David Green: We should not cut university places

It is absolutely right that in the current financial climate, universities should be asked to do more for less to help the country. Higher education has a crucial role to play in helping the UK climb out of recession, and it is not unreasonable to expect universities to take their fair share of spending cuts.

What is unreasonable is the sheer scale of the cuts facing the sector – amounting to some £500m next year in England – and the policy of freezing and even axing student places in the face of an unprecedented increase in demand.

Cutting expenditure by reducing the number of university places is an inefficient way to save public money and makes neither economic nor moral sense. Yet that is exactly what the Government has done, leading to a situation where at least 250,000 would-be students – many very well-qualified – will find the door to higher education closed this summer.

This is a real waste of potential. In the present economic circumstances, people who don't go to university have too few alternatives for getting on in life. In practice, shutting them out forces more people on to the dole.

Each place at university costs government just over £71 a week in student support payments. Job Seeker's Allowance is £51 a week. It's inefficient to deny people education and put them into idleness for the sake of £20 a week. There is a much better way of saving public money now.

Currently, former students owe a total of £25bn to the Government in student loans. This will increase by at least a further £5bn this summer when more students graduate. If the government introduced a voluntary early repayment scheme offering a discount of say 10 per cent, many millions – possibly even billions – of pounds of debt would be repaid within the next two years. This would dwarf any saving that can be made by cutting university funds, and the money could be used to pay for the extra places we need for this year's and next year's would-be students.

There is no incentive at all at the moment for graduates to repay their student loans any faster than is required. If you go to any impartial money advice site, they all say that the last debt you should pay off is your student loan because it is the cheapest. At present the interest rate is 0 per cent. Some of the older loans are actually being charged at minus 0.4 per cent. It's extraordinary.

If an early repayment discount system were introduced I believe that you would find many graduates who are now in work and saving hard would make their loan repayment a priority. In some families, relatives with savings would also chip in with a contribution towards their son's, daughter's, grandchild's student loans. Let's face it. Savers aren't getting much interest on their savings at present.

The alternative, ill-judged route to saving public money that the Government is taking will cause real damage to our higher education system and could result in many tens of thousands of prospective students being denied a chance to boost their career prospects. Even places to study nursing and midwifery are being cut this year!

It is directly opposed to what is happening in other countries, such as the USA, France and China, where they are choosing to invest more in universities as a way out of the economic crisis. In the USA, California State Governor Arnold Schwarzenegger led the way last year in imposing swingeing cuts on higher education. This year he has reversed this because he realised that business people want to invest in a state in which higher education is growing stronger not weaker, and which is "choosing universities over prisons," in his own words.

The worst effect of the cuts is not crumbling university buildings, lecturer job losses, or inferior research facilities – though these are undoubtedly bad. It is the cut and cap on student numbers enforced by the new system of fining universities £3,700 for each student they take above their quota.

This will lead to tens of thousands of young people becoming disillusioned and bitter at the moment when they have the chance to learn new skills and become productive citizens. Universities can do many things to help the country tackle the economic crisis. Right now, our number one contribution should be to educate more students, more effectively and efficiently. Let us do our job!

The writer is professor of economics and vice-chancellor of the University of Worcester