Productivity matters and so, therefore, do skills. Without the right skills, efficiency suffers and growth falters. Modern economies also change constantly. So, therefore, do the skills they demand. Rich ageing countries innovate and update, or they decline.
But a skilled workforce doesn’t just happen. I have been analysing England’s current performance as a panel member for Philp Augar’s government-commissioned review of post-18 education and funding. By OECD standards, we spend a lot on post-secondary education. Yet ours is also an economy where productivity growth has, since 2008, been extremely low. And many aspects of our post-secondary system are, in my personal opinion, bizarre.
If you were the government, would you make it almost impossible for individuals to retrain? Would you concentrate more and more of your spending on 18-year-olds, at the expense of everyone over 21? Would you incentivise the education system to cut back on technician and advanced vocational courses? And would you, in the short period from 2011 to 2017, increase your university teaching funding in physics by just 6 per cent per student while bestowing 27 per cent increases on business degrees, and 34 per cent on sport sciences?
Of course, no minister sat down and listed these as official objectives. But they did, successively, implement policies with these results. And did so, moreover, against a background of well-documented, sustained shortages in the skilled trades, for technicians, and in “Stem” areas (science, technology, engineering and mathematics).
Funding decisions have been economically irrational. England’s further education colleges provide the bulk of non-degree education and training for school leavers and adults. They have also suffered major, repeated budget cuts. Student numbers have fallen; loss of skilled staff and stalled capital investment have badly undermined the whole national training infrastructure.
But much of the problem goes beyond headline figures. Rigid and little understood budget rules create perverse financial incentives and distort both demand and supply.
In England — quite uniquely — almost the only higher education option is a full three-year degree. Two years of degree-level study can take you to “higher technician” level. This is hugely important in economies such as Germany, and in clear demand from UK employers. Our still-respected Higher National Diplomas, like the two-year foundation degrees established in the early 2000s to promote vocational skills, met this demand. Yet numbers on both are now in freefall in spite of significant technician shortages. Only the full degree thrives.
One reason is irrational rules on what we will fund. You cannot obtain public support to study in a higher education institution if you have studied to that level before in another subject — not even if you paid for it yourself the first time. If you want to retrain for a new, high-skill occupation, the state mostly refuses to assist at all. On principle.
We also push people to opt straight away for a full degree. Student loans are (rightly) taxpayer-funded and graduates repay only after reaching an earnings threshold. But if you choose a technician qualification when you are young, you risk never being able to do a degree. Few 18-year-olds have the nerve to make that choice, even though between a quarter and a third of graduates are in non-graduate jobs.
Universities have enjoyed a decade of enormous income growth and the end of caps on recruitment, so the sector has expanded. Since our loan system gives students no incentive to save a few thousand by shopping around for cheaper courses, fees are, predictably, set at the maximum. Meanwhile, government has progressively chipped away at the teaching grants for expensive science and tech provision: hence the tiny increases in physics, say, compared to huge leaps for business or media.
The Augar panel called this week for better further education and science funding but also, crucially, for a move to a flexible loan allowance, set at the same level as the current loans covering undergraduate fees. Instead of “one degree and you’re out”, that loan entitlement should be under far greater individual control.
Students should not be penalised if they part-pay for courses, keeping some allowance in hand for the future. They should be encouraged, not prevented, from starting at the same level again as they retrain. They should be able to borrow for short bursts of upskilling, rather than all government support being tied to long courses. This change would deliver a system far better aligned with economic demand and its fluctuations. It would also encourage price competition. Otherwise, we can expect more of the same: an increasing gap between the skills that serve the economy, and what the government pays the education system to deliver.
The writer is professor of public sector management at King’s College London and was a member of the Independent Panel for the Review of Post-18 Education and Funding (the Augar review)
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