Why Labour’s promised fee cut is not as good for students as it sounds

Labour’s university fees cut pledge has certainly had the desired effect in grabbing the headlines. Clearly, they hope it will also grab the student vote. Lowering fees to £6,000 per year, they say, would reduce average graduate debt by nearly £9,000. This is no bad thing, nor is a fall of £10bn in government debt over the next parliamentary term through the decrease in the number of people who fail to pay back their loans. The £2.7bn that universities would lose from the fees reduction would be fully funded by a restriction on tax relief for the richest pensioners. It seems that unless you are an OAP in the top 1% of taxpayers, there is very little to dislike about this policy.

However, this money could be better spent.

It is well-known that students find it hard to meet living costs by themselves. For most students that means finding part-time work whilst studying or, more commonly, relying on parents to help them out financially. Many of these parents struggle to do so. Research published by Experian in 2014 revealed that one in five parents of students have faced financial pressures to support their children, whilst 10% have resorted to borrowing or using credit cards to cover the costs. Given that these living costs – accommodation, food, books, travel – need to paid upfront, surely it would make better sense for Labour to promise us more money in our pockets whilst we are still students.

Currently, to receive the full maintenance grant of £3,387, the maximum income of a household must be just £25,000 per year. A household income of £42,600 gives you a grant of only £50 per year. This means that if two working parents earn more than £21,300 per year, they are deemed to be rich enough to cover any extra costs that fall beyond their student son’s or daughter’s maintenance loan. Given that it is already difficult for the ‘squeezed middle’ to find much disposable income, students and families would be much better off with a higher maintenance grant which they would not have to pay off after graduation.

Given that these living costs – accommodation, food, books, travel – need to paid upfront, surely it would make better sense for Labour to promise us more money in our pockets whilst we are still students

This would mean increasing the grant amount at every income level as well as increasing the household income threshold needed to be able to qualify for the grant. The poorest students in most need of financial support still receive their share, as well as bursaries from the University. The richest students whose parents can afford to help them out would still do so. But those in the middle, whose parents find it difficult to fund their university lives but fall beyond the current threshold for a grant, would benefit from a much-needed increase in financial help.

It is difficult to work out exactly by how much we would be able to increase the grants. But Labour themselves say that the average student now graduates with £44,000 of debt. Why not give us the £9,000 promised saving whilst we are still students rather than once we have graduated? The potential savings to the taxpayer would be the same. But the reduction would be much more valuable in the three or four year period of study than spread out over the next 30 years of work.

Of course, this policy is better than the Tories’ of keeping things as they are. It is brave of Labour to help out the young, who typically don’t vote, whilst taking on the old, who typically do. But could they have done a better job with the same amount of money? I’d bet my student loan on it.

Imran Rahman-Jones

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3 Comments on this post.
  • Craig
    8 March 2015 at 21:01
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    You seemed to have overlooked the fact that Labour’s plan on tuition fees includes an increase in the maintenance allowance along with the £3000 cut in tuition fees. As the Guardian reported:

    “Ed Miliband has set out a £2.7bn plan to slash tuition fees in England from £9,000 to £6,000 a year and increase maintenance support for students by £200m, funded by higher interest rates for wealthier students repaying their fees.

    The maintenance grant will be lifted from £3,400 to £3,800 a year for students for families who pay basic rates of income tax and will help about half of all students. The interest rate on loan repayments for the highest earning graduates will rise from 3% to 4% to pay for it.”

    The failure to mention this in the article is very disappointing.

  • Andy
    9 March 2015 at 09:36
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    If you read the detail they are also increasing the amount of grant available. Pretty poor investigation….

  • Jack
    13 March 2015 at 01:57
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    The author whines about public funds being misspent but the only money being misspent in this article lies in the fact that Impact is bothering to publish such under-researched rubbish.

    The author hasn’t bothered responding to the previous comments so I will put the issue in as clear a manner as possible – Labour promises an increase in grants (exactly what the author claims to want) – it is up to the author to either address the issue or lay themselves open to the charge that they couldn’t care less about student grants but instead want to make some incorrect political point because they can’t be bothered to do any proper research.

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