David Willetts: Five reasons why some on the Right get it wrong about higher education

16 Aug

Lord Willetts is President of the Resolution Foundation. He is a former Minister for Universities and Science, and his book a University Education is published by Oxford University Press.

This week’s A level results have led to another round of anxiety about higher education. Much of the debate is bedevilled by five key confusions set out below.

1. Too many people go to university because of Labour’s 50 per cent target

In a speech to the Labour conference in 1999, Tony Blair announced the ambition that 50 per cent of young people should go into higher education.

It was the classic Blairite device of taking a trend and turning it into a target. Higher education is any education above A level standard. Universities are a distinctive institution with the power to award their own degrees, which are the main but not only way of delivering higher education. Further Education Colleges can deliver higher education, too. A Higher National Certificate or an Higher National Diploma in engineering counts as higher education.

I am not aware of any actual attempts to push people into university – though there have been some initiatives to boost access for the most disadvantaged. There certainly hasn’t been a 50 per cent target since 2010, and I don’t believe in practice there ever was one.

Nevertheless, Gavin Williamson managed to get coverage for announcing as Education Secretary he was ending the 50 per cent target. It is as though Ben Wallace earned column inches by announcing he is breaking with a long-standing policy of unilateral nuclear disarmament.

Meanwhile, the number of young people into higher education keeps on rising and has gone over 50 per cent. It is nothing to do with any target. Talk of targets obscures the real reason that more people go into higher education and to university: that this is what they are choosing to do. There is no public policy driving them to do so.

But across the Western world more young people access education at a higher level. Many might regard it is a key feature of modern liberal economies. It is almost the case that every year in every OECD country more young people go into higher education. England is not some eccentric outlier. We are slightly above the average, but close to the US.

2. We should back apprenticeships instead

The actual policy of almost every Government for decades is that more people should do apprenticeships. That is what every Education minster says. Many of them go on to suggest it is better than going to university. But meanwhile, in the real world, the overall numbers of young people doing apprenticeships does not rise.

One reason is that they are expensive for companies and Government – indeed, Conservatives brought in a levy on business specifically to fund them. The countries with lots of them – notably Germany – have a highly regulated labour market with many more licenses to practice, so you need an apprenticeship as a job requirement.

Countries with more flexible labour markets and fewer job guarantees tend to have fewer apprenticeships and more people in higher education. So if we really want apprenticeship rates like Germany we need to change the structure of our economy so it is more like theirs.

3. We should not have abolished polytechnics

Polytechnics are a form of higher education but with more of a focus on vocational courses. William Atkinson’s column on ConHome last week was an elegant account of the argument that they should not have been granted university title by John Major’s Government.

But they were not blown up. Their courses were not closed. Their staff were not sacked. We now have a lot of universities, formerly polytechnics, which still have strong local business links. Sunderland and Tees-Side run auto-engineering courses linked to the car companies of the North East, just as Coventry does in the Midlands. But we are so preoccupied with the Oxbridge model of a university that they are often treated with disdain and the critics want to deprive them of university title.

What makes our “top” universities top is their world-class research. That does not mean that their teaching is better. It is perfectly legitimate for a university to have a different role – such as delivering great vocational and technical higher education focused on the needs of the local economy and conducted applied research most relevant to them.

Indeed, that is really rather useful. We should be more tolerant of the wide range of different missions of modern universities. Even in Germany the Technische Hochschule (which advocates of vocational courses so admire) is increasingly taking university title – they are not schools but higher education institutions.

4. Graduates don’t earn enough which is why they can’t pay back their debt

One of my toughest battles as university minister was to open up access to information on graduate earnings derived from access to HMRC data. It now provides important evidence on how universities and courses perform on this metric.

But it is in danger of being over-interpreted. It is not automatic evidence a course is bad. It may reflect regional disparities – universities in the South East appear to do well whereas universities in low pay regions do badly. Graduates from more advantaged backgrounds earn more for any given degree attainment – probably because their social networks help them into better paid jobs – so universities which take more disadvantaged students are penalised for that in earnings metrics. And salary is not a measure of the quality of education though it is relevant for future loan repayments.

It is possible to expect a typical graduate to pay back for the cost of their education. But that model was seriously damaged when Theresa May significantly increased the threshold above which repayments start. High rates of loan write-offs is the result of a Conservative policy decision, not a sudden dramatic fall in the graduate premium. Now the repayment threshold is being brought down a bit and that will boost repayments.

The so-called “debt” is nothing like a mortgage or a credit card debt and mortgage lenders understand this. It is not deducted from the amount a bank estimate they can loan a graduate to buy a house. It is more like a higher rate of income tax above a high threshold, so commercial lenders treat it as a fixed outgoing. If a gradates is earning £30,000 a year she will be paying back nine per cent on earnings above the threshold of £27,295 – i.e: nine per cent of £2,705, which is £243 a year or just over £20 a month.

5. This is a Conservative problem because graduates vote Labour, so we should stop encouraging young people to go to university

The Conservative Party does indeed have a political problem among young people. As many young people go to university, this looks like a problem caused by higher education. But when you dig into the data and adjust for more young people being graduates and also the bulk of them being Remainers, you still find a big Tory disadvantage amongst young people.

