Labour slam 'chaos and confusion' in Government's higher education policy following report stating there was a '£1 billion a year black hole' at its heart

Student numbers may have to be cut or loan repayments drastically increased after miscalculations. Tuition fees for which Nick Clegg sacrificed reputation may cost more than old system

Labour today hit out at the “chaos and confusion” in the Government’s higher education policy in the wake of a report saying there was a £1bn-a-year “black hole” at the heart of it.

A report by the Higher Education Policy Institute, a highly respected think-tank, says the Government has "seriously understated" the cost of its higher education reforms, means the Government's new £9,000 fees regime is in danger of costing taxpayers more than the old system.

As a result, ministers will have to consider drastic cuts in student numbers or ask graduates to make higher repayments.

Shabana Mahmood, Labour’s higher education spokeswoman, said: “Today’s report undermines the chaos, confusion and incompetence at the heart of the Tory-led Government’s policy to treble tuition fees to £9,000.

“Ministers’ justification that fees had to rise has now completely unravelled as experts such as HEPI have shown that the new system will cost taxpayers more now and in the future.

“This shambolic and out of touch policy has now been exposed as both costly and damaging and today’s report further calls in question ministers’ credibility.”

The findings are deeply embarrassing for the Government, but particularly for the Deputy Prime Minister, Nick Clegg, and the Liberal Democrats, who ditched their election pledge to oppose rises in fees on the grounds that they were supporting an austerity programme.

Bahram Bekhradnia, Hepi's director, warned of "serious consequences" for the higher education sector. "Either future taxpayers will need to pay more, other parts of the higher education budget will need to be cut, student numbers will need to be held down even further than presently planned or former students will have to repay more," he said. Last night students and lecturers' leaders said the findings showed the Government's higher education policy was "in tatters".

The Hepi report focuses on two key areas where it says civil servants have made "highly uncertain and optimistic assumptions" on funding. Firstly, it cites the assumption that the average net fee charged by universities would be £7,500 a year – the true figure is nearer to £8,300, thus forcing students to borrow more.

Secondly, it calls into question the assumption that the average male graduate will be earning £75,000 a year in 30 years, the period by which loans have to be repaid. This is already a reduction from an earlier estimate of £100,000 a year.

The latest calculations from the Department for Business, Innovation and Skills (BIS) estimate the shortfall in loans recovery will be around 32 per cent. Analysis from the Institute for Fiscal Studies (IFS) suggests it is nearer 37 per cent.

"The Coalition got their sums badly wrong and have left a mess that will take years to fix," said Liam Burns, president of the National Union of Students.

Sally Hunt, general secretary of the University and College Union, added: "We warned at the time that fees close to £9,000 a year would be the norm and that the calculations for repayment by graduates were flawed. We take little pleasure in being correct, but it is clear now that forcing the burden of paying for university education on to students was an ideological move not a financial one."

Hepi also warns that salary increases among graduates are unlikely to be evenly spread across all sectors of employment. "Over the past 30 years highest-earning graduates have increased their salaries very substantially whereas those earning the median or less have had very much more modest increases, if any at all," says the report. "If low earners increase their incomes by less than high earners as has happened in the past, then this seriously impacts on the repayments that the Government will receive."

The higher fees regime also adds 0.2 percentage points to the Consumer Price Index – thus triggering larger rises in state benefits and civil service pensions of between £420m and £1.14bn a year.

The report acknowledges: "To put a figure on the extent of the shortfall would entail making predictions about what is unpredictable but it is likely to be substantial." However, even using the lowest indicator for the impact of inflation – the IFS' assessment of a 37 per cent shortfall in loans repayment and average loans of £8,000 – the increased cost will be more than £1bn a year, the report says.

"This sort of cost would very largely eliminate the savings that the Government claims its policies will generate of £1.3bn a year," it says. "A slightly higher [repayments] cost or a slightly greater inflationary effect than the most optimistic that we have considered here would mean that the present policy is actually more expensive than the one it has replaced."

Black hole: Why the sums are wrong

There are three reasons why the new system will cost at least £1bn-a-year more.

Firstly, the average fee is £8,234, not the £7,500 predicted. This forces students to take out higher loans.

Secondly, the Government estimates that it will not recover 32 per cent of debts. But the IFS reckons this should be 37 per cent because a civil service assessment of future salaries is over-optimistic, meaning more graduates will not have to repay their loans.

Thirdly, the repayments will put 0.2 per cent on the Consumer Price Index – triggering higher benefit payments and pensions.

