Thursday, 31 March 2011

More chaos on student fees

Once again the Government has shown that it is completely out of touch with public concerns about university student finance. Firstly they failed to understand that, for many poor families, if something is called a “loan” then they will see it as a loan however many times you try and persuade them it is some form of graduate tax. As such this is bound to impact on access to university for some poorer students.

Now a recent survey by the Times suggests that three quarters of universities plan to raise student fees for undergraduate courses to near the ceiling of £9000 per annum. Furthermore Leeds Metropolitan University is the first of the “new” universities to announce that it will set fees at £8500 per annum close to the cap. This blows a complete hole in the Government’s idea that price competition between universities would drive down fee levels – all it had dome is drive them up. Only Ministers could have thought things would be any different from this even though they were repeatedly told otherwise

Universities have clearly judged that the level of fees a university charges is often seen by teachers, students, parents and universities themselves as a surrogate for “quality”.and however many times you tell them this might be the case they won’t believe you. No evidence about teaching quality reviews etc will convince them otherwise. Also. past experience with the raising of university fees suggests that the universities may well be correct in their judgement.

I think the basic problem here for the Government is the ideological position of many right wing Conservative MPS who have a touching faith in the potential impact of market competition but fail to see the almost complete lack of rationality of many consumers. Go to any supermarket and you will see tins of branded product sitting on a shelf next to the supermarkets own product which is being sold at half the price of the branded good. When asked why they buy the branded good at twice the price people usually say something like “because it is better” but then can’t provide any rational evidence as to what makes it is better. Do you think they are going to take any chances with their kid’s education by buying what they will perceive as “cut price” goods?

Clearly Ministers and civil servants don’t understand either university cultures or the concerns of students and parents but they are blinded by a false economic orthodoxy. I am sure this latest new will disquiet Liberal Democrat MPs even more than they are already disquieted.

Wednesday, 23 March 2011

What the budget didnt do for growth

The Coalition Government came to power with a flagship policy of reducing public spending and high levels of Government borrowing but to achieve this they require reasonable levels of economic growth. Things haven’t been that good and at the outset the Chancellor had to release information that the Office for Budget Responsibility is predicting lower levels of growth in the UK economy than originally expected. Thus there remains serious concern about the ability of the UK economy to generate significant economic growth and hence tax revenues.

A large part of the budget speech, therefore, focussed on Government plans to make the UK business more innovative, competitive and attractive to foreign investors thus stimulating economic growth. In this way the Chancellor hopes to create a growing private sector to provide employment for those displaced from the public sector and to generate additional tax revenues. The budget focussed on four aims with a variety of detailed measures:-

• Simplifying the tax system and reducing the tax burden on business as an encouragement to investment
• Reducing the burden of regulation on businesses
• Improving our much neglected manufacturing base with the aim of increasing exports
• Improving the skills base of the UK workforce

Some of these business related measures will have implications for local and public authorities across the country including proposals for local authorities to keep growth in business rate revenues (and thus they have an incentive to promote business growth in their areas) and requirements for planning arrangements to be altered to put a premium on projects concerned with business growth.

While most people would support these government aims and many of the detailed measures proposed, the question mark is whether the Chancellors package will deliver against his aims. I see two major problems which need more attention than the Chancellor is giving

• A dilapidated regional infrastructure which is inhibiting economic growth in many parts of the UK. While the Chancellor announced a few additional schemes there are many years of neglect to be addressed through increased capital investment which would, at the same time, create jobs.
• A poorly performing education system (with thousands of pupils leaving school with no qualifications) which has big implications for business and economic growth. The 2010 PISA report on schools performance underlined the urgent need to reform our school system.

While the budget measure which will probably make the biggest newspaper headlines (and gain the Chancellor most plaudits) is that concerning relief on fuel duty, I suggest the key issue for the budget is growth. If economic growth is delivered then the Chancellor will be vindicated but it seems unlikely that years of neglect will be solved by one budget.