A New Proposal: Individual Education Budgets

PAG Staff Uncategorised

On 19th February 2018, Theresa May’s announcement of post-18 education reviews in the forthcoming year stirred debate surrounding potential reforms for an improved tertiary system that aligns with the Prime Minister’s vision of a versatile, accessible and forward-looking post-18 education system that offers better value for money. Amidst calls for cuts in tuition fees and the reintroduction of maintenance grants[1], Education and Skills (EDSK), an education think tank, proposed a new funding structure to meet the Prime Minister’s ambitions: The Individual Education Budget[2].

The Individual Education Budget (IEB) is described by EDSK as a learning account, where each student is provided with a maximum £20,000 tuition grant to finance any tertiary education scheme(s) of their choice. To account for social mobility, the IEB may be adjusted according to the socioeconomic background of each student, granting a lower sum to those who are from households with higher incomes and in turn, fulfilling May’s accessibility objectives.

The post-18 reviews published earlier this year chaired by Philip Augar proposed a funding scheme similar to that of IEB called the lifelong learning loan (LLL). The key difference between the IEB and the LLL recommended in the Augar review is that the IEB is predominantly grant-based, although students do have the option to loan up to £75,000 across their lifetime after the initial sum has been used. EDSK argues that the grant funding means that a lower amount of government finances will be spent on interest payments and outstanding student debt, and more on directly providing students with funding. EDSK argues that this, in conjunction with a lower repayment threshold (£25,000 to £12,500) is a much more sustainable funding structure for tertiary education as it results in a potential annual saving of £6.4 billion in government revenue. In accordance to the Prime Minister’s education targets, the IEB reform has a high potential to offer higher value for money, saving students, the government and taxpayers from a large portion of interest payments that is currently tied to tertiary education.

The introduction of the IEB would also be a step in meeting another set of criteria set by the Prime Minister for the Augar Review: promoting a wider range of tertiary programmes. More than ever, there is greater disparity between the number of students enrolled on conventional higher education (HE) courses and the number of students pursuing alternative tertiary programmes such as apprenticeships and studying part time[3]. The introduction of the IEB would establish a universal funding structure across all HE schemes and courses, eliminating bias in HE scheme choice caused by the disparity in levels of support for HE funding between different programmes that are currently in place.

As the IEB, in theory, meets all of the Prime Minister’s criteria for educational reform, we must question why the Augar review recommends the Lifelong Learning Loan in place of something which looks more like the IEB. One of the main concerns with IEB surrounds the infrastructural changes needed to be implemented with the funding scheme (e.g. lower repayment thresholds/longer repayment periods for loans up to £75,000) in order to finance the scheme itself. The nature of a grant means that the IEB requires a significant level of fiscal expenditure to maintain, in addition to a considerable sum of initial startup costs. Furthermore, strict policy measures need to be implemented and enforced in order to ensure that the scheme is protected from exploitation, which incurs additional costs and therefore may initially impose a heavy burden on the taxpayer.

All in all, the IEB scheme is an ambitious proposal with regards to the initial amount of financial capital required. Despite having the potential to meet the 4 key criteria for educational reform Theresea May set out for the Augar Review (choice, value for money, accessibility and forward-looking), there are many risks that come with any changes in education policy, and particularly any policy which relates to the hot potato of tuition fees. Between the full parliamentary schedule, the bidding war to increase education funding and the uncertainty around who will be the Secretary of State in the near future, we may need to wait a while for any such nuanced discussion to progress at a policy level.


[1] Department for Education (2019), Review of Post-18 Education and Funding

url: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/805127/Review_of_post_18_education_and_funding.pdf

[2] Richmond, T. (2019), Free to Choose: How ‘Individual Education Budgets’ can revolutionise tertiary education, EDSK

url:https://www.edsk.org/wp-content/uploads/2019/05/Free-to-choose.pdf

[3] Callender, C. and Thompson, J. (2018) The Lost Part-timers, The Sutton Trust

url:  https://www.suttontrust.com/wp-content/uploads/2018/03/The-Lost-Part-Timers-Final.pdf