UCU calls for an employer levy to fund undergraduate study

The UCU spin of the London Economics wheels of steel focuses on tuition fees only, and argues that a levy of around 1 per cent on employer national insurance contributions (NICs) for companies employing students in a given cohort would cancel out the £11bn per cohort generated UK wide from tuition fee repayments. An alternate option would be a 3 per cent increase to corporation tax.

This position is backed up by Savanta polling, suggesting that 53 per cent of the UK population (based on 2,000 poll responses collected between 16-18 February) would back employers making a greater contribution to higher education – including 47 per cent of Conservative voters and 61 per cent of Labour supporters.

The LE sums are as robust as we have come to expect, and the methodology is largely unchanged from recent adventures in public accounts modelling. Opinions will clearly vary on political palatability, but the case is well made that the numbers could be made to stack up in the indicated manner.

The issue, unfortunately, is with the framing. The calculations are based on a steady state – a direct, cash terms, replacement of the tuition fee loan element of the four current systems (though the model assumes a removal of the requirement to provide access bursaries). Removing fee loan repayments in England would make the cost to the exchequer of maintenance loans fall, as graduates would end up repaying more of the amount that they had borrowed.

You’ll have spotted two issues here – the first is that the amount of funding per student has been falling in real terms for a number of years, and simply switching the source of this income from future graduate repayments to employer national insurance (or corporation tax) does nothing to address this issue. The job cuts and redundancies that UCU’s Reclaim Higher Education campaign rightly highlights – and the years of below inflation pay increases – would need to continue under this model of funding. Linked to this, the model assumes that undergraduate numbers remain at 2021-22 levels – this raises the spectre of number controls (admittedly this is favoured by some UCU members) and a decline in proportional demand.

For me the more fundamental issue is that this model does nothing to address the cost of living pressures faced by students. Even given a moral case for increasing the contribution made by employers to the higher education sector (rejecting the Browne review argument that “businesses will not be compelled to contribute more – they contribute by rewarding graduates with higher wages”) there is surely an equally compelling moral argument that at least some of this additional funding should be devoted to student support and maintenance – some combination of raising the parental contribution threshold, restoring a non-repayable grant element (as in Wales), or raising the maximum available loan amount.

If you are wondering if LE has just recycled the modelling under Johnny Rich’s much discussed proposals, the answer is not quite. The Rich model adds a levy (3 per cent) to the cost of employment for graduates earning more than £25,000 in the relevant cohort only to repay fee and maintenance loans – for the UCU model the levy is lower (around 1 per cent) is linked to employer NICs, and does not include a salary threshold. The earlier model represents a higher cost of employment, but even after covering maintenance repayments on top of fee loans generates a £6bn surplus per cohort which could be used to scale up the unit of resource or student maintenance offer.

How might you do that? Well, the spreadsheet strikes again – London Economics modelling for the Sutton Trust suggests that higher loans, plus the old grant system, plus higher thresholds would come in at £1.78bn. If you are raising employer NICs by 1 per cent, why not a few fractions of a percent more to cover some much needed student support?

Though there may be a sweet spot in-between the two proposals, we are left with issues of palatability. We currently measure the “quality” of provision via the likelihood of a graduate quickly finding a graduate job (and/or a decent salary) – increasing the cost of employment would limit the number of graduate jobs on offer and negatively impact the income and employment of each cohort, with the greatest detriment falling on those less able to live flexibility to facilitate a less-than-perfect job.

Even if you argue that the pendulum has swung too far in the direction of privileging a narrowly defined graduate success (as opposed to, say, quality of life), this doesn’t feel like a risk any government would want to take.