in Northern Ireland was in addition suspended for several years during the period. Further, a series of policy changes in England have provoked different responses in each of the devolved nations, at different times, for a combination of practical, financial and political reasons which vary between those jurisdictions. As a result, there have been few years since 1999 without a substantial change being implemented somewhere in the UK. The three year period ending with the current academic year (201516) has been the longest period of stability in the past decade and a half, seeing no significant change to the student funding system in any of the four UK nations. The current position The position as at 2015-16 is summarised in Table 1. The figures shown for living cost support are for students living away from home, but not in London, and exclude the various systems of supplementary and special grants available in each nation. They also ignore the system of institutional bursaries and fee waivers which the UK government requires universities in England to provide, which add a further layer of complexity. A wide variation is visible in grant levels, total living cost support, the definition of the lowest income households and the setting and funding of fees. Classified simply by levels of grant and fee, there are five different approaches.
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Table 1: Key elements of UK student funding systems compared AY2015-16 Max
Max total living cost support away from home (not London) (grant plus loan)
Income threshold for max support
Income threshold for any form of grant
£
£
£
£
England
3,387
7,434
25,000
42,620
Up to £9,000, High fee/mid all as loan grant
Northern Ireland
3,475
6,428
19,203
41,065
In country: £3,805, all as loan
Mid fee/mid grant
Elsewhere in UK: up to £9,000, all as loan
High fee/mid grant
In country: £1820, fully cash funded by government
No fee/low grant
Elsewhere in UK: up to £9,000, all as loan
High fee/low grant
grant
Scotland:
7,625
young
1,875
mature
875
Wales
5,161
7,957
18,999
18,370
33,999
50,021
Fee liability and funding
Description
Up to £9,000: Mid fee/high first £3,810 grant as loan; remainder fully funded by fee grant
This is devolution at work, perhaps more visibly than in any other policy area, taking into account that students under these various different systems may be studying alongside each other in the same institution. The system for Northern Ireland has been in place longest, with very little change since 2006-07. The English system dates from 2012. However, the UK Government has recently announced it will abolish grants for new students in England from 2016, so that this brief period of relative pan-UK stability is about to come to an end. For Wales, the figures here 3
reflect a decision by the Welsh Assembly Government in 2013 to increase the total value of living cost support substantially. The current Scottish system also dates from 2013, when the Scottish Government also increased the total value of living cost support, but in contrast to the Welsh Assembly Government, also reduced the value of grants for new and current students, so that spending on means-tested student grants in Scotland fell that year by 40%. Political claims: the case made for Scotland The political claims surrounding these differences have been made most powerfully in relation to Scotland. In August 2014, shortly before the Scottish independence referendum, Michael Russell MSP, then Cabinet Secretary for Education, said, ‘Scotland is the only country in the UK to ensure young people … can go to university based on ability, not the ability to pay’, clearly implying within the UK a uniquely Scottish attachment to social justice and egalitarianism in relation to higher education. The narrative of a distinctively Scottish rejection of a system based on “ability to pay” first emerged in 1998, as part of the Scottish National Party’s argument against the introduction of upfront fees, but it has remained important, even since the nations in the rest of the UK have moved, in effect, to a model of deferred fee payments, changing the issue from one of immediate access to private resources to one of debt. Thus, for example, Nicola Sturgeon MSP said in July 2006: “Access to education based on the ability to learn rather than the ability to pay is one of the oldest and most cherished public policy principles in Scotland.” More recently, material produced for the independence referendum by the campaign body Yes Scotland noted [emphasis in original]: “The amazing thing about free tuition fees is that no matter what your family background, you can go to university and not have to worry about finding the money … Compare [the system in England] to up here where some of my friends from my football club just wouldn’t be able to go to university if they had to pay”. (Yes Scotland 2014) Since the increase in the English fee cap in 2012, the Scottish Government’s objection to the principle of payment has been strongly coupled to comparisons with the absolute level of fees