Higher education funding reforms in England: the distributional effects and the shifting balance of costs



6. The shifting balance of funding

7.

8. Whilst the analyses of the previous sections have highlighted the
distributional effects of the new system for students and graduates, in this
section we take each of these groups as a whole, as well as taxpayers and
universities, and consider how they are affected financially by the reforms. In so
doing, we show how the reforms shift the balance of funding for HE between the
public and private sector.


9.

We illustrate who pays for the system of HE funding in England by means of a
circular flow of payments. Table sets out our calculations of the net balance of
payments (-ve on the table) and receipts (+ve on the table) between different
participants within the HE system - universities, students, graduates and taxpayers -
under the old and new systems of HE funding in England. Accounting for both where
payments come from and where they go to results in a zero-sum. Comparing such
zero-sums across different systems gives us a clear indication of the net winners and
losers (or less emotively, payers and receivers) from the new reforms.
27 Note, these
figures are mainly based on official government public expenditure projections from
2005.

Looking at the first column of the table, we see that under the old system, universities
received about £5.5bn in total funding for teaching, coming mainly from taxpayers
(via direct payments to universities in the form of the recurrent teaching grant made to
HEFCE each year, and fee exemptions), and also students (via up-front fees).
Graduates also gained around £0.6bn, from maintenance loan subsidies (paid for by
taxpayers). The second column shows that under the new system university coffers
are significantly swelled, to around £6.7bn.
28 This increase is paid for by graduates,

27 Of course, in reality the distinction between these different groups is more blurry than our analysis
suggests: for example, students go on to become graduates, so transfers between these two groups are
really transfers across time, rather than between people. Most graduates, and some students, are
taxpayers. Money paid to universities will in general benefit the students who attend them and the
graduates they go on to become.

28 This amount has not been reduced by potential payments of new bursaries to
students with parental income between £17.5k and £25k. We currently assume that
1/3 of students receive bursaries.

28



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