Funding gap still left to bridge

If upfront top-up fees are on hold, where is the money education still needs? asks Stephen Court

Next month the government publishes its ten-year strategy review for higher education. Prime minister Tony Blair has said the review will increase access to university. This month he told Parliament: "(The review) will not mean that parents will have to pay thousands of pounds upfront in fees."

This statement has been widely spun as ruling out top-up fees. This seems to be a misinterpretation of the prime minister's words. Parents may not have to pay thousands of pounds in tuition fees. The fees may not be upfront. But top-up fees may still be charged, paid through loans and repaid by graduates once their earnings have reached a reasonable threshold.

The reason the prime minister moved to rule out big upfront cash payments by parents was to keep middle-class voters on side. Allowing unregulated upfront top-up fees would hit middle-class parents hardest. With their eyes on a third successive term, the government can ill afford to alienate the Middle England electorate.

In the search for a solution, one stone remains unturned: additional public spending to help meet the shortfall. It seems that a line has been drawn under current funding levels and no more cash can be spared. Yes, new Labour has pumped significant sums into the sector, halting the real-terms reduction in funding per student and improving spending on science.

But the Treasury's public expenditure statistical analyses indicate that the amount spent by the government on higher education, together with the science budget, was lower in 2001-02 in real terms than in the mid-1990s. Public spending in the UK on higher education in 1999 (the most recent year for which data are available from the Organisation for Economic Cooperation and Development) was 0.8 per cent of gross domestic product. This was 20 per cent below the OECD average, which was 1 per cent of GDP. Bringing the UK into line with competitor nations would cost £1.8 billion a year at 1999 prices.

Total annual public spending on education in the UK is projected at £68 billion for 2005-06. As promised in last year's manifesto, Labour is increasing the share of national income for education. But the government is waiting until next month to announce how the education cake is to be cut, following the summer's spending review. If an "OECD catch-up factor" was made available for higher education, the sector would be well on the way to meeting its projected shortfall.

The universities say they need an extra £10 billion spread over the next three years. This is for additional investment in teaching, research and infrastructure to address staff recruitment and retention difficulties and to face the challenge of meeting the government's student expansion target.

An extra £1.8 billion a year, rising with inflation, would still be a relatively small slice of the education cake. But it would be a prudent investment and would help bridge the funding gap. The benefits to the economy of investing in higher education, as pointed out by chancellor Gordon Brown in his pre-budget speech last month, are well documented.

Not all the university income gap can be met out of the public purse. It is accepted that individuals who benefit from higher education - and the rate of return is particularly high for UK graduates - should contribute to tuition costs once their income has reached a reasonable level.

Last month in the Commons, Blair expressed his confidence that the government's review of higher education would find "the right way through". That way should include close examination of whether additional public funding for universities can be found from the education budget, before next month's announcement. That way the UK might level the playing field with OECD competitor nations, and new Labour might take the heat out of its crisis over top-up fees.

Stephen Court is senior research officer at the Association of University Teachers.