The European Investment Bank to the rescue of DBIS?

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The Independent Online

The unprecedented rise in applications from people of all ages who want to study at university in 2009 should be no surprise. The number of 18 year olds peaks in 2009 and 2010. Recession and a tightening of the labour market have historically incentivised interest in higher education. This time the recession is deeper, more prolonged and global – and the correlation with demand for university places even more pronounced.

To be fair, Ministers and the Treasury are in hoc to a demand-led student support system premised on a sale of student debt which has proved impossible. The hope has to be that Lord Mandelson has the clout in Government to prevent the embarrassment of qualified students having to turn to the dole queue rather than turn up for university in September.

It does not have to be like this. Professor Danny Blanchflower, the economist and former member of the Bank of England’s Monetary Committee, has urged the Government to do much more to fund expansion in higher education to combat rising unemployment.

Whatever the green shoots in the economy, the labour market will run behind any recovery. With the certainty of 3 million unemployed, the failure to provide temporary short-term funding for university places in 2009 and 2010 has consequences – not least for the already burgeoning budget of the Department of Work and Pensions.

The rising demand has revealed trends that the Government with its laudable commitment to social mobility, should welcome. The number of male, and especially black male applicants, has increased significantly. Applications from the over 25s and the over 40s have rocketed. The biggest rise in applications by socio-economic group is from those from lower supervisory and technical backgrounds – ONS group 5. What’s not to celebrate?

Instead the rise in applications has been treated like a toxic asset. Ministers bang on in Parliamentary Answers about an increase in numbers and university admission being a competitive process. This is not good enough. The original commitment to 15,000 additional places in England in 2009 was cut to 10,000. This is nothing like sufficient. UCAS, the Admissions Service, now talks about applicants waiting a year if they don’t get a place in 2009. If there are insufficient funded places in 2009 where will these places come from in 2010? What is the point of increasing the numbers of unemployed when individuals could be studying at university?

What should really keep Ministers awake is the nature of the applicants who are most at risk of not getting into university. Those with lower entry grades (students who consistently prove that they have just as much potential to gain a graduate qualification if given the chance), those from non-traditional backgrounds who rely on clearing to get a place and students whose family and personal circumstances mean that their only real choice is their local university or no university at all, are the ones most at risk.

million+, working with London Economics, has calculated the funding required to support every additional 5000 students in 2009. After factoring in variables for teaching costs, completion rates, take-up of maintenance grants and take-up and repayment of maintenance and fee loans, we estimate that the total cost to Government of every 5000 additional full-time students entering a standard 3 year programme in 2009 is £90.06m. These costs take account of 3 years of study and the cost of the loan repayment period after graduation but they take no account of savings in unemployment benefit, the life-time premium gained from the higher taxes paid by graduates or the well-evidenced, but more intangible, benefits associated with family and societal well-being of graduate qualifications .

Ed Balls has allocated £655m to keep 54,000 16-19 year olds in education or training in 2009. If the same sum were applied to university places, over 30,000 additional full-time student places could be funded. If additional funds were used to support a mix of full, part-time and foundation degree students – a mix of provision which is what is needed – numbers could be increased further.

Ministers suggest that the real problem is the cost of student support. They need look no further than the European Investment Bank – a Bank already used by Lord Mandelson to provide loans to the UK’s car industry. The Bank’s remit includes the promotion of the knowledge economy and social inclusion. The EIB is already providing loans to one of the German Lander and to Hungary’s Government to introduce a partial fee loan system.

If the UK Government is unable to find the investment required to fund the current student support system and meet the aspirations of people who want to study at university in the middle of a global recession, it should leave no stone unturned. If the EIB can provide the means, the new DBIS should take it.

Pam Tatlow

Chief Executive of the university think-tank million+