How to boost higher education and cut public spending

In a new paper published by the Higher Education Policy Institute (@HEPI_news), the Rt Hon. the Lord (David) Willetts, the former Minister for Universities and Science (2010-14), considers how to overcome challenges currently facing the higher education sector as well as how to save public spending on higher education at the forthcoming Spending Review.

David Willetts, the author of Boosting higher education while cutting public spending (HEPI Report 142), said:

‘Higher education has fallen out of favour. But it boosts earnings, wellbeing and the prospects of people and areas left behind. Conservatives are increasingly worried that graduates are left wing but the Party’s problem is with young people more widely. The best way to tackle this problem is by helping them fulfil their aspirations – to own their home, get a decent job, and – yes – go to university.

‘It is in the interests of students that universities are well funded. But that should not come at the expense of taxpayers. It is wrong that forecast loan write-offs have risen from 28% under the Coalition to 53% today. Too many graduates have the depressing experience of their student debt rising each year when they could be paying it off. That’s why I believe the repayment threshold should be brought back down to £21,000 saving £3 billion of public spending a year.

‘Universities are crucial to levelling up and boosting earnings as well as delivering vocational training. That means breaking down old-fashioned assumptions about universities shaped by the long dominance of the Oxbridge model. Higher education comes in many forms. The so-called “bad” universities are very useful indeed in vocational training and applied research. They are anchor institutions boosting local economies across England – in Bolton, Bradford, and Sunderland as well as Oxford and Cambridge. New universities should be created in towns from Blackpool to Chatham. Universities are a great national asset. We should use them and build more of them.’

Key Points

• The aspiration to reach higher education is widespread, particularly among groups which have not had the opportunity in the past. The red wall seats have much lower participation. Fewer than 30% of school and college leavers go on to higher education compared with 60% in affluent long-standing Tory seats.
• Low levels of participation in higher education are holding back wages in the Tory red wall seats. New figures on a constituency basis show that higher education qualification ranges from 19% of the working age population in Great Yarmouth (where median weekly full-time earnings £473) to four times this at 77% in Tooting (where earnings are £767). For every 1 percentage point increase in the proportion of the working age population with higher education qualifications, median full-time earnings in a constituency rise on average by almost £5 per week (or over £250 per year). Almost half of the variation in earnings between parliamentary constituencies is statistically associated with variation in the prevalence of higher education qualifications.
• More graduates in an area boosts the earnings of non-graduates. The levelling up agenda means we need more university students from low-participation areas. That is unlikely to be achieved if it is a zero-sum game dependent on lowering participation in high participation areas.
• Economies with liberal labour markets and high levels of flexibility tend to have slightly higher levels of participation. Our participation rate is not the result of a centrally imposed target of 50% participation which has long since been abandoned. It is the result of the choices of young people. 
• Graduates are not currently paying back enough of the cost of higher education. Forecast write-offs of student loans in England have risen from 28% under the Coalition to 53% now. This is the result of the mistaken decision to raise the repayment threshold to £25,00 and index it thereafter. It should be reduced to £21,000, including for graduates who have recently graduated. That would save £3 billion per year. It would also reduce the number of graduates who see their graduate debt rising each year – a concern to them and their parents.
• There should be a quinquennial review of the levels of fees and loans so they can be recalibrated as the labour market and the economy change.
• The Government should make it easier for universities to communicate with their graduates. And universities should have the opportunity of taking a stake in the debt of their own graduates so they gain if their graduates’ earnings rise.
• The social backgrounds of degree apprentices are higher than for university students. Compared with mainstream students doing a similar subject, higher level apprentices were more white, more male, less likely to be disabled and less likely to be from a deprived area. Social barriers to apprenticeships may be one reason why disadvantaged groups have rapidly increasing levels of participation in higher education which has more diverse and open recruitment.
• There is no battle between FE and HE. The biggest single role of Further Education Colleges is delivering education and training for 16 to 18-year olds. They are a crucial route to higher education and can also deliver it themselves, usually in courses validated by a university.
• Driving students to do T-levels and enforcing a binary divide between academic and vocational courses at the age of 16 is a mistake. BTECs straddle that divide and are popular with 250,000 students doing them every year. It would be a great error to remove funding for them to force students onto T-levels. My proposed amendment to the Skills Bill requires consultation with employer representatives before any such qualifications lose their funding.
• The Lifelong Loan Entitlement is an important new initiative. However, mature students are more averse to loans than younger students, who can see the promise of the graduate route whereas it may be harder for older people to shift career. It is likely therefore that take up of the four-year loan entitlement will be greatest among younger students. This is an opportunity to move to four-year degrees, a historic opportunity to tackle England’s worst education problem – early specialisation.