Higher fees won’t help Britain’s beleaguered universities much

For much IFSIFSof its time in opposition the Labour Party pledged that it would abolish university tuition fees, if only British voters would give it the chance. On November 4th, four months after returning to power, the party announced instead that it would raise a cap that holds down what universities may charge English undergraduates. Next September, the maximum annual cost of tuition will increase in line with retail-price inflation for the first time in eight years. It will go up by 3.1%, to £9,535 ($12,400).Labour’s move aims to shore up . The fees paid by English students have been allowed to rise only very slightly since 2012. Over that period inflation has stolen about a third of their value. Universities have dealt with this through a combination of cost-cutting and enrolling more foreign students, who may be charged whatever the market will bear. But now they are running out of road. In May the Office for Students, a regulator, warned that 40% of universities were running a deficit, and that this share could double in three years. Rumours persist that one or two are on the edge of bankruptcy.Though fee rises are deeply unpopular with students and their families, the effect on their finances may be milder than many expect. An increase in fees does not alter graduates’ monthly loan repayments, which are determined solely by their income, not by the size of their borrowing. The impact, instead, is that they will have to make repayments for a few months longer. For most graduates, that will not become relevant until they are in their 40s and 50s, reckons the Institute for Fiscal Studies (), a think-tank. The lowest-earning fifth of graduates will pay no more even in the long run, because the government is already expected to write off a chunk of their borrowings (student loans are forgiven after 40 years).Labour’s announcement will provide some short-term relief for universities. The reckons that, absent any fee increase, the money they get for teaching would have fallen by £390m in real terms next year. Yet some vice-chancellors had dared to hope that Labour would permit a bigger-than-inflation fee increase, to make up for years of foot-dragging. Or that it might give extra money directly from government coffers, circumventing the unloved fee system. None of that has happened. Instead it looks like Labour is now choosing to make permanent the cuts universities have had to make in recent years.One big worry is that, according to some analysts, the large majority of universities’ new income might have to be spent meeting additional costs that were imposed by the budget, presented on October 30th. An increase in employers’ national-insurance contributions will push up pay bills in higher education by £372m, or 2.1%, according to the Universities and Colleges Employers Association, a union. Moreover, Bridget Phillipson, the education secretary, has declined to make clear whether the government intends to keep on raising the fee cap with inflation. Until they hear differently, university bean-counters will have to plan around the possibility that the coming rise ends up being a one-off.At the same time as announcing the fee increase, Labour said it would push up by 3.1% the maximum sum that English students may borrow from the government to cover their living costs. The government appears to recognise that a widening gap between loans and the cost of living risks making university unaffordable for poorer students. Yet that increase in the maximum maintenance loan is only going to “scratch the surface” of the problem, according to Carl Cullinane of the Sutton Trust, a charity. He notes that the real value of these loans has fallen by around 11% since 2021.For years the Conservatives hurled brickbats at Britain’s universities, without doing much that might improve them. In that context, Labour’s decision to halt the decline in funding displays commendable pluck. Yet in many regards, this week’s announcements leave universities and students treading water. The government promises that it is going to lay out far more ambitious reforms to higher education, perhaps some time next year. It gives the strong impression that it is still casting about for a plan.