Government plans for higher education offer little of substance

Len Shackleton

February 24, 2022

The government’s new proposals on post-18 education and training are underwhelming.  Bits and pieces are cherry-picked from Sir Philip Augar’s 2019 Report, but many issues are ducked, and yet more consultations will ensure that nothing much changes within the lifetime of this Parliament.

The tweaks to the Student Loan system will attract most attention. They are designed to ensure that a higher proportion of loans will eventually be repaid, by lowering the payment threshold and extending the repayment period to 40 years from 30 years (it was originally 25, remember) but this will not have a noticeable effect on public finances for many years.

However, new entrants to the system in 2023 will start paying back loans at lower levels of salary, which will be perceived as a further hit to young people who have disproportionately suffered during Covid and are already facing higher taxation, rents and house prices. This change may be justified, but the situation of young graduates is not at all transparent. Holding down student fees, and charging interest at RPI rather than RPI plus 3 per cent adds to the confusion. This is not a simplification of the system and ignores some sensible suggestions in the Augar Report.

Incidentally, holding down fees for a prolonged period will of course increase pressure on universities, which may be a good thing. But keeping standard fees across the board ignores an important point made by Augar, that there is considerable cross-subsidisation in universities as it costs far more to deliver, for example, laboratory-based courses than social studies programmes. The latter also get far less face-to-face teaching, a value-for-money issue which these proposals do nothing to tackle.

One of the tricky matters on which consultation is solicited is our old friend the Mickey Mouse degree. For such a popular target for resentment, such degrees are in reality difficult to track down. The Department for Education is touting the idea that we can spot these programmes from their statistical profile; one suggestion is that courses with less than 75 per cent completion rates, and/or with less than 60 per cent ending in graduate jobs, should have their numbers capped.

The trouble with such indicators is that, like all central planning targets, they can and will be gamed. Completion rates will be boosted by dropping exams in favour of coursework. Ambiguity over defining graduate job titles and incomplete reporting will fudge the employment criterion.

Another suggestion is that there should be higher minimum entry standards to university. Good luck with that one, which will have to be hedged around with all sorts of exceptions if higher education is not to suffer a major loss of the disadvantaged students the Office for Students is demanding they take on.

It is disappointing that there is no sign of fundamentally rethinking the student loan system to try to realign higher education incentives.

If we want universities to pursue employability, raise academic standards, and only accept students who have commitment and a reasonable chance of success, they need to be rewarded when they do so, and punished when they don’t. This is most obviously done by linking their income to the success of their graduates.

One way to do this is by a risk-sharing arrangement such as that being pioneered by StepEx for London Business School and Insead – where universities receive a share of graduates’ future earnings rather than a guaranteed payment from the Student Loans company. But no such radical thinking is on the cards.

More top-down initiatives in the new proposals include other old favourites such as increased STEM funding. Politicians always love this; they see industry as crying out for people with these ‘real’ degrees, which will boost our future economic growth. Maybe this is true of some, but it’s interesting to see that many STEM subjects, including Physics, Engineering, Veterinary sciences, Biosciences and Subjects Allied to Medicine have high proportions of graduates who will not repay the cost of their education, with many of them deserting their specialist subject for general management or other jobs.

We are promised some more money for a ‘national scholarship’ scheme, worth £75 million over three years, which would fund perhaps 8,000 awards of £3000 per year. As always, these scholarships are targeted at disadvantaged groups, in this case those from households with annual incomes of less than £35,000. This back-of-the-envelope scheme will encourage all sorts of shenanigans as people try to make their ‘households’ (often a slippery concept) eligible: it will be too expensive to adjudicate properly a separate arrangement outside existing criteria used for universal credit or free school meals.

As with many recent government announcements, such as the Levelling-up White paper, the post-18 proposals involve a lot of re-announcing proposals which have already had an outing – T levels, a ‘skills mission’, more apprenticeships. These things are themselves often retread policies from ten or fifteen years ago.

One possibly beneficial scheme is the ‘Lifelong Learning Entitlement’ which may do something for older people who need retraining, and may give the opportunity for younger people to finance non-degree technical training. But again we have seen similar schemes in the past such as New Labour’s Individual Learning Accounts, which had to be scrapped when Estelle Morris discovered the scale of fraud involved.

I didn’t agree with much of the Augar Report, but it was at least a serious attempt to grapple with the perennial issue of how we prepare people for work. Today’s proposals offer little of substance.


  • Len Shackleton

    Professor Len Shackleton is an editorial and research fellow at the Institute of Economic Affairs and professor of economics at the University of Buckingham.

Written by Len Shackleton

Professor Len Shackleton is an editorial and research fellow at the Institute of Economic Affairs and professor of economics at the University of Buckingham.

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