Press Release

Government reforms to HE finance currently estimated to save little but long-run impact on public finances is hugely uncertain

Date: 24 April 2014

The government’s 2012 reforms to higher education (HE) funding in England now look like they will do little to reduce the total taxpayer contribution per student. However, this depends fundamentally on what happens to graduate earnings over the coming decades.

In fact, the main impact of the reforms on the public finances has been an increase in uncertainty. Teaching grants (a certain cost to the government in the short run) were replaced by substantially larger tuition fees and an accompanying increase in student loans (the public cost of which is highly uncertain) (see note 2). Since the long-run public cost of student loans depends on the earnings and repayment behaviour of graduates for many years in the future, the government will not know for decades whether the 2012 reforms have saved taxpayers any money. This is the main finding of new IFS research published today and funded by Universities UK, with additional support from the Nuffield Foundation and the ESRC Centre for the Microeconomic Analysis of Public Policy at IFS.