charged elsewhere in the UK (in practice meaning in England, although that has not always been made clear).The White Paper on Scottish independence (2013) promised that: “on independence, Scottish domiciled students will continue to have free access to higher education. This guarantee will save Scottish students up to £9,000 a year compared with the cost of studying in England. Free education for those able to benefit from it is a core part of Scotland's educational tradition and the values that underpin our educational system.” Comparing systems As the White Paper exemplified, the claims made for greater social justice in the Scottish system rely specifically on comparisons with fee levels in the rest of the UK and more particularly England. However, comparisons between systems based only on headline fee levels, or even the debt associated with fees, are problematic as they exclude the treatment of living cost support, which is also essential to many students, particularly those from lower income backgrounds. Overlooking the treatment of living cost support, which unlike fees is normally means-tested, has the further drawback of ignoring how costs and benefits are distributed by income within a system. A more complete comparison of how well student funding systems function to promote social justice needs to examine how much students at different incomes are given in total by 4
the state towards their living costs while they study, referred to below as spending power, and the total amount of final debt students from different incomes face on graduation for fees and living costs. A further relevant point of comparison is how loan repayments are collected relative to earnings: space only allows a brief reference to that here. When systems are compared in this more rounded way, the claim that Scotland stands out as being unusually socially just within the UK becomes more open to question. In the comparisons which follow, the figures once again exclude the effect of the institutional bursaries and fee waivers in the English system, as they are variable and unpredictable. Readers should however bear in mind that at the lowest incomes especially, the figures for England in particular will tend to understate spending power and overstate debt, compared to what students may experience in practice. Living cost support In all parts of the UK at present, living costs are supported through combination of grant and loan: the maximum total such support at any income is described below as “spending power”. Figure 1 compares spending power for students from the four UK nations who live away from home (but not in London) in 2015-16. The greatest spending power is generally provided by either the English or Welsh system. Northern Ireland has the least generous level of support, with Scotland between the two extremes. Only at incomes above £54,000 does Scotland offer the most support.
Figure 1: Annual spending power 2015-16
Total grant plus loan (£)
9000
8000 Scotland
7000 Wales
6000 5000
England
4000
Northern Ireland
0 4000 8000 12000 16000 20000 24000 28000 32000 36000 40000 44000 48000 52000 56000 60000 64000
3000
Household income (£) Source: Relevant student finance calculators; Student Awards Agency Scotland.
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In England, Northern Ireland and Wales, students who live in the family home are generally entitled to around £1,000 less each year; those who study in London see their entitlement increased by a similar amount. Therefore, Scotland generally provides the most for students living at home but the least for those in London. Despite the claims made for the relatively strong performance of the Scottish system for poorer students, it emerges from this particular comparison that for students living away from home whose families come from low-to-middle incomes, the Scottish system provides less assistance upfront than one or more other parts of the UK. In effect, the Scottish funding rules tend to assume greater ‘ability to pay’ on the part of such families, particularly at household incomes over £19,000. Indeed, with fee regimes elsewhere fully funded upfront through loans, for that group of students – from low incomes of £19,000 or more, living away from home - in practice it is the Scottish system which relies most on upfront “ability to pay”, the dominant political rhetoric notwithstanding. Debt Living cost support determines how much immediate financial pressure students face. But systems built on loan have another important dimension, which is their long-term cost to individuals. The starting point for this is a student’s total borrowing. Fee loans, where they apply, form one part of that. Living cost loans form the other. Figure 2 shows the total amount of debt students in each part of the UK are expected to take out each year, to fully fund any fees and obtain their maximum living cost support away from home. Scottish or Northern Irish students who cross a border are not shown: they will have a debt up to £9,000 higher than if they studied on their home nation.
