Draft Higher Education (Fee Limits and Fee Limit Condition) (England) (Amendment) Regulations 2025

Neil O'Brien Excerpts

Monday 24th February 2025 General Committees

[Neil O’Brien (Harborough, Oadby and Wigston) (Con)]

It is a pleasure to serve under your chairmanship, Ms Furniss.

Through these regulations, the Government are increasing tuition fees to £9,535 a year. The maximum maintenance loan for students not living at home is £10,227, or £13,348 in London, so after a typical three-year degree, a graduate will need to pay back up to £59,000, or up to £68,600 for those who studied in London. If the Government continue to raise fees in the same way throughout this Parliament, those figures will increase to about £66,400 in the rest of the country, or £76,900 for those who studied in London. Those are two very large numbers.

As it happens, this year’s fees hike has not made universities any better off because the cost of the national insurance hike wipes out the benefit to the sector of the decision to increase tuition fees. Effectively, one broken promise on fees is paying for another broken promise on tax. The Secretary of State’s website still has the ironic headline, “Graduates, you will pay less under a Labour Government”, but in reality they are paying higher fees and more tax, too.

The current system produces some incredibly high marginal rates for young people. Those who have a postgraduate loan, or who pay the high-income child benefit charge, face incredibly high marginal rates, even on middling incomes. Sadly, the new Government have abandoned plans to reform the HICBC, so this problem will not go away any time soon. Graduates have 51% of their income taxed away at just £50,000 of earnings, a sum which will not feel like being rich for those renting in an expensive city. At £60,000 of earnings, graduates with kids, particularly postgraduates, face marginal rates in the 58% to 73% range—the kind of rates that used to apply only to super-taxes on the very wealthy.

One way things have changed since the launch of fees is that we have much better data, particularly thanks to the creation of the longitudinal education outcomes dataset under the last Government. This lets us look at a degree’s value added compared with something else, and something else can sometimes be better. The latest data shows that the median first-degree graduate earnings five years after graduation are £29,900, compared with £33,800 for level 4 apprentices; the apprentices are earning substantially more.

The Institute for Fiscal Studies has taken the deepest look at this question. It has considered how graduate earnings are evolving for those who study at different types of institutions and on different types of courses, and it has tried to compare that with counterfactuals for people with similar prior characteristics. It looked at how many people saw their earnings boosted by a degree and what the costs were, and worked out the net benefit for the individual and the taxpayer, and it combined these perspectives to get a final score. The conclusion of its 2020 report was that

“seen over the whole lifetime, we estimate that total returns will be negative for around 30% of both men and women.”

That is a huge share for whom it is proving not to be worth it.

The IFS also noted that

“While getting an undergraduate degree is worthwhile financially for most students, there is significant variation across subjects. Some subjects, such as medicine, law and economics, offer a springboard to very lucrative careers…However, a significant minority of mostly men are likely to not see positive returns as a result of going to university…lifetime earnings returns remain low or negative for subjects such as creative arts and English.”

Today’s Times has a report based on my freedom of information requests to the Student Loans Company. That in itself is telling: the whole process of assessing public spending on higher education needs to be radically more transparent. We should not need to rely on freedom of information requests just to get this data, but now that we have it, it reveals the vast variations between higher education institutions in the share of loans that are being repaid. Where we see that only very small fractions of the money loaned out by the taxpayer is paid back, it often means that the courses are not that great for either the taxpayer or the student, who may feel that their degree has cost them a lot without necessarily taking them to where they hoped. Yet the Government seem to have looked first at jacking up young people’s fees, and they seem to have given up on reforming the system to weed out courses that offer low value for money.

Speaking of value for money, one university that will benefit from these regulations is the University of Greater Manchester. The Minister will have seen the extremely concerning reports in the press, particularly The Manchester Mill, about the attempts to pay huge sums of what is effectively taxpayers’ money to relatives of the university’s managers, and to what appears to be a shell company in Casablanca. Can the Minister assure me that he is investigating those concerning allegations?

I am very sympathetic to the plight of staff at universities where the leadership have got them into financial difficulties, be it through taking out ill-judged, expensive loans, overspending on buildings or becoming overdependent on one particular group of overseas students—I am sympathetic to universities and lecturers more generally, as it is a hugely important job. I am not saying that all universities are awash with cash, but it is worth saying that up-front real-terms funding per student is still substantially above the level of the pre-fees era, even as student numbers have exploded.

There are many wonderful, valuable courses in our universities, which I hope will expand and prosper, but young people in Britain are now facing really large repayments and high marginal rates, which make it difficult to get on in life. We need to do right by our universities, but we also need to do right by our young people. I believe that reforms offer scope to get them a much better deal. We should look first to reforms, rather than simply increasing the burdens on young people. That is why we are sceptical about these regulations.