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Government lifts cap on higher education places – do the numbers add up?

The government has announced it will lift the cap on the number of students universities can recruit. Having already lifted the cap on the number of top performing students universities can attract, they intend to widen access to all.

The result will be more students than ever attending university. Is it as good as it sounds?

Robbins report

Lifting the cap has been cast as a fitting tribute to the famous Robbins report in its 50th anniversary year. The report, published in 1963, was the first comprehensive study of the effects of higher education. It established evidence for the higher productivity of graduates, leading higher education policy for decades.

Following in its footsteps, today’s government argues that widening access to university will be good for individuals, and for the wider economy. The increased productivity will contribute to a more innovative, dynamic workforce, enabling Britain to better compete in the global market – and contributing higher taxes to the Treasury.

graduation

Funding

Higher education for all certainly seems like a Good Thing – but it does beg the question of how it will be paid for. Under our current model, hardly anyone pays for their education up-front, so more students requires a larger outlay of public finances.

The government insists the economic benefit and tax revenues wrought from more graduates in the workforce will pay for itself. But in the first instance, the extra places will be funded by the sale of the old Student Loan Book. Once that runs out there will be an implied £700m annual subsidy.

This is all well and good, but when 85% of all student loans are projected to remain unpaid, do the figures really add up? The £890m old student loan book was sold for a comparatively paltry £160m. Although the assertion is that tax receipts will cover the difference, is that really likely when wages are stagnating in the long term? And with more graduates than ever flooding the labour force, will a degree really still lead to significantly higher earnings?

According to the ONS, the benefits of a degree are most keenly felt by top students from top universities, with the positive effects lessening the further down the scale you go. Lifting the cap will only increase graduates at the bottom end of the scale, further diluting an already weakening cost/benefit relationship.

Graduate tax revisited

It might be time to start considering other models of funding. There’s no question the free-at-the-point-of-service principle should not be violated. What’s the sense in widening access if no one can afford to pay? A more radical approach to paying back the debt may be required.

A graduate tax has been touted a number of times over the years, and is usually rejected on grounds of fairness. Under the current system repayments are only made once graduates earn over £21,000 anyway, at a proportional level, so richer graduates already pay more – but there is a cap of the overall level of their repayment, equivalent to the value of their loan.

The central difference of a graduate tax is that there would be no upper limit to how much graduates pay. As long as they continue to earn over the threshold, they continue to pay the tax. This would amplify the difference in repayments we already have, easily creating inequalities worth tens of thousands. It’s easy to see why the idea has never gained much traction.

However, if the widening of access creates the funding black hole it looks set to, it may be time to consider a more ‘progressive’ system of funding, where those on higher incomes openly subsidise those on lower incomes by design.

The quality issue

Funding isn’t the only issue. In response to the cap lift, the Russell Group made clear their concerns about maintaining quality with such a large number of undergraduates.

They are right to be worried. Ever since polytechnics were given university status there have been questions over the consistency of quality in higher education. With the system already strained, the consequences of widening access further is likely to be more dubious courses from less-than-prestigious institutions.

The up-shot is not just a lower quality experience for students – who might perhaps do better in vocational education – but a reduced benefit to the economy. Employers already complain of graduates unable to perform simple tasks, do we need to further dilute the value of a degree?

This is not to say access to education shouldn’t be widened. Of course every single person should be afforded the opportunity to attend higher education. Not just for the economic benefits, but because higher education levels allow citizens to better participate in society – a society that is more well-rounded and tolerant as a result of education. And lifting the cap could help redress the balance in an applications system that is weighted towards privately educated students.

But there are significant questions as to the wisdom of introducing an unrestrained market in education. Economic arguments aside, university isn’t for everyone. And we run the risk of creating a socio-economic environment where people are penalised for not having a degree, rather than rewarded for having one.

Image: http://commons.wikimedia.org/wiki/File:College_graduate_students.jpg



This post first appeared on Moneyism.co.uk | Spending, Saving And Investing, please read the originial post: here

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Government lifts cap on higher education places – do the numbers add up?

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