Ben Blackmore: How to make Universities offer courses that meet employer demand and fuel growth

Ben Blackmore is Area Deputy Chairman (Political) of Berkshire Conservatives.

When Blair set forth his desire to get 50 per cent of students into university in 1999 the maths was appealing: the average starting salary of a graduate was almost double that of a minimum wage job. Blair’s policy would justify the tax and spend policies that would follow as untold billions would be captured by productivity increases.

The reality, however, is that a full-time worker on minimum wage has increased by 60 per cent since 2001 to £21,700 due to increases in the national minimum wage, while graduate salaries have declined 6 per cent to just over £34,000, according to the Resolution Foundation. What is even more concerning is that those at the 10th percentile of Graduate earnings now have salaries just 11  per cent,higher than someone on the national minimum wage, compared to 82  per cent higher in 2001.

The contrast with US graduates’ wage premium paints an even bleaker picture, with US graduates receiving a sharp increase in real term wages between 1997-2021. In contrast, in all regions except London there has been a sharp decline in real wage growth, reinforcing housing supply issues and regional brain drain.

We are soon reaching the point where we will no longer need to argue between equal opportunity or equal outcomes because we will have the most dissatisfying conclusion of equal outcomes through equal opportunity.

While Universities have long been tasked with enacting Employability as a focus of their outcomes, measures enacted so far have failed to address this decline. Indeed, in November 2018 the former Education Select Committee Chair Robert Halfon MP said, “The blunt reality is that too many universities are not providing value for money and that students are not getting good outcomes from the degrees for which so many of them rack up debt. Too many institutions are neither meeting our skills needs or providing the means for the disadvantaged to climb the ladder of opportunity.”

But a door has been opened, inadvertently by Labour’s moralistic crusade against private schools. By applying VAT to private schools in their aim to reduce inequality they have removed the long held consensus that all education is a public good.

We should capitalise on this.

How?

By adjusting the Value Added Tax Act 1994 to no longer provide a blanket exemption for universities; instead an exemption for courses with Graduate wage premium at least 25 per cent above the national minimum wage on average. In addition to not extending loans to cover these VAT increases, we can create a price mechanism that will eradicate courses and institutions that are not focused on creating value and growth, whilst also preventing the exploitation of young students and the taxpayer.

Arguments could be made from which benchmark we set this from; 1 year after graduation, 3? 5? But ultimately it will finally give us a tool to force universities to design courses that meet local industry demand rather than just misaligned consumer demand.

Exemptions will have to be made around new courses addressing new industries to prevent stagnation but ensuring that a proper business case is presented which aligns to National strategy or Industry demand but these challenges can be overcome.

The Augar review states as of 2018 there will be a deficit of £1.1 billion for the creative arts, nearly £1 billion for business degrees and over £800m for social studies due to written-off loans. This has certainly grown greatly. The government is forecast to subsidise 29  per cent of the full-time undergraduate higher education Plan 5 loans issued in financial year 2023-24 and expects only half of undergraduate loan borrowers starting in academic year 2023/24 to repay their loan in full within 31 years.

The current status quo within Higher Education cannot stand, value is being destroyed rather than created.

By turning around the decline in the graduate premium, we can make the long road toward growth a little shorter.