David Willetts has refused to guarantee the future of student opportunity funding for the poorest students, following reports it could be cut by ?200 million in the forthcoming grant letter.
Appearing before MPs on the Business Innovation and Skills Committee to discuss student loans, Mr Willetts also admitted that the government’s estimate of the cost of the new loans system is to rise yet again.
Shortly before Mr Willetts appeared, the Million+ group of newer universities released a press statement claiming that cuts in student opportunity funding of up to ?200 million, or 60 per cent, were “due to be announced” in the grant letter.
It is thought that the grant letter – sent each year by the Department for Business Innovation and Skills to the Higher Education Funding Council for England – had been scheduled to be sent last Friday.
However, a battle over student opportunity funding seems to be delaying the letter, with no final sign off on the planned cut – to which Mr Willetts is thought to be opposed, but which may secure continued protection for the research budget.
Million+ said in its statement that it is “understood that the Treasury and the Cabinet Office are pressing for the reductions as part of cost savings being imposed” on BIS.
BIS is under pressure to make cuts after uncovering a ?1.4 billion shortfall in its budget in the coming years, caused by higher than expected student numbers at universities and a failure to control places at private providers.
At the committee, Paul Blomfield, the MP for Sheffield Central, asked Mr Willetts to assure the committee that student opportunity funding would not be cut.
“We have yet to finalise the grant letter,” answered Mr Willetts. He added: “It is very important to spend on access, but the exact, specific, financial details about where that money should go have not yet been finalised.”
Toni Pearce, the National Union of Students president, said in a press statement: “Cutting the student opportunity fund is an absolute disgrace and, in the wake of cuts to the National Scholarship Programme, looks like the government is backtracking on its commitment to support social mobility in favour of balancing the books on the backs of the poor.”
On the student loan system, Mr Blomfield said the government’s estimates on the portion of loans that will never be repaid – the resource accounting and budgeting (RAB) charge – had steadily risen from 28 per cent to 40 per cent, on the most recent forecast.
Mr Willetts said there were “more factors at work which will increase the RAB charge”, highlighting issues around projected graduate earnings, which determine repayment levels.
“People on low earnings are more likely to be on low earnings for longer…than was assumed in the original modelling,” said Mr Willetts. “Things like that will push up the RAB charge.”
Asked by Mr Blomfield whether his department’s modelling suggested the RAB charge could rise as high as the “high 40s” or 50 per cent, Mr Willetts said: “I don’t want to speculate…I don’t think the process of revising the RAB charge is suddenly going to stop.”
London Economics, a consultancy, has said that a RAB charge of 48 per cent is the point at which the new system becomes more expensive than the old system of direct grants.
In addition, the committee asked whether the abolition of student numbers controls would go ahead even without the sale of student loans – which George Osborne, the chancellor, has said will be the means of financing the expansion.
Matthew Hilton, director of higher education at BIS, said: “I think it would be fair to say the Treasury do intend to underwrite this policy.”
He added: “There is no logical follow through from the decision on the loan book to the decision on the expansion of the higher education budget.”
