Support for lifelong learning should not impoverish the wider system

Philip Augar and his panel have produced a thorough and illuminating analysis of England’s post-18 education system – which it shows barely deserves to be called a system at all.

The greatest strength of this report is that it looks at the whole of post-18 education and training as a single system. In particular, it focuses on the intense pressures facing further education and the continuing failure to provide a system of apprenticeships which live up to the name. It is above all a challenge to policy makers to offer a fair deal to the 50% of young people who currently do not go to university: that is a challenge which has to be tackled.

Not a zero sum game

However, it should be possible to enhance opportunities for young people who do not go to university without damaging the education of those who do. One student’s gain must not come at another’s expense. So the report’s biggest weakness is that it believes it has to penalise university students in order to help others.

Some argue that it makes sense to deter students from going to university because economic returns from university qualifications have fallen. This is to put too much weight on particular interpretations of LEO data, before the wider research community has had the opportunity to access and analyse it.

The period covered by the LEO data is the ten years since the financial crash. Our research at Resolution Foundation has shown that this post-crash decade has been particularly bad for salaries, and even more so for the pay of young people. The real hourly pay of young people aged 18-29 fell by 9% in the four years after the crash – an unprecedented fall followed by a modest recovery. Unemployment was less bad than in previous recessions but – again – one group which did suffer increased unemployment was young people with lowest educational qualifications. Their unemployment rate increased from 68% to 56% after the crash whereas for graduates it only fell from 91% to 88%. It looks as if graduates traded down to less well-paid jobs, displacing the less qualified.

The LEO data excludes unemployed people so the only effect they show is on pay. You would not get any sense from the review that the British economy has just been through its deepest post-war recession – with big effects covering exactly the same period as the LEO data. By contrast that same decade did not see a significant increase in the number of graduates – indeed the rate of increase of people with higher education qualifications slowed down. So it is dangerous to interpret LEO data as telling us much about higher education when it may be telling us more about the post crash labour market.

Incentivising lifelong learning

One bold proposal is a single funding model for higher education – a single lifelong learning loan for four years covering study at levels 4,5 and 6. It has an attractive simplicity and inclusiveness. And as learners could access it for specific modules of level 4,5 and 6 qualifications it could help with what they rightly call the problem of the “missing middle” of level 4 and level 5 qualifications.. It is well worth developing this idea further – I see it as a mechanism to enable some of the 50% who do not go into higher education to get at least some worthwhile qualification.

The new loan would be limited to four years of higher education (there has to be some limit) but unless there is more flexibility it does not resolve the long-standing problem of barring funding for equivalent level qualifications (ELQ). The pressure point is a graduate who has already done one degree and is then not eligible for funding if they come back years later to do a second degree. Successive governments have relaxed this rule subject by subject..

The problem faced for mature students in higher education is that fees and loans are much more a barrier when someone is already in work. Someone in this situation may have less prospects of moving jobs, than for an eighteen year old facing a much bigger fork in the road. One reason for the decline in mature students in my time was that we thought the same support scheme would work as well for them as for younger students. This is why I have concluded there is a case for specific grant funding for the institutions which serve this group. There are limits to tidy-mindedness: no single funding model can work for everyone whatever their circumstances.

Creating flexibility in repayment

Augar has a clear and robust defence of the basic graduate repayment model. The report says it would be better if it were described as a graduate contribution scheme. I agree. But it is hard to achieve that linguistic ambition when the language of fees and loans is embodied both in popular discourse and in legislation.

The panel is also to be congratulated for trying to reverse two key policy errors which have put question marks over the graduate repayment model. First, the removal of maintenance grant and replacement by means tested loans in 2016 has led to students from disadvantaged backgrounds ending up with more debt as graduates than more affluent students. I agree with Augar that this is wrong. The reports proposal to bring back a means tested maintenance grant is sensible.

The decision made in 2017 to increase the repayment threshold to £25,000 pushed up the RAB charge so high that it opened up the whole question of whether the funding model was a genuine repayment scheme. The obvious solution is to bring the repayment threshold down as the report proposes. But the panel seem to envisage that this change should only apply to future students. Hitherto all such changes have applied to all graduates and students in the system. The graduate contribution scheme is a public finance measure not a commercial loan so governments need to retain the flexibility to change the terms – that would after all be a feature of the graduate tax which is a close relation of the current scheme. And it is made clear to students that governments have the right to change the terms.

This mistake is compounded by suggesting a formula for the repayment threshold linking it to median earnings of non-graduates. Other ways of setting the threshold have an equally strong logic. Labour’s original threshold of £15,000 was one of the less controversial features of their system and uprating that for subsequent earnings would be one option. I argue in my book A University Education that the model should be one in which the median graduate pays back in full.

Another basis would be to set a balance of public and private contribution which aims broadly to match public and private benefits. As there are several candidates I see no reason why any one formula needs to be fixed forever – instead we need more flexibility. Given all the controversy about how the system is calibrated I think the report could have proposed that the key features of the scheme such as the repayment threshold should be reviewed every five years, like national insurance contributions. That would enable the parameters to be set for all students and graduates taking account of latest evidence on the state of the graduate labour market and the public finances.

Seriously, no more cuts

The review proposes a continuing real terms cuts in the resource for the education of students in higher education. The overriding test must be what is in the interest of students themselves – and this move is not. It takes us back to the bad old days, before the graduate contribution scheme, when the unit of resource per student fell steadily for twenty years.

The cut is undesirable. It is not even necessary to reduce public spending as sensible reforms to the repayment terms mean most of the cost of higher education can and should be born not by the taxpayer but by the majority of graduates who end up in well-paid jobs. Given the crucial importance of universities and their graduates to our country’s future continuing the cuts of the past few years would be a serious mistake.

Join us on 2 July in London for a one day conference to analyse and digest the Augar review and begin to build the response.