Former Theresa May aide attacks tuition fees 'Ponzi scheme'

The universities minister has defended tuition fees after one of Theresa May’s former chiefs of staff described them as an “ultimately pointless Ponzi scheme” that needed a radical overhaul.

Nick Timothy, who was May’s most influential policy adviser until he resigned after the general election, used his new column in the Daily Telegraph to launch a wholesale attack on the system, which will see students paying fees of up to £9,250 a year from this autumn.

His comments are surprising because Timothy was one of the main authors of the Conservative party manifesto which said nothing about reforming tuition fees. By contrast, Labour’s manifesto proposed getting rid of them.

In an interview on the Today programme the universities minister, Jo Johnson, said tuition fees were delivering on their core objective of enabling more people to go to university – although he also suggested that the government might be open to modest changes to reduce their burden on students.

Timothy argued in his column that, although successive governments had favoured getting more people to go to university, this was a mistake because having more graduates did not lead to more economic growth.

“There has been no improvement in Britain’s productivity as graduate numbers have increased,” he wrote.

“Many graduates work in non-graduate jobs, and many earn no more than if they had not gone to university at all. Certain degree subjects offer no return on investment, while studies show there are entire universities where average graduate earnings 10 years after study are less than those of non-graduates.”

Timothy said that, although tuition fees were supposed to make university funding more affordable for the taxpayer, even this goal was not being achieved.

“More than three-quarters of graduates will never pay back their debts,” he said. “The Office for Budget Responsibility calculates that student loans will add 11.1% of GDP to the national debt by the late 2030s.”

He added: “We have created an unsustainable and ultimately pointless Ponzi scheme, and young people know it. With average debts of £50,000, graduates in England are the most indebted in the developed world. Even if they do not pay off the full amount, graduates face dramatic increases in marginal tax rates as their earnings increase.”

Timothy said he could see why Labour’s promise to get rid of tuition fees was popular, but he said that this would be regressive, because higher-income families would benefit, and that it would lead to lower standards.

Instead it would be better if more young people studied for a technical qualification, he argued. He said young people should be entitled to a loan that they could use to fund either a university degree or a course at a technical college, which may well be better value, he argued.

Timothy acknowledged that the Conservative government proposed opening new “institutes of technology”. But, in a damning aside, he said: ‘The budgets available mean they will be small in number or resources will be spread so thin that the institutes will fail.”

Responding to Timothy’s argument, which echoed the case against tuition fees that has been made by the former Labour education minister Lord Adonis in recent weeks, Johnson claimed tuition fees were justified because graduates earned more than non-graduates.

“Universities continue to deliver extraordinary returns for people who go. On average, if you are a woman, you are likely to have higher lifetime earnings than women who don’t go, to the tune of about £250,000,” said Johnson, who also argued that the country as a whole benefited from having an educated workforce.

Johnson claimed that the tuition fee system was a fair means of sharing the cost of higher education between students and the taxpayer generally.

He hinted that the government might be open to modest changes. “We always keep the system under review to ensure it is fair and effective,” he said.

“There always can be a debate about the balance between the individual student and the share borne by the general taxpayer.”

But, generally, Johnson defended the status quo. “We think that at the moment the system is delivering on its core objectives. More people from disadvantaged backgrounds are getting a chance to go [to university] than ever before because finance is absolutely no barrier now.

“And we can see in the results today that entry and placed offers to people from disadvantaged backgrounds are at record levels.”