Osborne's student loan 'gift' has pound;1.1bn sting in the tail

29th October 2010 at 01:00
As Joseph Lee reports, worries are emerging as the detail is fleshed out

Proposals for the fees and loans system for funding university were introduced with a manifesto pledge, legislation, intense public scrutiny and widespread student demonstrations.

A similar system for over-25s returning to FE to gain GCSE and A-level equivalent qualifications slipped out in just three lines in the comprehensive spending review last week, with almost no fanfare from media or politicians. But the changes have left colleges pondering the implications.

Colleges, which already have to charge half the cost of many courses where students do not fall into the entitlement categories, set out by the last government, have long looked enviously at higher education's comprehensive student support system.

So it was a cause of deep frustration last week that when a similar system was at last extended to FE, it came at a heavy price. Government funding will be cut by pound;1.1 billion over four years and public money will be withdrawn from whole swathes of provision. The lesson? Beware of chancellors bearing gifts.

Julian Gravatt, assistant chief executive of the Association of Colleges (AoC), said: "Colleges have been asking for income-contingent loans for FE students for years. We'll get them at the point where the terms for these loans get much worse."

The changes outlined by Chancellor George Osborne in the spending review introduce two cut-off points. Those aged over 25 will in future lose the entitlement to free qualifications at level 2 (equivalent to GCSE). For the time being that will mean paying half the costs but also leaves the door open for the student to bear the full cost in the future.

A slightly different age barrier applies for level 3 (A-level equivalent qualifications) where those aged 24 and over will have to pay the full costs of their course, with no Government funding. This equates to about pound;3,000 for a full-time student in most parts of the country, compared to the current pound;1,500 fees.

The shifting age barrier could confused some students about the level of support they can expect to receive, but Mr Gravatt said there was good reason for placing the cut-off for funding in the mid-20s. "If you didn't, you'd catch 19- and 20-year-olds doing A-levels, which you've got quite a lot of in urban colleges," he said. "They're people who didn't get GCSEs first time and maybe left education for a year - they get back in and find themselves 19 and in college. There are about 80,000 of those."

It also reflects the Government's priorities, as set out by Business Secretary Vince Cable in the grant letter to the Skills Funding Agency earlier this year. Along with apprenticeships, the highest priority was 18- to 24-year-olds out of work or education. Having attacked the Labour government for the steep rise in youth unemployment, those in the new administration are wary of exacerbating the problem.

Colleges have been told to expect the loan system to be implemented for 2013, in line with the pace of the cuts at the Department for Business, Innovation and Skills (BIS) as a whole, which loses just pound;200 million of its pound;3 billion cuts in the first year, before hitting three years of more substantial reductions.

That gives some time to solve some of the technical challenges. As Mr Gravatt points out, in HE the loan system only has to deal with one entry route, Ucas, which has about eight months' notice before students start their courses. Even then, they managed to overspend on student support by pound;200 million, according to figures for 2008.

But at colleges, no one knows if a student is applying for a course until much later - and they deal directly with the institution. Co-ordinating the loans sytem is, therefore, likely to prove a challenge, and malfunctions such as the failure to pay education maintenance allowance for months in 2008 may be a taste of the future.

The AoC also pointed out to Mr Cable before the spending review was announced that making loans available only for courses previously covered by the entitlements would continue to distort provision in favour of courses singled out by Government, rather than providing a system responsive to demand.

Mr Gravatt said: "The fact that this wasn't in the skills consultation but is in the spending review suggests it's just come off the top of someone's head over the summer.

"But there is some time left to iron out the wrinkles. I would be surprised if they don't make some amendments between now and 2013."

Another of the "wrinkles" is the varying costs of the courses. Despite 40 per cent cuts to teaching budgets in HE, the Browne review proposals adopted by the Government concentrate on funding for science, technology, engineering and maths subjects, which are expensive but important for the economy.

But FE's funding cuts are targeted by age group rather than subject, so over-25s could find themselves charged far more for an engineering course or a construction qualification than for media studies. What is likely to seem even more unjust is that subjects which do receive funding at degree- level will not do so at level three if the student is the "wrong" age.

This shift to increased fees to replace part of the pound;700 million a year spent on adult skills at level 2 and 3 forms part of pound;1.1 billion of cuts; the other big loser is Train to Gain.

Its budget has already been cannibalised for pound;50 million of capital spending and pound;150 million for apprenticeships. A further pound;100 million will bring the total extra apprenticeships to 75,000, short of the Government's pledge for 100,000.

But Gordon Marsden, shadow FE and skills minister, has pointed out that apprenticeship recruitment last year is likely to be "comfortably" over the target of 250,000, meaning that the extra money may simply be picking up the tab for an expansion that has, in large part, already happened.

He also said that while the spending review promised to "protect" the pound;210 million for adult community learning, it also threatened "reform" without offering any details of how it might do this.

"With the Government, I take the same view as (President) Reagan did of the Soviet Union: trust, but verify," he said.

Mr Marsden was formerly part of the Commons skills select committee, which made some sharp criticisms of the Train to Gain programme. But he said its role in increasing participation was vital.

"In the overall scheme of things, Train to Gain was always going to have an element of dead weight in it," he said. "It's almost a philosophical question between the merits of a universal benefit and a targeted benefit. There will always be people in a universal system who are better off and don't need it.

"But it delivered substantial benefits in terms of learner participation at level 2 and 3. What is incumbent on the Government is to spell out in a very detailed way how the replacement is going to meet the targets that Lord Leitch set out (in his 2006 review of UK skills)."

Last year's figures show more than 800,000 people starting courses through Train to Gain. A fall in adult participation in education and training, therefore, seems a near-certainty once it loses all its funding.

"Employers are going to have to pick up the slack," said Mr Marsden. "The further you go down the chain of employers, the less likely that is." The spending review's speculative proposal for voluntary levies was unlikely to work, he suggested. "Most sector skills councils were decidedly against voluntary levies even before the recession, they will be positively glacial now."

John Hayes, FE and skills minister, said the spending review was only the start of the process of reshaping FE, and promised further detail in the skills investment strategy, due later this autumn.

"How we actually carve up the budget is still to be finalised," he said. "That is why I have said there is still some work to be done over the spending review."

Among the areas to be resolved are how much money will remain for the Government's proposed replacement for Train to Gain, to be targeted at smaller companies, and whether there will be any funding for new capital grants for college buildings. A BIS spokesman said capital spending on colleges would continue, but did not clarify whether there was any money beyond the pound;700 million already committed.

Mr Hayes is banking on a market-led approach making FE more responsive to student and employer demand, and therefore more attractive - even if it proves more expensive.

The Government's gamble in FE mirrors its approach to the wider economy: that the private sector can replace jobs faster than the public sector sheds them, and that private investment in skills increases more rapidly than Train to Gain is dismantled.

But Mr Hayes is undaunted. "I think we can maintain high levels of participation," he said. "I'm not pessimistic about participation, I'm optimistic."

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