The furore caused yesterday by the thoughtful and incisive comments made by Universities Minister David Willetts tells you everything you need to know about the previous government’s handling of higher education funding.
Mr Willetts didn’t even have to say ‘the other f word’ for media outlets across the board to begin the perennial scare-mongering about higher tuition fees and their alleged consequences. Willetts’ entirely reasonable assertion that the current system was unsustainable was thus immediately greeted with a potent mix of fear, anger, frustration and derision.
However, what Willetts was really getting at was the hidden flaws in Labour’s design – almost certainly resulting from political concessions – that make the way funding operates, rather than the numbers involved, insufficient to survive in the medium and long term.
These caveats actually make funding arrangements relatively generous, but on this – as with many other issues – Labour’s timidity in addressing difficult problems openly and honestly resulted in a complete failure to accurately inform the public.
One response that was particularly striking came from the President-elect of the National Union of Students, Aaron Porter. He said: "Students will graduate owing an average of £23,500 and David Willetts' suggestion that students and families have misunderstood the nature of student debt beggars belief.”
By contrast, Willetts said in his interview for the Guardian that “students should regard tuition fees as an obligation to pay higher income tax rather than as a debt”. Guess who’s right.
Why? Because in reality, student loans (by which I mean maintenance and tuition-fee loans combined) are no more a “debt” than income tax, of which the average worker pays a career bill of about £1m; yet surely no-one sees themselves as being in such arrears to the state.
Crucially, like income tax, student loan repayments are merely added to the list of deductions on an employee’s payslip; graduates don’t ‘repay’ anything – they’re never given the money in the first place.
Even if one was to consider university loan repayment as a debt, the terms are about the most favourable that one could wish for. Payments only begin at the start of the new tax year after graduation, and are only made by those earning over £15k a year, at 9% of earnings above that threshold; any balance outstanding after 25 years is written off – borne by the taxpayer.
In addition, student loans are charged interest in line with inflation, thus usually below the government’s own cost of borrowing – with the cost of the shortfall borne by… guess who. For loans taken out since 1998 – when tuition fees were introduced – no interest was charged at all in 2009-10, and the 2010-11 rate looks set to be just 1.5%*.
As for universities, they are currently being funded by the government just as substantially as before, whilst the Treasury awaits the (uncertain) repayment of the loans granted to hundreds of thousands of students. This explains Willetts’ assertion that "if fees go up, the government would have to lend people the money to pay for them… [So] the Treasury can’t afford them".
Therefore, opposition politicians, populist journalists and NUS wannabes should not rush to jump on the same old fees/debt bandwagon but instead wake up, realise the direction in which the system of higher education funding is headed, and recognise the need for radical overhaul.
And who should shoulder the burden? Consider this: a first job for somebody leaving education between 16 and 18 is, on the whole, highly unlikely to pay more than around £15k (does that figure sound familiar?); graduate-scheme employers pay starting (and often accelerating) salaries in excess of £20k without blinking. Even after taking into account loan repayments and higher tax, the degree would usually have paid for itself by the end of that scheme.
A degree certificate these days does not represent a guaranteed ticket to wealth and success. But the opportunities it presents should not be underestimated, and therefore – contrary to the view of Lib Dem deputy leader Simon Hughes – it would be wrong to expect anything other than that the individuals to whom those doors are opened should pay for the privilege.
* (The rate used is the lower of: (a) the base rate + 1%; and (b) RPI inflation, which is 4.4%)
Friday, 11 June 2010
Tuesday, 8 June 2010
The Axe Factor Approach to Government?
It is the first clear sign of the Big Society being called into action.
Today the Government is announcing plans for an ambitious and wide-ranging consultation on where to make the significant savings that are required to reduce future budget deficits, in advance of the long-overdue spending review in the autumn.
For all the humorous references to other examples of mass participation – with one MP today hilariously describing the idea as an “Axe Factor approach to government” – the less appealing likelihood is that this consultation will be conducted through the usual channels of political parties, business forums, trade unions, community groups and the like, albeit perhaps on a larger scale and in a better-publicised way than the invisible exercises of the past.
After all, the issue is a very serious and complex one, and the stakes are extremely high. It is not merely a matter of a popularity contest between public-sector programmes but instead an attempt to ask fundamental questions about the role and size of the state, and is being billed by the Treasury as an historic opportunity to alter the way government works.
