The same but different – devolution and the response to Augar

There are still quite a few things which bring together higher education policy watchers from across the UK. For the last few years, one of these has been waiting to see what the Westminster government would do in response to the Augar review.

In June 2019 I wrote here that “for as long as it is unclear any of this is actually happening, people in other parts of the UK may be wary of investing too much time in speculating over the cross-border complexities.”

With the government’s response only now published, any such wariness turned out to be well justified. A cut to fee levels, the policy with the largest disruptive potential, now appears to have been ruled out. Equally, the likelihood of any substantial Barnett consequentials looks to have receded. Augar-watching will continue, even so.

Number controls and the Newton’s Cradle

One reason is the possible re-introduction of number controls in England. Scottish student numbers are already capped in Scotland, but rUK students are not, are worth more to universities here than local students, and are recruited separately.

In Scotland the greatest financial exposure therefore looks to be if the UK government seeks to limit how many students it will fund in other parts of the UK. Wales has followed the English approach on number controls, and is much more entangled, with large numbers moving across the border in both directions.

The different scenarios here get quickly mind-boggling. Unlike Scotland, the Welsh government might be unworried about some limits on how far its system can be used as a pressure release, as English students compete directly with Welsh students for places.

Northern Ireland may be less likely to experience an influx, but is already under-supplied with places and relies on England and Scotland to absorb its surplus extra demand. In other words, student mobility inside the UK holds the potential for a multi-dimensional Newton’s Cradle effect whenever the largest part changes its approach to controlling numbers. The only thing that can be said with certainty here is that the UK government really needs to talk about its capping plans with governments in other parts of the UK.

Loans: converging rules and diverging effects

As discussed here, the UK government has rejected much of Augar’s student funding analysis. With grants apparently rejected, loan scheme changes are the main game in town, with changes prioritised which favour higher earners (an interest rate cut) at the expense of lower earners (repayment threshold reductions, extended repayment periods).

The same general principles apply here across the UK but the systems for funding students have diverged so much in the last 20 years that detailed conclusions which will be drawn and widely reported for England about the impact of loan changes will not translate directly across to the devolved nations.

Wales has so far always followed changes made to loan terms in England. Having ridden that tiger this far, it may be inclined to carry on doing so. It is certainly likely to come under pressure to abandon the higher interest rate. If that happens, the scheme under which £1,500 of debt is written off for every student – more or less off-setting the effect of the current additional 3% during three years of study for an average borrower – looks unlikely to survive.

Any interest rate cut would almost certainly have to come at the cost of adopting other elements. As in England, lowering the threshold and lengthening the repayment period will be to the detriment of low to middle lifetime earners, which Welsh graduates are more likely to be.

Against that, however, in contrast to England the Welsh system is designed to skew debt towards those who start from higher income families and away from those from lower income homes. As there is a correlation between initial family income and later earnings, and debt is lower than in England overall, this will take the edge of the most regressive effects.

That is not the complete story, of course. Some lower earners will still have enough debt to keep them in repayment for more than thirty years. At the other extreme, some higher borrowers will have invested rather than spent their loans. A reduction in the interest rate would make that option even more attractive. But lower debt on average, distributed differently, means the effects of copying English policy here need to be separately modelled, not assumed.

Scotland has operated a separate loan scheme for a decade and has lower average debt than both England and Wales. It has never moved away from applying interest at RPI and the repayment threshold in Scotland only rose in April 2021 to £25,000, as one of the few major actions taken from the 2017 Scottish student funding review, otherwise largely shelved, out Augar-ing Augar. What’s proposed for England will therefore mean the two systems converging independently on the same position from different directions.

The Scottish Government may look at extending the repayment period to 40 years, but I hope will think hard about that. With lower write-offs here already, it is not clear this change is needed. In contrast to Wales, but like England, higher debt here tends to skew towards those from lower income families, providing the conditions for more regressive effects from extending the repayment period, even with lower levels of borrowing.

Last, Northern Irish students are still in a version of the pre-2012 English system, other than for fees for those who leave, and still on the old Plan 1 for loans. Uniquely they would see an increase in the repayment threshold, of around £5,000, if the government in Belfast chose this as a moment to align its loan scheme more with other parts of the UK. That would help especially the large minority who study outside Northern Ireland, who end up more heavily indebted.

At least as equally pressing an issue for Northern Ireland however is that the level of living cost support for its students has fallen well behind that in other parts of the UK Northern Ireland is now the part of the UK which has gone longest without any review of undergraduate student funding: perhaps England tying up this loose end will provide a prompt here. As one door closes…?