How would Labour’s proposals for England affect comparisons with the devolved administrations?

This post considers how the Labour Party’s proposals for student funding in England would affect the cross-UK comparisons included last year in The Fairest of Them All?

The comparisons below take into account that Scotland has not yet announced its student funding rates for 2015-16 (these are now very late: see post here).

In brief:

• England would improve an already decent performance relative to other UK nations  in the amount of total upfront support to those from lower income backgrounds; and
• its higher debt levels would continue, but unsurprisingly the gap with other parts of the UK would close.  There would be some surprisingly close figures between it and Scotland for certain students at low incomes. In particular, Scottish mature degree students would resemble their counterparts in England more closely than those in the other devolved nations.

In practice, particularly if a lower loan repayment threshold continues to apply in Scotland,  the changes in England could easily mean that for many of those starting from low income homes  the actual total value of repayments to the state expected for a degree in both countries would not be very far apart.   The advantages of the Scottish system for those at higher incomes would remain larger, however.

Spending Power

Labour has promised an additional £400 in grant, which it is assumed here would apply in full to all those currently on the maximum (at incomes up to £25,000) and not replace existing loan. It has been reported that it would apply up to the point where higher rate tax applies, suggesting this amount would taper to £0 at the around £42,000, as happens with the existing grant.

This suggests that the maximum total support available at low incomes from a combination of grant and loan would remain highest in Wales, but that England would now be close behind, and at some incomes the most generous, if students continued to benefit from its higher threshold for maximum grant. Northern Ireland would continue to provide the least support.

Unless it announces a significant increase in grant or loan for 2015-16, Scotland would return to the position in 2012-13, where its total support was less generous than elsewhere in the mainland UK, particularly taking into account the immediate fall in total support to £6,750 once incomes reach £17,000.  In the other nations, support is tapered down rather than falling in steps.

Students living away from home: total maximum support

Debt levels

Labour’s proposals for a lower fee and higher grant in England would bring student borrowing levels in England more closely into line with those elsewhere in the UK, although debt levels would  still be expected to remain highest in England.

The annual figures for those on maximum state support would look like this, based on grant and fee levels for 2015-16 (2014-15 for Scotland).  The figures in brackets shows a more like-for-like comparison, which removes effects due to differences in the total value of living cost support provided in each country and fixes spending power to Scotland’s “minimum income guarantee” of £7,500 in each case. NB these figures exclude a £1,500 loan write-off promised to Welsh students on commencing repayment.

The gap between Scotland and the rest will be narrower than implied above for most degree students, because of the additional year of study required for an honours degree in Scotland. Once differences due to variations in spending power are also stripped out of the figures, English degree students from households with incomes between £17,000 and round £27,000 will be facing very similar debt to most mature students from Scotland: both would be either side £30,000 in total. Indeed, Scottish mature degree students would resemble their counterparts in England more closely than those in the other devolved nations. For young degree students at lower incomes, the total gap would reduce to between £5,000 and £10,000.  The gap would remain larger at higher incomes.

These comparisons take into account that interest rates are higher on student lending in England and Wales: they do not allow for the higher repayment threshold and shorter write-off period for student loans south of the border, which are  to the advantage of lower earning graduates.

The full figures on which this post is based are given below.  This graph Final debt Scotland-EngLab at equal spending shows how expected borrowing would compare between Scotland and England under the Labour proposals for degree students, once the element of borrowing in England due to extra spending power is stripped out to produce a like-for-like comparison.

Detailed debt comparison figures

The figures below have been obtained by using grant rates from the relevant student finance calculators for 2015-16 and for 2014-15 from the Student Award Agency for Scotland website.  For nations other than Scotland  the amount of borrowing shown is what would be required for that student to obtain the same total spending power as one at an equivalent income in Scotland and to meet their maximum fee cost for study in their home nation.   The annual figure in each case is multiplied by 4 for Scotland and 3 for the other countries to produce a total expected over a typical degree.  In each case the figure is increased by an appropriate amount to reflect the interest charged on the loan during the course.  This has a significantly larger effect in Wales and England than Northern Ireland and Scotland. Mature students in Scotland are separately identified as they receive a lower grant.