David Willetts is a member of the House of Lords, and the author of ‘A University Education’.
Henry Hill’s editorial of last Friday reflected a widespread Conservative hostility to universities. The evidence does not bear out his criticisms.
For a start the graduate premium is not disappearing. Non-graduates aged 21-30 earn on average £26,000, whereas graduates earn £31,500 and post-graduates earn £35,000. The gap gets even wider as people work their way through the labour market – applied-vocation qualifications tend to get someone onto a plateau whereas graduate earnings grow or longer.
Given this continuing premium it is reasonable to expect graduates to pay back at the rate of nine per cent if they are earning above a threshold, recently set at £25,000. That means the average better-paid young graduate, earning £31,500 in our example, would be paying back about £50 per month. And of course the debt is not like an overdraft or a mortgage – it is a fixed outgoing.
What is the alternative? I don’t see any prospect of going back to large-scale public spending on universities. Hill appears to regret that students are not directly paying up front, which would make them price-sensitive. But the dangers of that model are obvious: it really could deter people from going to university when they could benefit, just because their families couldn’t afford the fees.
The radical free market reform, first proposed by the IEA, was to fund universities by fees and loans. The basic argument, which is still true, is that graduates earn more than non-graduates. So this is a stage of education it is reasonable to expect beneficiaries to pay for – but they can’t pay upfront, so instead we lend them the money.
Initially Margaret Thatcher expected the banks to do this and set up a company for them – why the Student Loans Company is called a company. But if it is a bank loan it has to be regulated as such – so know-your-customer means individual assessment of loans.
Instead, the aim is to have a general loan scheme funded by Government. It not a fully private sector scheme, but nor is it public expenditure as the loans should, on average, be repaid. So it is something in between. That delicate balance has been accepted for twenty years and is the most viable fair model to fund higher education.
Conservatives have put it under pressure by failing to increase fees with inflation when that is now obviously necessary. Labour may destabilise it if they try to turn it into a system to collect much more from high-paid graduates than the actual cost of their tertiary education, in which case it becomes a graduate tax and the whole model could enter the public sector.
Hill suggests that perhaps there could be a graduate tax paid by employers. But are we really going to propose a new cost on employers? Employers already pay for higher education through the higher earnings which graduates tend to enjoy. We then use some of that premium to get graduates to pay back. That is the logical pro-market model.
There are deeper questions here, as well revealing confusions about conservatism today.
I have written before about the ideological incoherence of a party calling for a smaller state in general, but a bigger state for its own older voters protected behind the triple lock. There is a similar confusion in the message about higher education.
Conservatives complain about too many people going to university, whilst Conservatives have historically represented the places that send most people to university. Conservatives attack Labour’s 50 per cent target, whilst representing places in the prosperous home counties sending 60 per cent or more to university.
If there is a social and economic problem of too many people going it is not in Hull or Blackpool, it is in Surrey and Hertfordshire – and it really won’t do for the Party representing those high participation places to oppose initiatives to raise participation in the places still sending 30 per cent or fewer of young people to university.
There is another confusion. Countries with liberal labour markets tend to have more people going to university. Countries with more regulated labour markets and more licence-to-practice regulation tend to have more apprenticeships.
If Conservatives were serious about boosting apprenticeships we would reverse Thatcher’s labour market reforms, driven partly by frustration at apprenticeships trapping people in supposed jobs for life when the world was changing around them. Instead we would have to require licenses to practice for a swathe of jobs.
Meanwhile even Germany is moving away from this model: it has cut back on labour regulation and boosted higher education participation – and those German technical high schools which Tories love are actually institutes of higher education.
We have universities like them in Britain but given the misplaced concern that ex-polys are not real universities we don’t respect them; instead, they are treated with contempt as if they are bad universities. Almost every other Western country understands that some types of universities can deliver a lot of useful vocational and technical training; a key part of Britain’s skills problem arises from this deep ambivalence about universities delivering vocational education.
A good rule for any political party trying to rebuild in opposition is to be true to itself. Some Conservatives spend money on school fees to boost their child’s A Levels and get them into prestigious universities. They have photographs of a child or grandchild in their graduation robes on the mantlepiece. They live in places sending the majority of their young people to university.
That is the Conservative reality. It is a pity when sometimes the rhetoric does not recognise it.
