As good a place to start as any when looking at the collapse of the British State is the funding of higher education. For 20 years the political consensus was that access to higher education was little more than a rite of passage for all: an unlimited smorgasbord of subjects, paid for in increasingly large part by taxpayer provided loans, irrespective of the expected financial outcome. And as intended, on the basis of ships passed, it was exceptionally successful; undergraduate student numbers from 1997 to 2024 grew from almost one million to almost two, meeting the goal set of getting almost half of all students into higher education and ensuring that middle class parents would no longer be embarrassed at dinner parties by the modest academic achievements of their delicate offspring.
As numbers grew, so did the amounts invested through a kaleidoscope of evolving State loans. Mortgage type loans in 1990 gave way to Plan 1 in 1998, Plan 2 in 2012m, and Plan 5 from 2023, matched only by remorseless increases in both amounts borrowed and the hardening of repayment terms, to the extent that by the time Plan 5 was introduced in 2023, repayment terms were akin to a form of indentured servitude.
In large part this is because amounts lent have increased faster than graduate earnings as the material benefits of education have drifted ever further into the future. Your typical graduate in 2005 had £10,000 of debt, started on £22,000 and bought their first property in their late 20s. Today, the debt is £50,000, the starting salary £28,000 and the first property is bought almost 10 years later. Property prices play a role, but so does paying the 9% that reduces affordability calculations and defers saving for a deposit, which is why one third of first-time buyers use the bank of mum and dad. And with inheritance and belief increasingly trumping ability and education, the great unwinding of the great Thatcherite social revolution that revolutionised the distribution of wealth is all but complete.
This should not be surprising. The mathematics are straight forward. For the great majority of students, the loans are Plan 2: interest built around an RPI plus 3% model, now capped at 6%, repayments of 9% over a threshold of about £29,000. Which is fine until you realise that average graduate earnings even now are £42,000. If you have a typical Plan 2 loan, you need to be earning c£64,000 simply to pay off the interest based on current loan values. And not surprisingly given that only an estimated 10-15% of graduates do, even HMG only expects that 32% will pay off their loans over the 30-year stipulated term. Even this may well be a heroic assumption. Afterall, current estimates are that 50% of Plan 1 advances will end up being forgiven, despite interest being RPI plus 1% and advances averaging £15,000.
And entirely predictable. The DfE produces an excellent data set setting out graduate financial outcomes: Longitudinal Education Outcomes (LEO). Here, we can see that 40% of the growth in student numbers post 1997 were in courses with extremely poor financial outcomes, where graduate incomes will not on average exceed £30,000 five years after graduation. Indeed, in 25% of the mainstream universities, median earnings 5 years post-graduation do not exceed £30,000. Sparing Tabatha’s blushes it turns out has its price.
And the numbers are indeed sobering; In March 2026, accumulated Plan 2 debts of the 6-7 million estimated graduates who used the scheme totalled £224bn, (about 7% of total UK government debt of £3tn), an increase from the total of £213bn a year earlier, even though all new students were on Plan 5 and new payments under residual Plan 2 loans were only £4.5bn; and with the students struggling to pay the interest on the debt, we come to the crux of the matter; the expansion of higher education was effectively a massive Ponzi scheme, with the added benefit that the victims certainly could not vote, and in large part were not born when it was conceived. What ‘s not to like?
More than you might hope. As Covid and post-Covid partying drove the UK’s debt/GDP ratio up towards the magic 100% and a two generational project to get it under control, even the Iron Bank of Bravos began to question just how it was going to be repaid. Serious times call for serious measures: not being able to get English children to clean chimneys, Plan 5 was born for all new students joining from August 23: Interest rates were reduced to RPI, but to improve recovery, the repayment period was increased to 40 years.
In the Treasury it clearly was whisky all round. Recovery rates were forecast to climb to 50%. Which is an improvement, although of course means than 50% of all Plan5ers are officially forecast to pay the additional 9% all their working lives. And a little digging makes even this number feel optimistic. At about £48,000 the break-even salary for paying off interest remains well over the median income, and the only way you can get close to the estimates are by assuming full time working and no career breaks, maternity leave, illness. Which of course means that most Plan 5 graduates labouring under conditions of indentured servitude going are likely to look back at those on Plan 2 as belonging to a golden age.
