Simon Jenkins –
Lowering the cost of degrees will devastate university budgets. The state will bail them out – in exchange for more control
Meanwhile, back at the ranch – or in this case the campus – the mice are running riot. Ignored by Brexit, Britain’s universities are facing financial meltdown. I predict that within a decade they will become institutions wholly owned by the state, their academic autonomy unrecognisable.
A few weeks ago, three universities were reported to be on the brink of bankruptcy. University debt has soared by £12bn in the past decade. Cardiff has borrowed £300m over 40 years, with experts suggesting it would take 2,000 years to repay if its current surplus does not improve. The backing for these loans is supposedly the ballooning scale of student fees, which David Cameron almost tripled to £9,000 in 2012 in England, and the removal of the cap on student numbers. Fees, rather than grants, now comprise the vast bulk of all university income for teaching undergraduates.
The fee rise was an open cheque. Universities slammed on the accelerator and drove fees for virtually all courses up to the £9,000 cap. They made unconditional offers and hurled money at providing lifestyle value. The chief draw to students was the smart residences now towering over cities, notably across the north of England, many financed from overseas tax havens. Dubiously productive masters degrees were heavily marketed, and applicants were admitted from abroad with few questions asked. More than four in 10 postgraduate students in Britain are now from outside the European Union. Many universities are little more than global finishing schools.
Universities have been able to borrow to finance this capital expansion against the income they get from fees. But since the government pays these fees upfront, and barely half of student loans are expected to be repaid, the guarantor is effectively the Treasury. This resulting student debt has reached a staggering £100bn, and is predicted to rise by 2042 to £200bn, and on some estimates to as much as £1tn.