Suggested Topics
News
Clare Balding
peopleClare Balding on how women's football is shaking up sport
Arts and Entertainment
Carrie Hope Fletcher
booksFirst video bloggers conquered YouTube. Now they want us to buy their books
Arts and Entertainment
Damien Hirst
artCoalition's anti-culture policy and cuts in local authority spending to blame, says academic
Sport
premier leagueMatch report: Arsenal 1 Man United 2
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksNow available in paperback
Arts and Entertainment
A comedy show alumni who has gone on to be a big star, Jon Stewart
tvRival television sketch shows vie for influential alumni
Arts and Entertainment
Kirk Cameron is begging his Facebook fans to give him positive reviews
film
Life and Style
Small winemakers say the restriction makes it hard to sell overseas
food + drink
News
i100
Life and Style
fashionThe Christmas jumper is in fashion, but should you wear your religion on your sleeve?
Voices
Neil Findlay
voicesThe vilification of the potential Scottish Labour leader Neil Findlay shows how one-note politics is today, says DJ Taylor
Life and Style
food + drinkMeat-free recipes and food scandals help one growing sector
News
i100
Arts and Entertainment
Jason goes on a special mission for the queen
tvReview: Everyone loves a CGI Cyclops and the BBC's Saturday night charmer is getting epic
Life and Style
Tenderstem broccoli omelette with ricotta and pine nuts
food + drink
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Education

Randstad Education Cardiff: Maths Teacher

£100 - £120 per day: Randstad Education Cardiff: We are currently recruiting f...

Randstad Education Cardiff: Science Teacher

£100 - £120 per day: Randstad Education Cardiff: Science Teacher -Full Time - ...

Randstad Education Cardiff: After School Club Worker

£40 - £45 per day: Randstad Education Cardiff: The Job: Our client in the Newp...

Randstad Education Cardiff: English Teacher

£100 - £120 per day: Randstad Education Cardiff: Randstad Education Cardiff is...

Day In a Page

Mau Mau uprising: Kenyans still waiting for justice join class action over Britain's role in the emergency

Kenyans still waiting for justice over Mau Mau uprising

Thousands join class action over Britain's role in the emergency
Isis in Iraq: The trauma of the last six months has overwhelmed the remaining Christians in the country

The last Christians in Iraq

After 2,000 years, a community will try anything – including pretending to convert to Islam – to avoid losing everything, says Patrick Cockburn
Black Friday: Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Britain braced for Black Friday
Bill Cosby's persona goes from America's dad to date-rape drugs

From America's dad to date-rape drugs

Stories of Bill Cosby's alleged sexual assaults may have circulated widely in Hollywood, but they came as a shock to fans, says Rupert Cornwell
Clare Balding: 'Women's sport is kicking off at last'

Clare Balding: 'Women's sport is kicking off at last'

As fans flock to see England women's Wembley debut against Germany, the TV presenter on an exciting 'sea change'
Oh come, all ye multi-faithful: The Christmas jumper is in fashion, but should you wear your religion on your sleeve?

Oh come, all ye multi-faithful

The Christmas jumper is in fashion, but should you wear your religion on your sleeve?
Dr Charles Heatley: The GP off to do battle in the war against Ebola

The GP off to do battle in the war against Ebola

Dr Charles Heatley on joining the NHS volunteers' team bound for Sierra Leone
Flogging vlogging: First video bloggers conquered YouTube. Now they want us to buy their books

Flogging vlogging

First video bloggers conquered YouTube. Now they want us to buy their books
Saturday Night Live vs The Daily Show: US channels wage comedy star wars

Saturday Night Live vs The Daily Show

US channels wage comedy star wars
When is a wine made in Piedmont not a Piemonte wine? When EU rules make Italian vineyards invisible

When is a wine made in Piedmont not a Piemonte wine?

When EU rules make Italian vineyards invisible
Look what's mushrooming now! Meat-free recipes and food scandals help one growing sector

Look what's mushrooming now!

Meat-free recipes and food scandals help one growing sector
Neil Findlay is more a pink shrimp than a red firebrand

More a pink shrimp than a red firebrand

The vilification of the potential Scottish Labour leader Neil Findlay shows how one-note politics is today, says DJ Taylor
Bill Granger recipes: Tenderstem broccoli omelette; Fried eggs with Mexican-style tomato and chilli sauce; Pan-fried cavolo nero with soft-boiled egg

Oeuf quake

Bill Granger's cracking egg recipes
Terry Venables: Wayne Rooney is roaring again and the world knows that England are back

Terry Venables column

Wayne Rooney is roaring again and the world knows that England are back
Michael Calvin: Abject leadership is allowing football’s age-old sores to fester

Abject leadership is allowing football’s age-old sores to fester

Those at the top are allowing the same issues to go unchallenged, says Michael Calvin