Their only consolation is that it could be worse: they could also have a graduate loan as 500,000 now do, with about 65,000 being issued a year, of which 95% represent masters and the balance PHDs. Total loans are typically £10,000 for a Masters £30,000+ for a self-funded PHD. Now there is an argument that just applying for the loan should disbar you from studying; for the repayment terms are draconian, unreformed and modelled on plan 2 only with a lower threshold (£21,000) and repayment obligation (6%), but crucially payable in parallel to any undergraduate loan. Which means, that your typical academic may well be paying 15% of any income over £30,000 in additional tax, and aspire to own a property later in life than almost any other professional group; an academically interesting if personally frustrating way of expressing a love for their subject.
Struggling with loan repayments, with declining real gross earnings over the last 20-30 years, and on the wrong side of property inflation that saw house prices ratchet over 30 years from 2.7 times to 4.5 times average academic earnings, younger academics visibly can see the erosion of their material world. Not surprisingly, their response has been to become more radicalised and left wing in outlook with studies tracing the leftward migration of the academic herd from a left:right ratio of 2:1 in the early 80s to 3:1 in the 90s and 6:1 by the mid 2010s. A shift that was particularly pronounced in the humanities and social sciences, the very same subjects with poor financial outcomes for students. And while there is an elegance in the thought that Marxist professors really should experience oppression at first hand, Marxist tradition says otherwise. Afterall Marx himself lived quite happily on a stipend of £350 per annum, paid for by the profits of Manchester slums and American plantations. Another victim of the capitalist system.
The philosophies of woke need understanding in this context: an idealistic escapist set of beliefs centred a universal concept of victimhood and oppression that demands a subjective reordering of reality and financial need, enforced by a new priesthood of self-appointed acolytes whose purity of thought means they can do no wrong. Higher education not to prepare a student to take their place in society but to reorder it.
The English radical left then is not that of the classical Marxist working class. Afterall the working class is highly material in outlook. They feel more threatened, as good Marxists should, by immigration forcing down their wages and competing for limited social goods, driving them into the arms of Reform, a somewhat unexpected if grateful and more clubbable heir to the Bolsheviks. And as the Russian revolutionary movement of the late 19th Century came to be dominated by the underemployed university educated offspring of the bourgeoisie, the radical left in the UK, be it the Corbynites or the Greens and indeed the Labour Party itself, is increasingly dominated by the frustrated university graduates, epitomised by Zak Polansky, willing to find common cause with any group equally disaffected. And who is to say they will not succeed? Afterall, if Plan 2 radicalised even the junior doctors, what then Plan 5?
With millions of votes to play for, the effect is already being felt, with a Parliament that disproportionally is comprised of Labour MPs with large student loans from degrees with limited financial prospect. Almost 60% of the 2024 crop of Labour MPs studied degrees that are not expected to generate income of £40k after 5 years other than by becoming an MP. Indeed, the further left you go the higher the percentage becomes. This includes the current Prime Minister whose Cambridge English degree is on average at about £30,000 even more modestly rewarded, which may explains his decision to spend his entire working life as a well-paid Armani suit wearing politician, avoiding the financial uncertainty of a public house guitar strumming bard. And as you might expect, they are passing laws accordingly, particular in the rented housing sector: changes to legislation have weakened the property rights of the owner to such as extent that good capitalists no longer see investment in rented accommodation as rational and are voting with their feet. A triumph for political activism? No doubt. But a bizarre decision for any government promoting growth (and indeed lower rents) once you realise rental properties represent 18-19% of the housing stock by quantity (c5m homes out of 30m) and 10% of national wealth by value (£1.3tn out of £13.1tn) and are pne of the most popular investment class in the UK, threatening the UK. And the likely result? A future of low quality new build state housing and aging decaying private housing stock well known in Moscow and Leningrad in the late 1980s , and an even larger stream of dull, if well intentioned, Radio 4 plays about the inequities of life.
