Tertiary Education Student Finance - Ministerial Response Chief Minister - 06 June 2017

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11. Jersey students and their families are, in many cases, unable to meet the costs of attending university.

The  Minister  is  aware  of  this  and  has  made  public statements  to  express  his  concern  about  the  financial pressure on families. He has been contacted by parents directly and via the 2 workshops previously organised by the  Education  Department  at  the  suggestion  of  the Minister,  where  full,  frank  and  open  discussions  took place. The scale of the problem has also been highlighted in  meetings  and  correspondence  with  the  Student Loan Support Group. The problem is already recognised and the report reinforces what was already known.

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34. The Minister for Education and the Minister for Treasury and Resources have placed the responsibility for resolving the problems of student finance at each other's door.

The Council of Ministers have recognised that a skilled, graduate-level  workforce  is  vital  for  many  Jersey businesses  and  the  economy.  In  public  statements,  the Ministers have pointed out that they do not have the ability to  solve  the  problem  individually.  They  have complementary roles and responsibilities; It is within the Minister  for  Education's  remit  to  improve  on-Island provision of degrees and links with universities outside the UK, particularly in European countries where the fees are lower.  He  can  also  adjust  the  existing  student  finance system, but does not have the remit or expertise to create a new student loan scheme of the scale suggested. These skills sit with the Minister for Treasury and Resources and his  team,  who  are  best  placed  to  explore  funding mechanisms  and  their  implications.  The  Ministers recognise each other's responsibilities and challenges, and this  is  why  the  Ministerial sub-group  was  created  as a

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formal mechanism for various Ministers to work together on all aspects of the issue. All parties are committed to working together.

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35. The Minister for Education and the Minister for Treasury and Resources have placed the responsibility for resolving the problems of student finance at each other's door.

See above.

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40. The Island needs a pool of graduates for business to draw from.

This is agreed. The precise nature of any skills gap in the Island is currently being assessed as part of the process of creating a new Skills Strategy for Jersey.

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43. Jersey spends less, as a percentage of GDP, than listed OECD countries on Tertiary Education.

This is only one measure and looking at this alone could create  a  misleading  impression. Jersey  has  a  very  high GDP per head, so it would be more informative to compare each country's higher education spend as a proportion of government expenditure or look at spending per pupil.

In 2017 the Education Department will spend £9 million on  higher  education  funding.  Decisions  on  States expenditure  are  based  on   Island-wide  priorities,  social circumstances  and  available  resources.  Therefore, comparisons with percentages spent in other jurisdictions also need to take account of their particular circumstances.

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56. The provision within the Jersey Tax system of Higher Child Allowance is an indirect and poorly targeted method of assistance.

The Treasury recognises the limitations of using the tax system in order to support parents/students with the costs of higher education. In particular, it is recognised that the availability of the higher child allowance only helps those who  actually  pay  income  tax  and  that,  because  it  is available to all taxpayers with children in higher education, it  provides  assistance  to  those  taxpayers  with  the  very highest income who do not require any form of financial assistance from the States in order to send their children on to higher education.

In  the  2016  Budget,  the  Minister  for  Treasury  and Resources  considered  phasing  out  the  higher  child allowance from the standard rate calculation (at the same time as phasing out the other child-related allowances from the  standard  rate  calculation),  reducing  the  assistance provided within the tax system for those higher income taxpayers  who  have  their  income  tax  calculated  by reference  to  the  standard  rate  calculation.  The  Minister concluded  that  the  availability  of  the  higher  child allowance  in  the  standard  rate  calculation  should  be maintained until a broader solution for assisting with the

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costs of higher education was found, whereupon it would be phased out over an appropriate period.

Despite  its  limitations,  the  Treasury  highlights  that  the availability  of  the  higher  child  allowance  does  provide significant financial assistance to those who do pay income tax, and were the allowance to be restricted such that it were only available in the marginal rate calculation, those with the highest incomes would not be able to benefit from its  availability.  The  availability  of  the  higher  child allowance in the marginal rate calculation means that the majority of parents of children studying a 3-year degree course benefit from a cumulative reduction of their income tax of £9,360 over the relevant period.

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75. The maximum grant provided by the Minister for Education to Jersey students is insufficient to cover either the university fees or the maintenance costs.

This is factually accurate. Every Jersey student is expected to pay the first £1,500 a year of tuition fees so the grant does not cover the full cost for any student. When UK universities began to increase tuition fees, a Jersey student loan  of  £1,500  a  year  was  introduced  to  help  students afford  the  cost.  When  this  loan  is  combined  with  the maximum  grant,  the  tuition  fees  are  covered.  The maximum  maintenance  grant  to  contribute  to  living expenses is currently £6,000 a year, but this is below the estimated  total  for  living  expenses  that  a  student  can expect in a year.

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82. Many of the Jersey families who spoke to Scrutiny find it difficult to work out their student grant entitlement.

This is regretted. Parents and students are able to contact the Student Finance team, who will advise on potential grant entitlement. The calculation can be difficult because each family's circumstances are different, and this means the formula is complex because, in order to be fair, it has to take account of a number of financial factors, including household income, property ownership, business interests and siblings.

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92. Rather than being the optimal place to study, for issues relating to finance, University College Jersey has the reputation of being the default option'.

Highlands College is the largest single higher education destination for Jersey's degree students. It is a matter of opinion rather than fact that it is the default option'. There are  currently  109 students  taking  degrees  at  UCJ, compared to 44 at the most popular UK university. There is no data available on why students choose to study for a degree  in  Jersey,  but  the  UCJ  offering  means  that,  if finance is an issue, candidates do have more affordable opportunities to study at a higher level.