Figure 2: Student away from home 2015-16: annual expected borrowing Annual expected borrowing (£)
16000 14000 12000 10000
England
8000
Northern Ireland
6000
Scotland (Young)
4000
Scotland (Mature) Wales
2000
0 4000 8000 12000 16000 20000 24000 28000 32000 36000 40000 44000 48000 52000 56000 60000 64000
0
Source: Relevant student finance calculators; Student Awards Agency Scotland. Rather than a contrast being between Scotland and the rest of the UK, at lower incomes there is a much clearer distinction between England and the rest. This is because lower income students in Scotland are expected to borrow most of their living cost support, offsetting some of the benefit of free tuition, while students from Northern Ireland and 6
Wales have higher grant, while being subject to a fee limited to around £3,800. Scotland does show two distinctive elements: uniquely, the poorest students are expected to be the heaviest borrowers, while the students from the highest incomes are expected to borrow less than any other group in the UK. The figure above only gives a single year’s figures, but that has short-comings as a basis for comparison. Degree programmes in Scotland are conventionally a year longer than elsewhere in the UK, meaning that students studying to honours level need to fund an additional year. Further, as already seen, the debt associated in each system with students claiming their full package of support can mask considerable variation in how much spending power that borrowing supports (lower living cost support brings down the line for Northern Ireland relative to the rest in the figure above, for example). In addition, the interest rates applied during the course are higher in England and Wales than in Scotland or Northern Ireland. Last, the Welsh Assembly Government writes off the first £1,500 of debt when students start to repay. The comparison of final debt in Figure 3 below therefore is based on an equalised amount of annual spending (using the Scottish system as the benchmark), four years of study in Scotland and three elsewhere, an allowance for different levels of interest and the Welsh write-off debt scheme.
Figure 3: Degree-length debt 50000 45000
Total borrowing (£)
40000 35000 England
30000 25000
Northern Ireland
20000
Scotland (Young)
15000
Scotland (Mature)
10000
Wales
5000
64000
60000
56000
52000
48000
44000
40000
36000
32000
28000
24000
20000
16000
12000
8000
4000
0
0
Source: Relevant student finance calculators; Student Awards Agency Scotland. Even more so than before, this comparison shows a division between England, where debt falls roughly within a range £40,000 to £50,000, and the lower debt devolved nations, where expected debt falls roughly in a range £20,000 to £30,000 in all three cases. Within the devolved group, at lower incomes Scotland has average to high figures, because of its low use of grant. As before, not shown here are Scottish or Northern Irish students who cross a border. They fall into the higher debt group. It turns out that no-fee systems do not automatically generate the least debt for all students. Other elements of funding, particularly the availability of grant and the use of 7
debt write off, can make a critical difference, especially at lower incomes. Not shown here is that even on courses of equal length lower income students from Wales can sometimes be expected to have less debt than their Scottish equivalents. Repayment regime There is not space here to discuss the varying student loan repayment regimes in the UK in detail. However, a number of studies have demonstrated that repayment thresholds and how soon unpaid debt is written off are more important in sheltering lower earners than lower interest on loans. Scotland and Northern Ireland apply lower interest to student loans: but due to a lower repayment threshold in both nations, and Scotland having longest period in the UK before debt is written off, low earning Scottish graduates are more likely than those from elsewhere to repay any given amount of debt. Comparisons in summary In summary, whether considering spending power, final debt or loan repayment rules, the Scottish system does not stand out as exceptional for lower-income students or low earning graduates, and is often out-performed by one or more of the other jurisdictions. Wales in particular often produces more favourable results at low incomes on all measures. Further, while investment in free tuition has been preserved in Scotland, the same priority has not been given to protecting cash support for living costs. As a result, within Scotland the highest debt levels are now expected for, and indeed experienced in practice by, those from the poorest backgrounds, a regressive situation unique in the UK, for now. All three devolved nations are of course working within constraints set both by the devolution settlement, including their funding under the Barnett formula, which in all three cases has placed budgets under considerable pressure. The increased availability of student loans has provided the only financial safely valve for the three governments. Student borrowing has risen in Northern Ireland, Scotland and Wales, but arguably at least as much as a product of financial constraint as political choice. However, the comparisons here show how important local political choice has been in determining how that additional borrowing is distributed among students by income. Conclusion From these comparisons a rather different story of Scottish distinctiveness emerges. Looking at the material effects of policy, rather than the dominant rhetoric, where Scotland stands out is as the part of the UK where the interests of those at higher incomes have been most protected. Scottish students from better-off homes are now expected to leave university with the least debt of any group in the UK, benefitting from a system which chooses to skew student borrowing towards those from lower income backgrounds. In addition, many students from lower income homes in Scotland who wish to study away from home are subject to a higher assumed ability to contribute towards living costs than their equivalents in one or both of England and Wales. These effects sit uneasily with claims that the Scottish system is intrinsically more egalitarian and less based on “ability to pay” than those found elsewhere in the UK and present a significant challenge to the view that the availability of “free tuition” should be the benchmark by which systems should be judged to be more or less socially just.
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