Augar recommends that efforts be made to reduce the level of student debt © FT Montage/Alamy

The newly published independent review of post-18 education in England seeks to improve learning and training for adults of all abilities, and to rebalance resources between higher and further education while minimising additional costs.

The report by businessman Philip Augar, commissioned by Theresa May, the prime minister, is the first attempt in more than half a century to consider all post-school education funding. But it risks being ignored by her successor as leader of the Conservative party and by the opposition Labour party, which has called for tuition fees to be scrapped.

Mr Augar’s analysis suggests the extra annual costs of his inquiry’s recommendations would be £300m-600m to the government. The implications for students, universities and further education colleges would be mixed.

Will students be better or worse off under the reforms?

Students funding their higher education through loans, to be renamed “student contributions”, would incur less total debt during their studies, both because tuition fees would drop from £9,250 to £7,500 a year and interest payments added in during their studies would be charged at the rate of inflation rather than inflation plus 3 per cent, as they currently are.

The existing loan system also permits borrowing for living costs. Those from less privileged backgrounds would benefit up to £3,000 a year towards these costs as a grant rather than a loan. The review estimated that this would reduce the typical total debts for study and maintenance on completing three years of study from £60,000 to £45,000.

But, on graduating, all students would be required to start paying back their loans from lower income levels: £23,000 rather than £25,000 currently. They would also be required to continue servicing the debt for a longer period, for 40 years rather than the current 30, before it is written off by the state.

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Mr Augar estimates that under his reforms, monthly loan repayments would rise from zero to £15 a month for those earning £25,000 a year, to £578 from £563 currently for those earning £100,000.

The wealthiest would be better off, because they would be able to repay in full earlier than the new 40-year duration. They would also benefit from a lifetime cap of total repayments of a maximum of 1.2 times the inflation-adjusted value of the loan.

Under the models produced by the review, the changes would be regressive, with the richest fifth of borrowers repaying less, just over £50,000 throughout their lives, compared with up to £75,000 at present. Those on lower and middle earnings would pay more throughout their lifetimes.

Students currently pursuing further education, and those who do not at present undertake any higher-level qualifications, will have more opportunities to seek loans on comparable terms, which could improve their long-term earnings prospects.

Will universities receive less income?

If the panel’s recommendations are implemented in full, the higher education sector should receive the same total amount of funding overall, but it will be distributed differently.

Money that institutions receive for tuition, either directly from students who pay themselves or via loans, will fall from £9,1250 to £7,500 a year. In theory, the government would top up the £2bn difference in direct teaching grants.

But it would have discretion to allocate the money towards institutions and courses which it believes are costlier (such as science), strategically more important for economic prosperity or of higher quality, while cutting out the “small but significant minority”, according to Mr Augar, which offer poor value for money.

Universities and former education ministers, including David Willetts and Jo Johnson, are nervous that the government will not make good on topping up the funding gap at a time of fiscal pressure and hostility towards higher education. There are also concerns about what mechanism would be used to assess performance.

Adam Tickell, vice-chancellor of the University of Sussex, said: “Without a cast-iron guarantee that the Treasury would replace the funding shortfall, the proposal would damage students’ education.”

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Any squeeze in revenues would come as a shock after 15 years of steady income growth for the sector, which currently receives around £18bn a year. That would add to the uncertainty from rising infrastructure costs, falling domestic student numbers and the impact of Brexit, which puts pressure on foreign applications and EU research funding.

Will the further education sector be satisfied?

The Association of Colleges, representing colleges across the country, welcomed the review’s call both for a capital investment programme of £1bn over several years and efforts to rebalance access to student funding to encourage more part-time, adult and vocational learning.

But it follows two decades of neglect and under-investment, which has resulted in a sharp drop in funding, demoralisation and departures among teachers in the sector and dozens of mergers of institutions.

That has led to a sharp drop in the number of students, which to reverse will require a change in attitudes to vocational training by both employees and employers — many of whom have preferred to hire immigrants rather than invest in training.

David Hughes, the association’s chief executive, said that the government could have done much more to invest in the sector, and a number of continued obstacles remained. The money allocated per pupil aged 16-18 in colleges has fallen significantly below the sum offered to their counterparts who remain in schools, despite the high costs required given smaller class sizes, equipment and the need for teachers with industry experience.

He said teachers in further education were locked into lower pay scales and less attractive pension schemes than university lecturers.

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