Sir Christopher Snowden, the president of Universities UK, is sceptical when asked about the recent call for significantly higher undergraduate tuition fees made by Andrew Hamilton, vice-chancellor of the University of Oxford.

“I would expect, perhaps, a vice-chancellor of Oxford or Cambridge to make those points,” Sir Christopher said.

The vice-chancellor of the University of Surrey added: “I don’t think £16,000 is a likely scenario in the near future.”

But although Sir Christopher – who as UUK president represents its member institutions in talks with the government – is not an advocate of such a huge jump, he does have a close interest in major reforms to fees and funding.

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For him, there is a clear case for raising the £9,000 cap in line with inflation. And he has two options for further reform: either change the student loans system to inject more funding, after examining loan systems in nations such as the US, South Korea and Hungary; or reintroduce significant direct public funding for capital spending in universities.

“The whole issue is that fees can’t remain frozen for ever,” said Sir Christopher, who began his two-year term as UUK president in August. “In real terms by 2016, if you look at inflation rates, they will be worth about £8,250…The reality is, the money isn’t worth what it was.”

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He said it was true that the present £9,000 cap is “simply not sustainable” for universities beyond Oxford and Cambridge. Surrey has “several subjects where we are losing substantial sums of money teaching UK and EU students”, he explained. These include science, technology and engineering courses.

“On aggregate, the £9,000 was perhaps a reasonable starting point, but it really needs to have a sensible indexing linked to it,” he continued.

“The question is, is there the scope to look at some different way of funding the fee? Because the RAB charge [the proportion of student loans that will never be repaid] will obviously go up if you increase the £9,000.”

Figures from the Office for Budget Responsibility show that the impact of student loans on public debt will peak at 6.7 per cent of gross domestic product (£103 billion in today’s terms) in the early 2030s. “That’s a sobering thought. And that’s on £9,000, of course,” Sir Christopher said.

So although increasing fees in line with inflation “offers stability”, there would still have to be “other models looked at” in terms of “how you fund students and the student loan system”, he argued.

“As a starting point it’s worth looking at what other countries do,” he suggested, noting that the US federal government’s Stafford loans include “a means of subsidising the interest for students – some but not all”.

“Hungary has a fees system and South Korea has a fees system. They are both different to the US’. It would be interesting to compare what we now know happens with ours with what other countries do,” Sir Christopher said.

“It makes complete sense that before we change anything, we need to understand the relative merits of those [loan systems].”

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Of the US, Hungary and South Korea, he said: “All of them have different interest rate models. Which is important because that affects both the growth of the debt and the way that students manage it. It does impact on what sort of fee level you might start with.”

UUK is shortly to publish an analysis of future funding options, including studies of other nations’ loans systems.

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Capital funding

So apart from a major overhaul of student loans, “the other option is to look at whether there’s additional funding for capital, rather than relying on surpluses being generated off fees”, Sir Christopher said. This would be direct public funding for capital provided via the Higher Education Funding Council for England.

At present, after major cuts to capital funding under the coalition government, universities are funding their building projects either through their own surpluses or through borrowing. They must also cover the costs of building maintenance.

The sector is being expected to upgrade facilities itself to compete with big-spending institutions in countries such as the US and China, and to provide “the sort of services and quality students expect paying £9,000 fees”, Sir Christopher argued.

“I suspect most universities are really concerned about maintenance,” he said. He looked back to the 1980s when “university buildings were in a terrible state, literally had windows falling out”. The increased investment since then has only been enough to get universities back to a “reasonable state”.

But is it realistic to think that, after the 2015 election, any government is going to want to increase direct public funding for universities to provide such a capital injection?

“In a post-2017-18 scenario, where the intensive effort to get national debt under control [has eased], there is going to be an opportunity to reappraise where the priorities are,” Sir Christopher insisted.

So would he rule out UUK pushing for significantly higher fees, beyond rises to match inflation, under his presidency? “We have to be conscious of the fact – politics aside – that students will have to pay this. While there’s been some acceptance of the current fee model…you can’t just go on increasing fees without seeing increasing concern from students,” he said.

On further alternatives to the current public loan system, he said that despite the lack of firm proposals, it was not “inconceivable” that the government might still approach banks about ways to provide funding.

“That’s quite complex. [In] the early phases of [discussions], the banks all wanted to engage with the universities and wanted rather complex guarantees and covenants.”

But for Sir Christopher, bank schemes “could only ever be part of the funding model”.

He pointed to the US as an example. “If they haven’t managed to get to a situation that completely removes the need for state funding, I doubt that we will. I’m quite confident that in many years to come, if we stick with the current model, there will still be a student loans system administered by the government. But it may be a different one.”

Sir Christopher also accepted that after the Liberal Democrats were stung by their broken promise on tuition fees, the major political parties are unlikely to offer any firm commitment on fees in their manifestos. “They are likely to say absolutely nothing. It’s a very emotive issue. It’s not a vote winner.”

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But he still believed there was plenty up for grabs before the 2015 election. “The key thing is that as a sector we need to have a good engagement with all three parties to discuss not just fees and loans but the entire funding model for universities.”

john.morgan@tsleducation.com