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Student finance system “slowly going bust” Byrne warns

The government’s reforms of student funding and the introduction of higher level tuition fees has failed to put English universities on a secure financial footing, according to shadow universities minister Liam Byrne.

Speaking to an audience of higher education professionals at the Guardian’s university forum in London, Mr Byrne, who was Chief Secretary to the Treasury in the previous Government, warned: “We have a student finance system that is slowly going bust. “

He pointed to a Public Accounts Committee report, published earlier this month, which concluded that the Government is likely to be seriously underestimating the value of student loans that will never be paid back.

According to the Committee`s Chair, Margaret Hodge MP, there is around £46 billion of outstanding student loans on the government`s books, and this is before the full impact of fee rises to £9,000 a year. The figure is expected to rise to £200 billion by 2042.

Liam Byrne also pointed to a recent admissions by Nick Hillman, former special adviser to David Willetts, and now Director of the Higher Education Policy Institute, that the cost of the student loans system had been underestimated by the government.

Under its previous director Bahram Bekhradnia, HEPI attacked the government for basing its £9,000 fees system on an underestimate of the portion of loans that would never be repaid by graduates - known as the resource accounting and budgeting, or RAB charge.

Speaking to Times Higher Education, Mr Hillman said of Mr Bekhradnia: “We were on opposite sides of the RAB charge debate, and I’ve got to say he’s won it. The HEPI analysis has turned out to be correct, and even the government now pretty much accepts that.”

Mr Byrne concluded: “We do not have a sustainable system to grow the knowledge economy.”

The shadow minister`s concern was echoed by another speaker at the conference, Nicola Dandridge, Chief Executive of Universities UK.

She said of the Government funding reforms: ”There is a real sense of unfinished business. We don`t have sustainable funding.”

Ms Dandridge called for cross party consensus for a future funding model which should protect quality and social mobility, and suggested fees supported by loans and public funding was the way forward.

The leader of UUK also criticised Government cuts to the HE budget of £125 million for 2014/15 with more to come beyond that. She described the reductions, confirmed earlier this month, as “significant” and added that the UK`s investment in research and development, seen as key to economic competitiveness, lagged behind the OECD average.

However, a YouGov Guardian poll, commissioned for the conference, suggests even higher fees and increased funding for universities may attract little public support.

It found most parents with children in secondary school do not think university degrees are worth the money.

In a sample of just over 1,100 parents of 11 to 17 year olds, from all social backgrounds and across all regions of England and Wales, 60 per cent said the current fees were not good value for money.

There was another sobering message for higher education leaders. Asked if the benefits of a high paid job makes up for the large debts built up paying for university, no resounding faith in the graduate premium was expressed. Parents were evenly split: 36 per cent said yes; 38 per cent said no.

The Coalition`s immigration policy was also attacked. Nicola Dandridge described it as “unbelievably damaging” and quoted recent figures from the Higher Education Statistics Agency showing that the total number of international and non- EU students in UK universities fell for the first time by 1 per cent in 2012/13. This includes a fall of 4.5 per cent in the number of postgraduates in three years, and a dramatic decline in students from India: a fall of 49 per cent over two years.

A statement from BIS, read to the conference stressed “... there is no cap on the number of legitimate students who can study here. By working with other countries we will continue to attract international students and promote the UK's expertise in education."

But Liam Byrne described the government`s policy of  including overseas students in the net migration figures as, “ridiculous” , and pledged to change that if Labour wins next year`s election.