Peter Ainsworth is the Managing Director of EM Applications and is the author of Universities challenged: funding higher education through a free-market ‘graduate tax’.
James Frayne astutely explains that once Brexit has occurred a major plank of the Conservative Party’s appeal to working-class voters falls away and it “needs to do a lot more for working class voters – and very fast.”
Perhaps anticipating this requirement, the Institute of Economic Affairs ran a competition over the summer to identify a policy proposal that would provide opportunity for all. The winning entry, announced last Thursday, could well be the proposition the post-Brexit Conservative Party needs as it distributes state largesse from the privileged and remain-voting university-educated to the broader population.
“EdEGG”, as the policy proposal was named, aka The Education, Enterprise and Giving-back Grant, is an innovative policy which, without costing the government a penny in additional expenditure, provides a nest egg of opportunity at age 18.
By re-arranging the flows of money into higher education so that universities, rather than the government, lend to their students, and receive income-related repayments from them, the taxpayer is saved the £10.6bn that is currently lost on student loans. Combined with the £2.7bn generated through the Apprenticeship Levy and sharing equally and fairly between all 18-year olds there is enough to provide each of them with a £20,000 credit. This can be used towards: (i) further education or training, (ii) the launch of a new business or (iii) voluntary activities. The money does not have to be used at age 18. It is a Lifetime Opportunity Credit, offering financial support at many different stages of life.
Rob Owen OBE, Chief Executive of the St Giles Trust, which helps people facing severe disadvantage to find jobs, says: “Many of our clients feel they have no stake in society. They don’t have a bank of Mum and Dad and have no access to even small pots of money to pay for training courses – especially pragmatic skills.”
Ironically, while St Giles’ clients receive little support, those children who attend university, coming predominantly from wealthier backgrounds, do benefit from significant state aid in the form of the subsidisation of their student loan. EdEGG’s re-distribution of this subsidy addresses a root cause of inequality and provides the same help for all, regardless of region or social background.
Under EdEGG, universities and other post-18 providers can set their own fee levels but must share the risk faced by the student, relying in part on post-graduation income-related payments in order to survive and prosper. With this alignment of interests, institutions will ensure that what is being taught is useful, they will re-design courses to make the most effective use of time on campus and provide “after-sales-support” to un- or under-employed graduates. Arts and Humanities courses will thrive as they develop the creativity needed in the robot age. The NHS will benefit from more doctors being trained as the limit on the number of medical students, a consequence of the government bearing the cost, can be lifted. The institutions will benefit from less red tape and a government guarantee on loans made to them.
EdEGG funds may also be used to help launch a business by providing the necessary initial capital. To give every start-up the best chance of success, EdEGG funds are only released after a bank has agreed to lend it at least an equal amount. As the bank will be at risk it will have a powerful incentive only to approve propositions that have merit.
Alternatively, EdEGG will help finance the creation of a Community Interest Company (CIC), to provide services – which could be a youth, elderly, music or theatre group – that benefit local people. To confirm that a CIC has popular support, and that the community is willing to share in the risk of the venture, a total of £1,000 must be raised from 100 local citizens.
Finally, any EdEGG credit that is unused by age 55 will be paid to that person’s pension plan, subject to them confirming that they have carried out voluntary work that benefited others equal in hours to the EdEGG credit divided by the minimum wage.
At launch, EdEGG will create a wave of optimism among the 18-year olds who receive the £20,000 credit. Over the medium-term it will make a university education always worthwhile – any career hiccups and the institution will be in touch, keen to help. Many more people will be able to afford vocational training, there will be a jump in new business start-ups and a leap in the formation of community-enhancing projects.
In the long-term it is a game-changer, transforming the mojo of the country as each new generation has opportunities opened to them.
Using free-market principles to achieve a progressive end at nil cost to the Exchequer, EdEGG is not merely feasible, it is politically compelling. By requiring universities to share in the risk their students take and freeing them from much red-tape, it directs help to the voting constituencies the Conservative Party needs to win over – the young and Frayne’s non-university-educated “working class”.