Skills gap
Universities still fail to deliver the specialist staff that British employers crave
It felt like a make-or-break moment for millions of 18-yearolds last week, as they collected grades that determined whether or not they had obtained a university place. Over the next few weeks, thousands will be shuffled through the clearing process, matching up students without a place to universities with slots to spare. For the students going through it, the process feels as if it will determine the course of their whole careers. The truth is rather different. Based on current data, only half of them will be in professional jobs in three or four years’ time.
This is a national scandal. The amount of money ploughed into universities has soared over the last decade. Yet businesses across the country are still reporting widespread skills gaps, and too many graduates are struggling to find graduate-level jobs.
Many of those who fail to climb the career ladder will never repay the money the Government lends them to study because they will never start earning over the repayment threshold of £25,000 a year. The ballooning liability for all these unnecessary degrees will therefore land straight on the public balance sheet. The wasted years of their early working life, on the other hand, are a loss that the students will never recoup.
A country with a severe productivity problem, a growing list of unfilled vacancies for skilled jobs and a desire to cut immigration that might otherwise fill these gaps cannot afford to keep funding a higher education system that delivers such poor value for money. It’s a threat not just to public finances, but to Britain’s prosperity.
Criticism of the university sector is often dismissed by references to the excellent performance of Britain’s best institutions. A growing number of international students study in the UK and the value of a degree at a top university is ever greater. LSE’S economics graduates, for example, earn a median wage of £61,100 five years on, by which time Oxford’s law graduates are taking home a median salary of £56,600. Such earnings are surely worth the high price tag of the degrees that help achieve them. This boon at the top obscures the terrible performance at the bottom, however. Graduates of Suffolk University’s English course are making a median wage of just £13,000 five years after leaving, while those who have studied psychology at South Wales are earning £16,500.
Both are charging £9,000 per year or more for these courses, money that will most likely never be repaid by students. How can it possibly be worth it for taxpayers to plug the gap?
Since 2010, universities have benefited from a massive income boom. The cap on tuition fees for English universities rose from £3,225 a year to £9,000. The idea was that the best institutions would be able to levy fees at the top end, since their degrees are clearly worth it, improving their funding situation while lessening the burden on government. The less valuable degrees were meant to cost less. Instead, they all shot up to £9,000 and students failed to turn into the discerning consumers they should be. In surveys of what metrics students use to choose their course, the amount graduates earn is ranked equal to the quality of local nightlife.
This poor decision-making has allowed universities to collect a huge windfall, whatever their actual performance. Data collated by the Higher Education Statistics Authority shows that fee income in England rose by 119pc to £15.6bn between the 2009-2010 academic year and 2016-2017, or 17 percentage points per year. Some of the rise was offset by a big drop in general funding grants, which fell 51pc to £3.5bn, but overall, university incomes have been on a tear.
Some of the money has gone on capital expenditure, which rose from £2.5bn to £4.2bn over the same period, according to Hefce data.
Investment is a positive sign, but this spending captures a range of projects, from shiny new laboratories kitted out to do some of the world’s most advanced research (good) to the University of Central Lancashire’s decision to build a whole outdoor set for students studying soap operas (less good). Meanwhile, spending on staff has also been rising, but by a fraction of that amount. Total staff costs at English universities rose by 30pc to £15.7bn from 2009-10 to 2016-17.
Unfortunately, the data are not broken down by teachers versus administrators, so it’s hard to know exactly where the extra cash is going, but it’s highly likely that the ratio between students and staff has got worse rather than better since tuition fees rose. Many courses offer as little as nine hours’ class time per week and lecturers were recently on strike in protest at cuts to their pensions. Anyone who knows a lecturer will know they are not usually swimming in cash. So something doesn’t add up here.
Education isn’t all about earning power, of course. But at a time when the Government is effectively funding a multi-billion pound increase in university spending, it’s reasonable to ask why it appears to be delivering such poor value for money.
Despite a lot of positive soundbites about vocational and technical training, the botched rollout of the new apprenticeship levy has triggered a massive fall in the number of apprenticeships on offer and lax policing of the system has allowed companies to direct the money towards executive coaching over training for school leavers.
All of this adds up to a system that is failing to deliver what workers and businesses need. Bank of England economist Andy Haldane spoke yesterday about his worry that automation will destroy more jobs than it creates. The only remedy government can pursue, he said, is to make sure our people are trained to be adaptable and take advantage of new opportunities that do arise. Judging by the state of Britain’s further education system, we are manifestly failing in that task.
‘The botched rollout of the apprenticeship levy has triggered a massive fall in the number on offer’