Retired or dead: the real winners from Clegg’s ‘fair’ fees
The coalition government’s plan to treble tuition fees will leave graduates better off – if they retire soon, become permanently disabled or suffer a premature death.
Ministers have persistently argued in recent weeks that their plans to raise the cap on tuition fees to £6,000 for most degrees and £9,000 for elite courses are fairer and more progressive than the current system.
Under the plans, fees will be paid after graduation over 30 years and above an income threshold of £21,000 a year.
One of the government’s main assertions has been that the lowest earning 25 percent of graduates from undergraduate courses will end up paying less for their degrees than they would under the current system.
Higher education minister David Willetts told the House of Commons in November: ‘Under our proposals a quarter of graduates – those on the lowest incomes – will pay less overall than they do at present.’
The government has specified that this quarter of graduates refers to those with the lowest lifetime incomes, but has given the impression that these graduates will be the ones who take relatively low-paying jobs and hold them over the course of many years.
The reality, however, is very different.
According to the Department for Business, Innovation and Skills (BIS) – which oversees higher education policy – the 25 percent figure comes from data in a so-called ‘ready reckoner’ published on its website.
This vast database includes the long-term earnings forecasts of 4,041 hypothetical graduates from undergraduate degrees. Using the government’s fees proposals, it calculates how much each student will end up paying for their degree, based on their income.
The database includes hypothetical graduates of varying ages, female graduates who take part-time work or leave employment for a number of years, and graduates who suffer permanent disability or premature death.
And looking at the figures, it is arguably true that the 20-25 percent of graduates with the lowest lifetime incomes will pay less than they do under the current system.
But what is striking is why.
The lowest-earning 10 percent of graduates on the BIS dataset – in other words, those who will benefit most from the new fees system – is dominated by three groups:
- mature students graduating in their 40s and retiring midway through the repayment period
- graduates who are statistically forecast to suffer permanent disability during the repayment period
- graduates who are statistically forecast to die during the repayment period
Each of these incidents – retirement, permanent disability and death – terminates the graduates’ student debt.
In other words, the main beneficiaries of the government’s plans gain neither on the basis of low-paying graduate jobs nor on the basis of moderate long-term earnings growth, but simply by virtue of their debt being terminated early through retirement or tragedy.
Thus the main ‘progressive’ element of the government’s plans has less to do with low income and more to do with shorter life.
The devil’s in the detail
The BIS ready reckoner has two lists based on the same data. The main list ranks the hypothetical graduates by lifetime income, on the basis that this roughly equates to how much they will have to pay in fees.
The figures are stark. Out of the 404 graduates in the lowest decile – the bottom 10 percent of graduate lifetime earners, who will benefit the most from the new policy – a staggering 87 percent are forecast to retire, suffer permanent disability or die within the repayment period.
Only 54 of these 404 graduates – 13 percent - are aged under 40 and not impacted by disability or death inside 30 years. In fact, almost 50 percent are aged over 40, compared to 10 percent across the entire dataset.
If we look at the second-lowest 10 percent of graduate lifetime earners, the trend continues, albeit less sharply. Around 40 percent of these 404 graduates are forecast to retire, die or suffer permanent disability during the repayment period. The percentage is much higher in the lower half of this decile.
It is harder to draw conclusions from the other list the BIS has published, which ranks graduates by how much they will pay for their degrees, rather than by how much they will earn, because this list does not show which graduates will suffer permanent disability or death. It does show age, however – and 40 percent of the lowest decile of fee-payers are aged 40 or over, retiring within the repayment period.
Clearly there are graduates who can expect to pay less than at present without retirement, disability or death. And given that retirees, the permanently disabled and the dead are all exempt from paying fees under the current system, the beneficial impact of the new policy is likely to be down to the fact that repayment won’t start until graduates are earning £21,000 a year, rather than £15,000 at present.
But looking at the very figures the government is using to claim 25 percent of graduates will be better off under the new proposals, it is clear that a significant proportion will only do so by virtue of hitting retirement or being hit by a bus.
A dodgy dossier
The BIS data doesn’t take account of the recent concessions offered by the government to wavering Lib Dem MPs, including raising the £21k repayment threshold by inflation on an annual rather than five-yearly basis – although how much difference such measures will make is debatable.
There are other flaws with the dataset. It doesn’t appear to take account of the planned increase in the retirement age, particularly for women, which will increase the repayment period for mature students.
Its demographics are bizarre – barely a third of the hypothetical graduates are aged 20-24, whereas in reality 62 percent of all undergraduate qualifiers at UK universities are in this age group. And the repayment period is set at 35 years rather than the government’s proposed 30 years.
All in all, a rather dodgy dataset for the government to use to claim to the country that its fees proposals are fair.
It’s important to note that the independent Institute for Fiscal Studies (IFS) also says that just under a quarter of graduates will be better off under the government’s plans. The IFS does not use the BIS data; instead it has its own data and modelling, which an IFS researcher tells me has a more accurate age range than the BIS – more school-leavers, fewer imminent retirees.
Unlike the government, the IFS is independent and doesn’t have a track record of fiddling figures and facts. However, the data upon which its conclusions are based is not made publicly available, and therefore cannot be scrutinised. And, as Left Foot Forward points out, the IFS study also shows ‘that students from all backgrounds would be significantly worse off if fees were set at the £7,500 level’.
Of course, all this talk of ‘fair fees’ ignores the true definition of what is fair and unfair. For a generation of university and school students, it is profoundly unfair that they are being asked to foot the bill for an economic crisis they did not create. It is profoundly unfair that a party that pledged to abolish fees and vote against any increase just seven months ago now sees fit to treble them. It is profoundly unfair that the cost of higher education is undoubtedly going to rise for the overwhelming majority of graduates without any improvement in the education they will receive.
No amount of statistical conjuring can make that unfairness fair.
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