Former May adviser Nick Timothy calls student fees 'a Ponzi scheme'

Nick Timothy resigned as Theresa May's chief of staff following the 2017 election

University tuition fees are an "unsustainable Ponzi scheme" and should be radically reformed, Theresa May's former chief of staff has said.

Writing in the Telegraph, Nick Timothy likened the fees system in England to the well-known investment scam.

Former Labour education minister Lord Adonis backed the call, saying the "current system of fees and loans is unlikely to survive for long".

But the government said abolishing fees would be "catastrophic" for funding.

Mr Timothy's intervention comes as students in England, Wales and Northern Ireland receive their A-level results. The number of university places allocated so far has dropped.

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University tuition fees rise to £9,250

Tony Blair's Labour government was the first to introduce fees for university students in 1998. Before that, the cost had been met by the student's home local authority, which also provided means-tested grants which students could top up with loans to help meet living costs.

The upper fees limit rose to £3,000 in 2004, before the Conservative-Liberal Democrat coalition government approved an increase in the ceiling to £9,000 in 2010. Fees in England now stand at £9,250 for those studying in 2017-18.

Students from Scotland can claim grants to cover fees charged by Scottish institutions, while grants reduce the level of fees in Wales and Northern Ireland, as a result of the policies of those nations' devolved governments.

'Ponzi scheme'

"Tuition fees were supposed to make university funding fairer for the taxpayer, but more than three quarters of graduates will never pay back their debts," Mr Timothy wrote in his Telegraph article.

"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."

Named after Italian fraudster Charles Ponzi, a Ponzi scheme promises high returns for investors but in fact generates those returns using money from new investors. Eventually, there is not enough money to go round and the scheme collapses. They are sometimes known as "pyramid schemes".

Mr Timothy, who resigned as a Number 10 adviser following the 2017 election result, backed "a single financial entitlement" which a student could spend on any kind of tertiary education, including technical courses which "were often cheaper".

He argued that successive governments had assumed, wrongly, that an increase in university graduates would boost economic growth, but instead technical qualifications were more likely to boost productivity.

Labour peer Lord Adonis, who was an adviser to Tony Blair at the time of the 2004 reforms, argued that it should be possible to return fees to a level of £3,000 or to achieve "outright abolition".

He wrote in the Times: "The Labour Party is committed to outright abolition; for the Tories, Damian Green, the de facto deputy prime minister, has called for a 'debate', while universities minister Jo Johnson floats a 'review'.

"It feels like Margaret Thatcher's infamous poll tax a few months before its abolition."

'The system works'

However, universities minister Jo Johnson defended the system, telling Prospect magazine: "The English system works."

He wrote: "Young people from the poorest areas are now 43% more likely to go to university than in 2009/10, and 52% more likely to attend a high tariff institution.

"Our universities now enjoy 25% more funding per student per degree than seven years ago. And the system is fair on taxpayers: a university degree boosts lifetime income by between £170,000 and £250,000.

"Students pay on average roughly 65% of the cost through fees, while the taxpayer shoulders around 35%, through teaching grants and loan subsidies, and a much higher share if we add £6bn of annual investment in research. This is an equitable split."

In its election manifesto, Labour promised to scrap university tuition fees in England but there was no mention of writing off unpaid student debt.