David Willetts

Policy background

In July 2007, John Denham announced an expansion of student maintenance grants for the 2008/09 academic year onwards.

• In 2007/08, students received a full maintenance grant (£2,765) if their household income was below £17,910 and a partial grant if their household income was £38,330 or less.
• In 2008/09, students are entitled to a full maintenance grant (£2,835) if their household income is below £25,000 and a partial grant if their income is £60,005 or less.

In other words, both the lower threshold and the upper threshold are much higher in 2008/09 than they were in 2007/08.

When he announced the changes, John Denham told the House of Commons that the new, more generous grant regime for 2008/09 would provide:

• full grants to 50,000 more students
• partial grants to 100,000 more students

He also said one-third of students would be entitled to a full grant and one-third would be entitled to a partial grant - two-thirds in total. Only the one-third of students from households on more than £60,005 a year would not be entitled to a grant. (Hansard, 7 July 2007)

Ministers’ mis-calculation

Now ministers are saying that 40% of students who started university this autumn have turned out to be eligible for the full grant and more than two-thirds for any form of grant. They claim this uptake has taken them by surprise and is unaffordable.

As a result, they have announced a reduction in the grants system: from 2009/10 new students from households with incomes of more than £50,020 will no longer receive a grant. So students from families on between £50,020 and £60,005 will not be entitled to grants any more (though existing claimants receive protection). In addition, grants will be withdrawn more quickly from students that are entitled to a partial grant.

These changes are expected to save £100 million a year once they are fully in place. Ministers have also announced they will save money through a new - lower - cap on the number of university places in 2009/10, and have promised overall departmental savings of £1.5 billion per annum. (Hansard, 29th October 2008)

Number of losers

When explaining the new system for 2009/10 to the Innovation, Universities, Science and Skills Select Committee on 29th October, John Denham said:

‘the system remains substantially more generous than the one that operated just two years ago in 2007/08 … so compared to just two years ago it is a much more substantial package … there is some imprecision [on the number of losers], but we could be upwards of 10 per cent of the intake of that year … that would take us to around 35 to 40,000′.

The media have picked up on this 35-40,000 figure, but it seems to be a big underestimate for the number of people who will be worse off under the new system compared to the current system.

In fact:

• there are likely to be 35,000 fewer students who are entitled to any form of grant in 2009/10, as the Government are committed to bringing the total number of people eligible down to two-thirds of the total number of students
• many of those in receipt of a partial grant (probably all those in households with an income of between c.£35,000 and £50,020) will receive a lower partial grant - this is likely to be around a further 45,000 people or half of those in receipt of a partial grant in 2009/10
• there will be no losers among those who would be entitled to the full maintenance grant were the current system to continue

In other words, around 80,000 people each year are likely to lose out, double the figure provided by John Denham.

Once the new system is fully in place and covering all three years’ worth of undergraduates, the number of losers will total 240,000.

Why has Denham got it wrong

John Denham’s figure for the number of losers appears to include only people whose families are on incomes of more than £57,708. The Department for Innovation, Universities and Skills claims: ‘all students with household incomes of £18,360 - £57,020 will be eligible for a more generous package of grant and loan support than in 2007/08′.

His 35-40,000 figure seems to be based on this assessment, but it is an artificially low figure because:

• it assumes that grants and loans are interchangeable, but they are different because the latter will leave students with much larger debts at graduation
• it compares the 2007/08 system with the 2009/10 system - it would make much more sense to compare the current system to the 2009/10 system (after all it was John Denham himself who designed the current system, whereas the 2007/8 system dates back to legislation from 2004)
• it includes only the loss among one year’s intake of students, and not the number of losers once the new system is fully implemented - when the system was made more generous last year, the Government’s figures for the number of winners assumed full implementation and did not only cover one year. Moreover, the savings announced as part of the new policy assume full implementation.