Starmer is right, we need to give up on the cult of a university education for all

Labour leader Keir Starmer came under fire for his recent reverse ferret on abolishing university tuition fees. Some see it as an inability to stick to a pledge, while others view it as  a further betrayal of the policies of Jeremy Corbyn.

From an egalitarian perspective, Starmer’s decision is absolutely correct. Abolishing fees would cost over £10bn, the exact amount depending upon whether maintenance grants would be reintroduced, another Corbyn pledge.  

But this money would go straight into the bank accounts of young people from relatively affluent backgrounds. Despite all the changes in the higher education sector, very few make it to university from the deprived council estates surrounding our major cities.

Policies towards higher and further education need a more general and drastic rethink.

When he was Prime Minister, Tony Blair set the target of 50 per cent of the relevant age cohort going to university.

At the time, Blair argued there was a “graduate premium” which benefited individuals and society. Graduates did more skilled jobs than non-graduates and were paid more as a result.

When Blair was pushing the policy forward, critics pointed out that the premium would be unlikely to apply to much of the new cohort of students. The 50 per cent target involved a big increase in supply, driving down the price paid by graduates down.

There was a possible offset to this. Increasing the supply of graduates might stimulate employers to increase the demand for jobs which needed graduate skills. There would be both an increase in supply and a rise in demand.

But this has simply not happened. There has certainly been a rise in “credentialism” – demanding a degree from prospective employees. But this has not changed the relatively low skilled nature of many of these jobs.

Most students graduating from the elite Russell Group universities continue to command the so-called graduate premium. Their lifetime earnings will be higher, often considerably so, than non-graduates.

For many, this is simply not the case. Their degree adds nothing to their value in the labour market. The House of Commons library estimates that around half of all students will never earn enough to repay their loans.  

The amounts involved are staggering. There is already over £150bn of outstanding student loan debt. The government estimates that by the middle of the century this will reach £500bn in today’s prices.

This in effect is a subsidy to the huge numbers of students at our less distinguished universities. They will never repay their loans, so they are being paid by the taxpayer to enjoy three years of semi-leisure.

In contrast, very little is available to the half of the population of young people whose academic record means that they cannot get into university.  And these tend to come from less affluent and sometimes difficult backgrounds.

An approach which would be both more efficient in terms of outcomes and at the same time reduce inequality is to require graduates to repay their loans regardless of their income levels. This would soon lead to a sharp fall in the numbers wanting to go to university.

The resulting savings could be directed to the further education sector. This could deliver a real boost to the skills, employability and earnings of the less academically able half of the population.

Starmer is right to keep tuition fees. But it is just the first step towards a further education policy which is both more effective and more egalitarian.

As published in City AM Wednesday 10th May 2023
Paul Ormerod
Image: Pexels

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