The  UCJ  degrees  are  all  accredited  by  recognised  UK universities,  and  feedback  from  students  is overwhelmingly  positive.  Employment  rates  for  UCJ degrees  are  well  above  the  national  average,  which demonstrates  the  value  placed  on  them  by  Jersey employers. It has been a long-held principle that degrees offered locally have been developed in conjunction with

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business sectors that already exist in the Jersey economy to help meet their skills requirements. This targeting makes them an important and valuable provision that also meets the needs of older students who cannot, or do not, wish to leave the Island to study because they have commitments in the Island.

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95. Increasing the provision of University College Jersey ALONE is not a viable option to provide for the needs of all Island students. Similarly, arranging provision with other overseas locations will only help at the margins.

This is accepted: A variety of solutions is needed to meet the circumstances of the different students in Jersey. The Education  Department  will  continue  to  expand  the different options available to Jersey students, and this is why we created the concept of Campus Jersey', increasing local provision with the close co-operation of the private sector and offering greater choice and more opportunities for students.

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102. Many parents and

students in Jersey, who either spoke to the Panel or made written submissions, want some form of loan scheme.

The Minister is aware of these views. However, he is also conscious  that  many  families  with  lower  incomes  are grateful for the assistance they receive through the current grant system. They say a large student debt of £60,000 would be a deterrent to their children attending university. A number of students have said they would not support a full loan, particularly those who currently receive grants.

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107. No talks have taken

place with the UK at political level in relation to removing the blockages for Jersey students entering the UK loans scheme.

This is factually accurate. Although initial approaches had been discussed, these have not yet been progressed. So far, meetings  have  been  held  at  officer  level  with representatives of the UK Student Loans Company and the UK Department of Business, Innovation and Skills. This will now be followed up at a political level, but might be delayed by the UK General Election on 8th June 2017. Correspondence has been drafted as part of the Island's Brexit negotiations, requesting that when higher education arrangements  are  renegotiated,  the  students  from  the Crown dependencies should be put on an equal footing with students from Overseas Territories, who can access the UK Student Loan.

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123. During the period that

this review was running, the Chief Minister created a Sub- Committee of the Council of Ministers tasked with finding a solution to the funding problems being suffered by Jersey students and families.

This is factually accurate.

Recommendations

To

Accept/ Reject

Comments

Target date of action/ completion

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59. The Minister for Treasury and Resources should phase out Higher Child Allowance from standard rate (20%) tax payers as soon as possible.

Min. T&R

Accept in principle

In  the  2016  Budget,  the  Minister  for Treasury  and  Resources  considered phasing out the higher child allowance from  the  standard  rate  calculation  (at the same time as phasing out the other child-related  allowances  from  the standard rate calculation), reducing the assistance  provided  within  the  tax system  for  those  higher  income taxpayers  who  have  their  income  tax calculated by reference to the standard rate calculation. The Minister concluded that the availability of the higher child allowance  in  the  standard  rate calculation should be maintained until such  time  as  a  broader  solution  for assisting  with  the  costs  of  higher education  was  found,  whereupon  it would  be  phased  out  over  an appropriate  period.  The  Minister  for Treasury and Resources maintains that this is correct approach; agreeing that the allowance should be phased out, but only when a broader solution has been identified.

N/A

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60. The Minister for Treasury and Resources should phase out Higher Child Allowance from marginal rate taxpayers and redirect money to direct assistance for students once a suitable solution is found.

Min. T&R

Accept in principle

The  availability  of  the  higher  child allowance  in  the  marginal  rate calculation means that the majority of parents  of  children  studying  a  3-year degree course benefit from a cumulative reduction of their income tax of £9,360 over  the  relevant  period  (£2,340  per annum for 4 tax years). Removal of this allowance  and  the  corresponding increase in tax payable  would have  a significant  impact  on  parents,  unless they  were  receiving  compensating support  through  other  measures.  This process would have to be carefully co- ordinated.

It  is  noted  that  restricting  the availability  of  the  allowance  to  the marginal  rate  calculation  limits  the scope for the deadweight loss identified

N/A

Recommendations

To

Accept/ Reject

Comments

Target date of action/ completion

in the adviser's report (which appears to be the key argument for the removal of the allowance), because those with the highest  incomes  (who  have  their  tax calculated by reference to the standard rate calculation) would not be able to benefit  from  its  availability.  The Minister  for  Treasury  and  Resources maintains that this is correct approach; agreeing that the allowance should be phased  out,  but  only  when  a  broader solution has been identified.

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70. The Chief Minister must ensure that the Council of Ministers Sub-Committee, tasked with finding a solution to the problems of financing students through university, examines the implications of Income Support when seeking a solution to the problems of financing students through university.

CM

Accept

The Sub-Committee will liaise with the Social  Security  Department  to  ensure that  any  implications  for  income support are raised.

Qtr. 4, 2017

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83. The Minister for Education should provide an online calculator, that allows families to understand their entitlement and that is flexible enough to change as policy is amended, with immediate effect.

Min. for Edu.

Accept – ongoing

The  suggestion  has  been  considered previously by the Student Finance team, and is being actively discussed with the Information Services team with a view to having a calculator online. Scoping meetings are taking place shortly.

Qtr. 4, 2017

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114. The Chief Minister

must ensure that the Council of Ministers Sub-Committee is tasked with finding a solution to the problems of financing students through university,

CM

Accept

Various different solutions to financing students,  including  loans,  are  being considered by the Sub-Committee.

Qtr. 4, 2017

Recommendations

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must consider some form of student loan system.

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125. The Chief Minister

must ensure that the Council of Ministers Sub-Committee created to resolve the problems of financing students through university, should publish its terms of reference, specify a deadline for the work to be concluded and present its recommendations to the States in the form of a report.

CM

Accept

The  terms  of  reference  will  be published together with a timeline for the work.

Qtr. 3, 2017