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English universities will be able to take as many students as they want from 2015, after the chancellor said the limit on places would be abolished – leaving critics to question how the expansion would be funded in the long-term, with potentially damaging implications for the arts and humanities.
Describing the restriction on places as a "cap on aspiration", George Osborne said the 60,000 students who achieved the necessary grades each year but missed out on a degree place would now be able to go to university. The Treasury calculates that the system will need £700m a year – and funds will be raised by selling off the student loan book.
However, critics questioned how sustainable this form of funding would be. The Russell Group, representing the UK's top 24 universities, said "quality higher education should be prioritised over quantity, especially in times of limited funding", adding that "only time will tell if [the loan book] sale will fully meet the costs of this expansion".
These sentiments have previously been used by the business secretary, Vince Cable, nominally in charge of university policy, who has argued that the marginal benefits of sending more people to higher education will be less than the average benefits. Last month, the education spokesman, David Willetts, publicly disagreed with his boss, saying "everyone able to go to university should have a place".
Cable's department said the cabinet minister had "fully accepted" the announcement, pointing out in 2014 the number of university places would increase by 30,000, with £50m a year to fund science and engineering students – "to ensure that institutions provide places in the subjects most needed in the economy".
Some universities have warned that the plans raised "fundamental questions" over the nature of public sector higher education. Nick Petford, vice-chancellor of the University of Northampton, said there were concerns over arts and humanities funding. "It does make sense to get more goodies for technology subjects that are driving economic growth. But what about creative technology, arts, fashion and design, which are also strong drivers of economic growth?"
Petford also noted that private universities will also be able to access student loans for approved courses. "We are beginning to wonder where this is all taking universities. What does it mean if we are demonstrably funded 100% by private monies? Why should we adhere to public sector regulations? What's to stop say, Google, setting up a private university and competing for students?"
While Osborne claimed "access to higher education is a basic tenet of economic success in the global race", his detractors countered that the system would collapse under the weight of its own ambition. Andrew McGettigan, analyst and author of The Great University Gamble, said the government's analysis that the student loan book was worth £12bn was "very optimistic".
"Because students don't earn enough to pay loans back, the actual value of the asset is much less than predicted. In fact, the best performing student loans date from the early 2000s [and] are only worth two-thirds of face value. So you need to sell about £20bn of student loans to get £12bn. In recent years, the loan book raises much less money."
McGettigan said that what Cable's department had done was "cover up a black hole in its finances". "They were heading for a shortfall of £570m next year. This announcement is a gamble designed to avert the budget crisis in higher education funding that the department was facing."
However, officials at the Department for Business, Innovation and Skills deny this, arguing that places could be funded by selling each year's loan book. "New student loans get taken out all the time, so there are always in theory newer loans the government could sell on," said a source.
The government's decision to abolish the student cap is the latest in a set of reforms "freeing universities". Last year, universities were able to take as many students as they liked who had the equivalent of at least two A grades and a B at A-level. This year, that has been lowered to encompass those with the equivalent of at least one A grade and two Bs. The reforms in effect resulted in universities competing to attract the best candidates.
It is thought around 115,000 fell into this category. Students with grades below the ABB level were still subject to a cap on numbers, which was set by the government and saw each university allocated a set number of places.The department noted that the Russell Group, which had been critical of today's announcement, were "beneficiaries" of the new regime. "We freed all applicants getting ABB or better in the A-levels from number controls in the autumn of this year – a freedom they have made great use of!"
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