In these circumstances, the absence of meaningful change to the traditional undergraduate course structure is surprising. Afterall, the need to reduce costs is obvious, and with 130 mainstream universities you might have expected vigorous competition to emerge especially as many of the least financially rewarding degrees have the lowest cost of tuition. You would be wrong: few universities have 2 year courses which might reduce the cost, and over 99% of students are studying on a 3 year to BA model, where at £9,535 pa, the universities are uniformly charging the maximum permitted, the only visible competition being and the percentages of first-class degrees awarded (reaching 28.8% in 2024 from 13% in 2007) and the salaries of vice chancellors which from 1997 to 2024 rose from £100,000 on average to well over £300,000.
Even the USA does better, where lower cost degree options are widespread from community colleges, discounts for local students and scholarships: over half of graduates are debt free, of those who borrow, average debts on graduation are c$30,000 (c£22,000) while average borrowing is c$14,000 (c£10,000) while average earnings after 5 years in the region of $60,000, about 32% more than their British equivalent.
The grandchildren’s charge sheet is really quite sobering: universities colluding to provide high cost, low value degrees; students saddled with debts that bare no relationship to their ability to pay; wide scale tax payer funded blanket debt forgiveness occurring even where not required; interest rates that are arbitrary, bearing no relationship to the tax payers costs of funding the schemes; and a political class who has spent their children’s and grandchildren’s inheritance subsidising their own lifestyle, rather than generating the growth required to square the circle,
Only the Government could get away with offering such terrible loans. Legally. It is hard to imagine any FCA regulated commercial bank offering them given their obligation to ensure borrowers could repay the loan and fully understood the consequences of signing, once their actuaries and concluded that 50-70% or more would likely default after struggling for 30 or 40 years. This is the real elephant in the political room, amoral, unfair and economically destructive. The case for reform is overwhelming, the absence of debate damming. Afterall, if the State is willing to write off well over 50% of the loans and interest advanced plus much of the interest, there were and are always alternatives.
For Parvus, there are a number of principles that any system should be built around: there must be a realistic chance of debts are cleared within 15 years; education as an investment in financial security should be treated as pension payments are; the state and employers as beneficiaries should make a contribution; incentives should be provided to pay of debts early; debt forgiveness is unfair to those not going to university; interest should reflect the Government’s cost of borrowing; and finally, all student cohorts must be treated equally.
At this point there is simply a smorgasbord of options to achieve the goal: payments from pretax income, the right to allocate pension contributions, additional payments from employers free of NI, family contributions made tax deductible, part of NI to be allocated on lower income graduates, combined graduate/postgraduate loans, grants for the exceptional but poor, payments to cease at 20 years with amounts outstanding to be made an additional charge against the estate to name but a few. And of course, it is morally and politically unsustainable to restrict this to new students. All students should be given the right to convert their loans across and have the balances recalculated. And finally, loan values must reflect expected financial outcomes and if universities cannot work out how, then they should be allowed to fail because they have.
The range of outcomes is infinite, and all superior to where we currently are. The table below summarises one possibility. For those interested: it assumes Plan 5 plus pension contributions allocated first to pay debts, the 5% recent increase in NI from employers being allocated to repay debt where graduates earn under £40,000 and the 9% payment from pre-tax income.
The final conundrum to be unpicked is why on earth has this gone on so long? Afterall, the Treasury must be full of extremely bright graduates with Plan 2 loans. Perhaps, though, they are managed by Scots who have very different priorities? For the Scots have gamed the system so much on the back of English subsidies that their average loans on graduation are £20,000 with a threshold of £33,795, allowing them to buy their first properties at 31, at least 3 years before their English cousins. Who, of course, if they ever regain their ability for critical thinking, might just conclude that while the Scots will never vote for independence, maybe as second class citizens labouring with no end in sight under a Scottish yoke, they should.
Vaduz. September 2026. With thanks to the Stiftung Ananyev
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