If you still worry about too many people going to university, there is indeed a Conservative problem here but a rather different one. Tories represent the places which send most people to university. Indeed, many Tories try to get their kids into schools which send well over 50 per cent to university. If there is a problem of too many young people going it is in Kensington and Chelsea, in Surrey and Hertfordshire, and the prosperous parts of Cheshire. Conservative MPs and Tory councils preside over this apparent social problem. It is Labour seats which tend to have lowest participation rates.

The best way to way to win over young people is to make it easier for them to fulfil their classic ambitions of getting a decent job, owning their own home, and settling down to raise a family. Going to university still increases your chances of fulfilling these ambitions. Trying to stop young people doing this because of a misplaced fear it makes them socialists would not just be wrong, it would be a major political error.

The post David Willetts: Five reasons why some on the Right get it wrong about higher education appeared first on Conservative Home.

Eamonn Butler: Consols are the answer to our Covid debt problem – but only if twinned with a pro-growth agenda

16 May

Dr Eamonn Butler is Director of the Adam Smith Institute.

William Atkinson has built a fair case for parking the Covid debt away from the everyday public finances — an idea endorsed by Liz Truss recently — before knocking it down. Yes, the best time to have done this was last year, when Adam Smith Institute argued the case; then, interest rates were low and rate hikes seemed a distant fear. But it is still a good idea. Let me explain why.

What makes the idea necessary is that the Government borrowed hundreds of billions to get us over the Covid pandemic, producing record peacetime public debt of over £2 trillion, or around 100% of GDP. But the Covid borrowing is exceptional borrowing and should be treated as such. It’s the sort of borrowing that comes up only once or twice in a century — think the Napoleonic Wars, or the two World Wars. And let’s hope we won’t be facing wars, or pandemics, on that scale for another long while.

When governments want to borrow, they issue bonds — typically 10- or 20- or 30-year bonds that pay the holder annual interest and then are repaid, at face value, at the end of that period. If the government still wants to borrow, it issues new bonds when the old ones are retired. But if interest rates are on the way up, it obviously has to pay that higher interest on every new bond it issues.

We suggested that low interest rates could be locked in — and the exceptional Covid debt kept apart from the regular business of spending and borrowing — by instead issuing special ‘Covid Bonds’ with no fixed term. These consols (‘consolidated annuities’ in the jargon) would simply continue to pay interest until the government felt able to repay them. Which could be quite a while: famously the Napoleonic War consols, and those that Churchill issued to park the First World War debt, were only fully repaid in 2015.

Sure, with interest rates rising as they now are, the Government has left it too late to capture the full benefits of very long term, low interest funding. But there are still benefits to be had through this approach.

And sure, economic growth expectations have taken a nosedive too. But that is no reason why we cannot fund the Covid debt by this method. Quite the contrary. Low growth makes it hard for the government to keep on rolling over its 10-year debts, and if things stay bad, maybe its 20- and 30-year debts too. But the point is that, as long as growth is at least positive, our wealth, and our ability to repay our debts, continues to rise. As long as the public finances can still afford the interest payments, that means we can wait until we are much better off and repay this exceptional Covid debt. It might be any time this century, or even longer! But we are not being pushed into paying off an exceptional and very large debt before we have grown enough to afford it.

Now, William Atkinson is right that we need a growth agenda. To my mind, that means we need to cut taxes, especially taxes on business. We have a lot of holes to fill in our Covid-scarred economy, and business economists confirm that the thing that most deters people from starting new businesses, or from expanding existing ones, is high tax. It just adds to the risk of an already risky proposition. The recent NIC rise is one of the most economically inept policies I can remember, and that’s saying something.

Atkinson is also right that there must be spending cuts to facilitate tax reductions. That means two things. Firstly, as my colleague Dr Madsen Pirie has proposed, we need a systematic programme of prioritisation. What does government really need to do? What does the public really want from it? And what is it wasting time and money on doing that has little or even sometimes negative effect? Secondly, we need to look again at the Byzantine structure of Whitehall and see how things can be reconfigured to consolidate functions, reduce bureaucracy and save money. The ASI’s series of reports on this are out soon.

We learnt the hard way, prior to 1979, that you can’t spend your way out of debt. The only way is growth, and that is why we need a tax- and spending-reduction agenda, and a government that does less rather than imagining it has to stick its fingers into everything. But that agenda has little to do with how we fund government debt.

The key thing about using consols for the exceptional Covid expenditures (a cool £550 billion by my reckoning) is that it gets that exceptional debt out of the everyday discussion. Yes, I know that some will think it’s good to keep things as they are, in the hope that eye-watering debt levels will pressure the government to trim its spending sails. But not treating Covid debt separately will make it harder to pay off and will prompt governments to do exactly what they are doing now — to raise taxes in ways and to a level that actually chokes off growth and our ability to get ourselves out of hock and avoid the same stagflationary decline we saw in the 1960s and 1970s.

William Atkinson is ConservativeHome’s new Assistant Editor

15 Mar

We recently gazetted Henry Hill’s appointment as Deputy Editor.  Today, we can announce William Atkinson’s appointment as Assistant Editor.  You can follow him on Twitter at @WTMAtkinson.

William will already be familiar to some readers through his writing for the Daily Telegraph, The Spectator, Cap X.

He debuts today with a ToryDiary arguing that in relation to the Government’s Coronavirus policy “the trouble of following public opinion has been a problem of these last two years”

As ever, we will bring you, our readers, the very best Conservative news, analysis, insight and opinion.