Mainly for those interested in the forthcoming UK general election
I do not remember much from my university days, but I remember one meeting where the subject was student finance. This was a time of student grants rather than loans, and the proposal being debated was to replace grants with some kind of loan or tax. Speaker after speaker went through how student grants amounted to a payment from those not attending university to those that did, while those that did benefited from the return on the ‘human capital’ a university education gave them. The logic on equity grounds for switching to loans seemed compelling. Then someone stood up, and talked of his background from a mining family in Wales, how he was the first of his family ever to go to university, and how this would never have happened if they had not had access to a grant. Those arguing for loans fell silent, and their proposal was lost.
Can the same logic be applied to Ed Miliband’s proposal to reduce the maximum tuition fee from £9,000 to £6,000? It is a very different starting point, as most UK students now pay this fee from a loan rather than a grant, but the distributional consequences are essentially the same. In the UK graduates only have to start repaying their loans once their income exceeds a threshold, and many will not pay some or all of it back as a result. Reducing the loan therefore mainly benefits those students towards the top of the income distribution. Labour’s proposal has mitigated that effect slightly by increasing the interest rate that high earners pay, but the IFS say that “mid-to-high-income graduates are the primary beneficiaries of this reform, with the very highest earners benefiting the most, despite the rise in interest rates that they would face.” The fact that the policy is being funded by cuts in pension relief which will hit similar groups is not really relevant, because that money could have been used for something else.
So why are Labour proposing to increase inequality in this way? Is it because they hope that lower fees will encourage those from poor backgrounds to go to university? One of the remarkable features of the Coalition’s decision to increase fees is that it does not seem to have reduced the numbers becoming full time students coming from such backgrounds, although the numbers are still very low. Of course we cannot be certain what might have happened to these numbers without the fee increase. It is also important to note that applications for part-time enrolment have fallen back as a result of higher fees.
However I doubt very much if encouraging the poor to go to university is what lies behind this policy announcement. Labour are slowly but steadily losing this election. Every time I look at the predictions for the number of seats, it seems as if Labour has dropped one or two at the expense of the Conservatives. Putting luck to one side, there seem no obvious events between now and May that will change this trend, while George Osborne has a budget that will be sure to include plenty of pre-election bribes to carefully selected groups, to add to the many already announced.
Perhaps Labour’s only hope is that they can galvanise those who traditionally do not vote: the young. The old are much more likely to vote than the young. In 2010 just over 50% of the 18-24 age group voted, but nearly 75% of those 65 or over voted. And the young vote left.
The chart below shows the ‘age gap’ by party, where the age gap is the percentage of the 18-24 age group who voted for a party, less the same percentage for the 65+ age group. The data for ‘now’ is taken from this Populus poll (Table 3). The age gap for the Conservatives has been steadily increasing over time. The LibDems benefited hugely from young voters in 2005 and 2010, but perhaps partly as a result of their change in policy on tuition fees that gap has completely disappeared. The youth vote has gone back to Labour as never before, but it is vulnerable on two counts. First there are the Greens. In this Populus poll 16% of the 18-24 group said they would vote Green (compared to just 2% of the 65+ group), but in this YouGov poll they were on level pegging with Labour. This volatility suggests there is all to play for. (Only 5% of the 18-24 group intended to vote for UKIP, compared to 17% for the over 65s.) Second, there is the question of how much this group will vote.
|UK voting age gap between young and old. Source (actual elections): IPSOS Mori|
Labour therefore need to galvanise the youth vote, and to do this it needs a cause. The collapse in the LibDem vote among the young suggests tuition fees could be a potent force, whatever the actual distributional consequences of the policy are. This against a background where young people are finding it more and more difficult to buy a house, and the distribution of income and wealth is moving in favour of the old. This is an election more than ever before about a clash of interests between the old and the young. The Conservatives have already given their fair quota of bribes to the old, so it really was a no brainer that Labour would do the same to the group that could just save this election for them.