There’s still no money, Liam

Liam Byrne, shadow universities minister, was quoted in the New Statesman recently in relation to tuition fees, saying: ‘We’ve just got to ask ourselves, how much more debt are we going to lay on to our young people?’ Possibly something he should have asked himself when in government prior to telling the incoming team in 2010 that he was afraid ‘there is no money left’ – his administration had hocked the future of this country’s young up to the eyeballs.

But the real criticism of what he says is that he’s totally missing the point. Whether the cost of a university education is paid for by a loan or through the tax system, the amount to be paid back is not the main issue. There are universities that offer inexpensive courses that are poor value and others that charge top whack and are worth every penny. Mr Byrne himself has an MBA from Harvard Business School, a qualification that typically costs in the order of £120,000 for a two-year course but on average gets the graduate a signing bonus of £15,000 and a salary on leaving of £80,000, so is extraordinarily good value for money.

The big number here in the UK is not the £9,000 per annum tuition fee but the sad and steady increase in the proportion of graduates still in non-graduate level employment (jobs they could have got even if they had not gone to university) more than 5 years after graduating. This sorry statistic has grown from 28 per cent in 2001 to 34 per cent in 2013 – over a third of graduates getting little benefit from their degree. Everybody knows the anecdotal evidence – educated children still dependent on their parents long into adulthood. Should we be blaming them? Has a generation gone wrong? More likely the jobs market has changed and an over-regulated, wrongly incentivised university system has not adjusted to the modern world.

Liam says he is a fan of a graduate tax. As a higher education is an investment with an uncertain outcome a strong case can be made that graduates should pay back in proportion to their income. But, as Tom McKenzie of Dundee University demonstrated in a recent paper, a graduate tax does nothing to improve teaching quality unless the revenue flows back to each graduate’s alma mater. Instantly there is a nexus between the fortunes of the graduate and the university, aligning their interests over many years. That is how to improve higher education and deliver value for money.

The £9,000 tuition fee cap is a fait accompli. It would be wrong for any political party to tinker with it. Cutting it for the future would be grossly unfair to those who have signed up to pay it. But it could be frozen and universities told that if they want more money, they have to share in the risks their students face. As an alternative to a loan they could be allowed to offer their students a new deal, where payments are proportional to income and there is no interest charged. If they help their graduates to do better than average, the university will gain the additional income so many say they need. Finally universities would have a real interest in finding out exactly what it is that employers want, and empowering their charges with those skills. There can be no more reliable mechanism for ensuring courses are relevant and students get value for money.

So, Mr Byrne, you know there is still no money. The way you can help the young is by creating incentives so that the institutions they rely on are motivated to support them in a world of work that is more complex, uncertain and fast changing than ever. It need not cost a penny.

For more details of Peter Ainsworth’s proposal, see A Free Market Graduate Tax: FAQs.