Prime Minister addresses CentreForum on the
future of higher education funding
Full text of speech delivered by Rt Hon David Cameron MP
Today I want to talk about the future of universities in this country. We’ve seen the protests. We’ve seen the
marches. We’ve seen how passionate many of our students are about this issue. Well let me tell you
this. I am just as passionate.
Just as passionate that young people should have the chance to go to university, whatever their
background or family income. Just as passionate that they should be able to leave university without
an unfair burden of debt. Just as passionate that our universities should be among the best in the
The debate going on today is about the best way of achieving these things.
But if I’m honest, the passion in this debate is drowning out some of the truth.
So today I want to explain the real truth about what’s going on, why we need change and why the
change we are proposing is the best option we’ve got. Let’s start with why we need change. Put
simply, we just can’t stick with the status quo.
The university system we’ve got today is unsustainable, uncompetitive and unfair.
It’s unsustainable because in the last fifty years we’ve seen a massive increase in the number of
young people going to university. And yet the current model of higher education funding is simply
not providing enough money to support this growing number of students. In fact, the Browne
Review shows the public funding per student is now lower in real terms than it was 20 years
ago. We have to address this. We simply can not allow our universities to continue to fall behind
their international rivals.
Just look at what’s happening in India and China. In the last three years, India has built eight new
Institutes of Technology, twelve universities and seven new Institutes of Management. And in the
next fifteen years, the number of graduates from Chinese universities is expected to grow five-
fold. This is the competition we face. So what do we do? Do we radically reduce the number of
student places and deny many of young people the chance to go to university? No. We want more
people to have the chance to go to university; not less. So we have to find a new way of funding
higher education in this country. The question is how?
It would be nice if we could do it just by increasing government spending. But we can’t. Even at a
time of economic growth, government spending alone could never be a sustainable way of funding
the growth in student numbers. And right now, it’s not just unsustainable in the long-term, but
frankly unaffordable in the short-term too. I’m not going to patronise you by pretending there are
pots of money we can delve into. There aren’t. We’re in deep debt. And if you want to know how
serious that can be, just look at what’s been happening to some of our European neighbours. Not
least of course in Ireland. At a time when markets are gripped by fears about government finances
across Europe. It’s absolutely vital that we keep Britain out of the danger zone by sticking to our
plans for getting the public finances under control.
So if we can’t increase spending should we hike up taxes? That would mean asking people on low
incomes, many of whom are struggling at this time, to subsidise higher education more than they do
already. I say that’s just not acceptable. We shouldn’t ask those on low incomes to pay taxes to prop
up an unaffordable university funding system that they themselves do not benefit from directly. In
fact, over the course of a life-time, a graduate earns on average over £100,000 more than someone
who doesn’t go to university. Isn’t it right that those graduates’ contributions to the system should
reflect the advantages they have enjoyed? We have no choice: we need change, we need to put the
funding of our universities on a sustainable footing – and it’s right that when it comes to doing this,
successful graduates pay their share.
There’s another reason we need change in our university system. As well as being unsustainable it’s
uncompetitive. Yes we have some of the world’s best universities. But I believe they can be even
better. Today the status quo is preventing that. At the moment, most universities get most of their
money from government and almost all of them charge the maximum fee. That system simply
doesn’t introduce any genuine competition or choice. There is no real incentive for universities to
improve and give students what they want, and that is damaging to the quality of higher
education. So again, we need change.
But here’s the biggest reason we can’t just stick with how things are. Universities should be a key
part of an education system that is an engine for social mobility. They should be a key vehicle
through which people from the poorest backgrounds lift themselves up. But today, that engine, that
vehicle – it’s stalled. The system is unfair. Just listen to this. Oxford and Cambridge take more
students each year from just two schools – Eton and Westminster – than from among the 80,000
pupils who are eligible for free school meals. In the past few years the number of children from
poorer families who make it to top universities has actually gone down. And as we saw yesterday,
21 Oxbridge colleges took no black students last year. If we’re serious about social mobility these
things have got to change.
Now we don’t change them simply by focusing on universities. Indeed evidence shows that’s it’s
investment in early years that is the biggest driver of social mobility. By the time children get to
university it’s usually way too late.
