1. Higher education decisions in the UK & the 2004 Higher Education Act. This presentation reflects the view of the authors and not BIS or UCAS. This material cannot be quote without prior written approval of UCAS Arnaud Chevalier (Royal Holloway) Gauthier Lanot (Keele University)

2. Motivations - Increased in the number of students, public finance difficulties and internationalisation have stretched the model of public finance to higher education. - Move to private contribution started with 1997 Dearing’s recommendations. "We therefore recommend that students enter into an obligation to make contributions to the cost of their education once they are in work.“  The 1998 Teaching and Higher Education Act is passed into law - setting an annual tuition fee for England of £1,000, with the expectation that means testing would mean a third of students would not pay anything.Teaching and Higher Education Act Up front fees:  restrict access for poorer students,  very limited support to students during their studies,  income to university is still limited.

3. 2004 Higher education act aims to correct these features by moving to income contingent loans  - Increase tuition fees – no longer means tested,  - deferred payment  - Income contingent reimbursements  - funding for maintenance for all students  - Institutions benefit from increased funding per students 2010 Browne’s review furthers these points and recommends further increase in the students’ contribution but what could be the effect of raising tuition fees on the demand for HE? This paper investigates the impact of the 2004 Higher Education act on the demand for HE

4. We use differences in the implementation between regions to identify the effect of the reform Policy was announced two years in advance  Some students who would have deferred entry until 2006-7 may not have done so, in order to avoid higher fees  Potential for overstating ‘true’ impact of new policy regime Importance of UCAS data:  Since the supply of HE is fixed, it is important to look at the demand (Applications) rather than the equilibrium (nbr of graduates)

5. Summary of conclusions 2pp drop in the applicants ratio (applicants/pop 18-20) 4pp reduction in accepted offers, conditional on having applied Students are more likely to expect to live at home (6pp) No difference in subjects applied to No difference in the offers made by institutions No difference by social background (in the short run) Welsh students more likely to accept places in Wales (+10pp)

6. Higher Education Act of 2004 - England  The reforms is multifaced and we cannot identify separately the tuition fees effect

7. Regional dimension Due to devolution of power to the regions, higher education policies differ, this will be the source of our identification Northern Ireland Same as in England Scotland  No fees for Scottish students studying in Scotland; No change over the period (2002-2007) Wales  Welsh residents studying in Wales are entitled to a tuition fee grant, effectively capping their fees at around £1,285 a year. For non Welsh resident, same as England

8. Trends in applicant ratio (population 18/20by gender and LEA) Still a large increase in the ratio in 2005 and a drop in 2006 We test pre-reform trends: no difference between England, Wales and Scotland, but significantly different for Northern Ireland. (important to note for difference in difference)

9. Applicants ratio – LEA data

10. Static Model  4to 5pp drop in application ratio in England and Wales (not significant)  Smaller drop in acceptance ratio  This model assumes no effect of year t demand on the demand at year t+1. The data in fact rejects this assumption. Dynamic Model  2pp drop in England  No significant effect in Wales

11. First Conclusions Comparing the trends in number of applicants in LEAs between the countries:  Reforms has not had a negative effect on number of applicants  But this is misleading as underlying populations changed over time Static diff in Diff  Drop in application ratio by 5pp Dynamic difference in differences:  Drop in application and acceptance by 2pp in England.  No effect in Wales  Note those are short-term effects since the data only covers the first 2 years of the policy change.

12. Individual level analysis All results are conditional on having applied, so the outcomes of interest have to do with the application process rather than the decision to apply or not. Change in prices of HE may have affected  Geographical mobility (-)  Quality (Ranking) of institutions/subjects applied to (ambiguous)

13. Between country students mobility Low level of cross country mobility in England and Scotland. Welsh applicants became more likely to apply and accept offers in Wales when Welsh grant is introduced (£1,800 if studying in Wales)

14. Individual level analysis - Application

15. Individual level analysis – Accepted offer

16. Conclusions The introduction of Higher education act 2004  At regional level, drop of 2pp (England) in application ratio in the short-run, no long-run effects.  At individual level, drop in 4 pp in probability of taking up an offer  No impact of the reform on reducing social gap in the short-run  Inference on the impact of tuition fees is limited since the reform affected tuition, loans and grants.  But Wales evidence suggest that students are sensitive to price. In Wales a £1,800 additional grant lead to a 10pp increase in accepted offers – but this is only a displacement effect

18. Population trends