We have made our choice. A choice in favour of social mobility, in favour of a fairer society. Of a
country where you can escape – truly escape – the circumstances of your birth. That’s why we are
protecting schools spending and enhancing it for the least well-off. Spending per pupil maintained
even in a difficult economic environment. Free nursery education for disadvantaged two-year-
olds. And a pupil premium, worth hundreds of pounds per disadvantaged pupil, all the way through
from pre-school to University. These are the choices we’re making.
The alternative is maintaining the status quo. A status quo in which a person who is well-off is
seven times more likely to go to university than someone from a poor background. This is the
appalling situation we’re in – and it’s why everyone who cares about fairness shouldn’t be fighting
change. They should be fighting for change. So I think it’s clear that long-term, responsible reform
of higher education means: Making it more sustainable, by asking successful graduates who go on
to earn a good salary to make a bigger contribution. Making it more competitive and more
responsive – with students calling the shots, and universities bending over backwards for them. But
most importantly, making it fairer – opening the doors of universities to everyone, regardless of
where they’re from.
So how do we achieve this?
Now some people suggest that a graduate tax fits the bill. Under this system, once students have
graduated and got a job, they would pay a supplement to their income tax – potentially three or four
pence for every pound they earn. We have taken a long hard look at this option. But it is not the
First off, it’s simply not affordable, particularly in the short to medium term. There’s a crisis in the
public finances now. But Lord Browne’s review shows that a pure graduate tax will actually take
until 2041 to produce enough money to fully fund higher education in our country. In the meantime,
it will be government that makes up the shortfall – adding billions to public spending and
Second – it is not responsive to students. All funding would be centralised. The money would come
into the Treasury – and it would be ministers and civil servants who decide where it goes. Under
this system, the relationship between the student and our universities would be even weaker than it
is today. That gives the student no real say over how things should be done. That’s bad for students.
And it’s bad for driving up standards.
There’s another way the graduate tax is uncompetitive and frankly unworkable. If you don’t live in
this country, the tax can’t be collected. That will encourage our graduates to find work overseas – a
brain drain from our shores. Just imagine that. Creating a system where we put in the money, time
and effort to educate our best and brightest and it’s other countries and economies that
benefit. That’s completely crazy. It’s not surprising that Universities UK can’t find a single country
that’s introduced a graduate tax.
Third, it’s also not actually as fair as you might think – or as fair as things could be. It’s true that
those who go on to get the highest paid jobs will end up paying back more. But under a graduate
tax, the very lowest earners – those on just £6,475 a year – will have to pay back too. I don’t think
that’s fair. It’s s a lower threshold than already exists for paying back student contributions – let
alone the higher threshold we will introduce. What’s more, because taxes cannot be collected from
people living in other countries, we could get a situation where foreign students end up paying less
than some UK graduates. That’s biased against people living here – and again, I don’t think that’s
Here’s another reason why it’s not fair. An open-ended graduate tax would mean you literally keep
on paying the government until you stop working. And this means some people will find
themselves paying many, many times more than the cost of their course. Just think about what that
means. It means the ambitious people who put themselves through university, who work hard and
do well off the back of their own efforts will be penalised for the rest of their life. Is that fair? No,
it’s not. Again, these are the people who should pay the most tax in the UK, but under this system
they could leave and pay none at all! In fact, it sends out the very worst kind of message, at a time
when we desperately need to drive enterprise and growth in our economy. Anti-aspiration. Anti-
success. Anti-people who just want to get on and do the best in their lives.
So it’s clear to me that a graduate tax is not the way forward. The last government looked at it and
found that. We have looked at it and found that. What’s not so clear is what the Opposition
think. The Leader of the Opposition thinks a graduate tax is right. The Shadow Chancellor thinks
it’s wrong. And the Shadow Business Secretary – well, he’s kind of for it but is unsure about how it
could work. By all means, they have every right to oppose what the government is doing. But they
need to be clear about what they will do instead. At the moment, they are facing in every direction
and that’s not responsible politics at all. It’s the worst sort of opportunism available. And as
someone in a political party that spent thirteen years in the wilderness, let me tell them, the public
aren’t fools and opportunism will get them nowhere.
Now while it’s clear to me that a graduate tax is wrong, it’s not surprising that some instinctive
supporters of a graduate tax, support our plan. They want a graduate tax because the poor should
pay less, the rich should pay more and the system should encourage people to aspire to go to
university. Our plan does all these things. Let me explain – clearly – what we are proposing.
We are taking forward the main recommendations made in the Browne Review – let’s remember, a
Review that was set up by the last Government, had cross-party support from Conservative and
Labour, and that looked at all the evidence. In that Review, Lord Browne advocated a Graduate
Contribution Scheme. So we will lift the current £3,290 a year cap on tuition fees to a basic
threshold of £6,000. In exceptional circumstances, some universities will be allowed to charge
£9,000. That’s the absolute maximum. These are the headline figures, and they are the figures that I
know people are concerned about. But – and this is a major but – neither students nor their parents
will pay a single penny upfront. This is really important because I know a lot of people are confused
about this. Not a single penny will leave their bank account until after they have left university and
got a job where they earn more than £21,000 a year. Then – and only then – will they start repaying,
at a rate of nine percent of their income above £21,000.
And here are some other important things people need to know. If at any time they are unemployed,
take time out to bring up children, or take a lower-paid job so their income falls below £21,000,
they will stop repaying. And after thirty years, all debts will be written off. With our new system,
the poorest quarter of graduates will pay back less overall than they do currently. And everyone –
everyone will pay less per month than they do now. Let me say that again slowly. Because
graduates will no longer make repayments on earnings between £15,000 and £21,000, and because
the pay back period is longer all graduates will pay less per month. That’s how our proposals work.
And this is why I believe they are right. One – they are sustainable for our country. This is the most
sustainable funding option available, allowing universities to get the funding they need and offering
much needed savings for the taxpayer. Today 60 per cent of university funding comes from the
public spending, 40 per cent from private. With our plans it will be possible to reverse this so 60 per
cent comes from private sources and only 40 per cent from public. And those who say we are
removing state subsidy or making students bear the full costs of higher education are wrong. In total
the amount we are paying through loans, grants and scholarships, in meeting both tuition costs and
living costs will rise over the spending review period from £7 billion to nearly £12 billion.
Two, our proposals will also make our university system much more competitive. Instead of
government deciding where the money goes, students will. The spending power is directly in their
hands. That gives students the greatest possible influence over the service they receive – and puts
real pressure on universities to drive up standards.
Three – and most importantly – our proposals are the fairest option on the table, fairer than the
current system and fairer than the graduate tax too. Take, for example, graduate care workers
earning £23,000. Under the current system they would begin making repayments of £44 a
month. Under a graduate tax of 3 per cent they would pay £38 a month on the tuition fees
alone. With our proposals they will pay only £15 a month.
Now, some people will say: these figures don’t matter, people, especially the poorest, will still be
put off by the fees. I think, frankly, that does a massive disservice to our students. They can tell the
difference between upfront fees they pay now or contributions that they make when they’re earning
money later. Indeed, the evidence backs that up. Lord Browne has shown that since the original
introduction of tuition fees, applications from poorer backgrounds have not fallen. The injustice in
the system is not the fees – it’s the failure elsewhere – particularly earlier on in the
system. Additionally, students from the poorest backgrounds aren’t given sufficient reason to
believe they can get to the best universities. Research by the Sutton Trust found that bright pupils
from private schools made more than twice as many applications to the best universities as those
from comprehensives. Changing this is something we are not leaving to chance.
We’ve thought from every angle about how we can raise people’s aspirations. So we are abolishing
the need for part-time students to pay upfront for tuition, as long as they are studying for at least a
quarter of their time. For the first time, they are going to be treated like everyone else. This is a
massive boost for fairness, because part-time students tend to be older, and less well-off. We are
also setting up a £150 million national scholarships fund open to anyone from a poor background
who is bright, ambitious and wants to go to university. This fund could mean any student eligible
for free school meals who is accepted for a place at university would have one year’s fees paid by
the government. And at the same time as increasing the amount universities can charge students
we’re asking more of those institutions too. We’re saying if they want to charge more than £6,000,
they have to show us real progress in widening access – not just through summer schools, outreach
programmes or offering more flexible part-time courses. But also with their own admissions and
we hope by funding a second free year for any student eligible for free school meals.
If they don’t show this kind of progress, they simply won’t be allowed to charge above £6,000. So
this is the real truth about our plans. They will put universities on a sound financial footing and
make future expansion affordable. They will create a dynamic university sector that can compete
with the very best in the world. And because the rich will pay more and the poor will pay less, they
will put fairness back at the heart of our university system. Sustainable, competitive and fair.
The universities that you want. The universities that I want. And the chance for everyone to go to
them, whatever their background or income.