The Chancellor, George Osborne, wants to identify operations and functions that must remain in full public ownership and control, and those which can be delegated to the private and third sectors. Thus the idea could be thought of as the Conservatives’ version of – or at least their answer to – Labour’s public-private partnerships.
This comparison is not inaccurate. After all, the idea is said to be inspired by the success of the Canadian governments of the 1990s in unremittingly slashing expenditure in order to substantially redesign the country’s entire public sector.
One particular aspect of the Canadian model that looks set to be reprised is the creation of a special committee of senior politicians and civil servants – dubbed a ‘star chamber’ – whose task will be to challenge actual and proposed departmental spending.
Such scrutiny may appear common sense to you or I but is in fact a clear break from the present and previous arrangements under which funding was advocated rather than defended, with only the accountability offered by the NAO and Public Accounts Committee providing a check on wasteful spending – and even these mechanisms rarely prompted real retrenchment.
With intriguing implications for the government’s new policy, the announcement of the much-needed shift to prevention rather than detection of government profligacy comes just hours after the latest, strong warning about the precarious state of Britain’s public finances, with credit-rating agency Fitch describing the situation as a “formidable fiscal challenge”.
The agency also raises a certain irony about another of Osborne’s pet policies, warning that if, as expected, the new Office for Budget Responsibility paints a more pessimistic picture of the UK’s growth prospects when it delivers its pre-budget verdict next Monday, the impact of the ongoing recovery on the deficit would be less than currently predicted.
Fitch concludes that the current circumstances warrant a “strong medium-term strategy for fiscal consolidation”, including a much faster pace of deficit reduction than that set out in Labour’s last Budget or the plans announced so far by the new Tory-Lib Dem administration.
Such an assessment highlights the bravery of the Treasury in sacrificing this aspect of policy autonomy in the name of accountability and accuracy – and demonstrates the consequences of doing so. Although it restores greater credibility to aspects of Budget statements that became meaningless in the Brown/Darling era, Osborne may find his hands tied by his own proud desire to “fix the budget to fit the figures, not fix the figures to fit the budget”.
No wonder he wants some help in solving the difficult choices and dilemmas so long swept under the carpet by his red box-brandishing predecessors. But heaven forbid such a task be left to the masses.
Today the Government is announcing plans for an ambitious and wide-ranging consultation on where to make the significant savings that are required to reduce future budget deficits, in advance of the long-overdue spending review in the autumn.
For all the humorous references to other examples of mass participation – with one MP today hilariously describing the idea as an “Axe Factor approach to government” – the less appealing likelihood is that this consultation will be conducted through the usual channels of political parties, business forums, trade unions, community groups and the like, albeit perhaps on a larger scale and in a better-publicised way than the invisible exercises of the past.
After all, the issue is a very serious and complex one, and the stakes are extremely high. It is not merely a matter of a popularity contest between public-sector programmes but instead an attempt to ask fundamental questions about the role and size of the state, and is being billed by the Treasury as an historic opportunity to alter the way government works.
The Chancellor, George Osborne, wants to identify operations and functions that must remain in full public ownership and control, and those which can be delegated to the private and third sectors. Thus the idea could be thought of as the Conservatives’ version of – or at least their answer to – Labour’s public-private partnerships.
This comparison is not inaccurate. After all, the idea is said to be inspired by the success of the Canadian governments of the 1990s in unremittingly slashing expenditure in order to substantially redesign the country’s entire public sector.
One particular aspect of the Canadian model that looks set to be reprised is the creation of a special committee of senior politicians and civil servants – dubbed a ‘star chamber’ – whose task will be to challenge actual and proposed departmental spending.
Such scrutiny may appear common sense to you or I but is in fact a clear break from the present and previous arrangements under which funding was advocated rather than defended, with only the accountability offered by the NAO and Public Accounts Committee providing a check on wasteful spending – and even these mechanisms rarely prompted real retrenchment.
With intriguing implications for the government’s new policy, the announcement of the much-needed shift to prevention rather than detection of government profligacy comes just hours after the latest, strong warning about the precarious state of Britain’s public finances, with credit-rating agency Fitch describing the situation as a “formidable fiscal challenge”.
The agency also raises a certain irony about another of Osborne’s pet policies, warning that if, as expected, the new Office for Budget Responsibility paints a more pessimistic picture of the UK’s growth prospects when it delivers its pre-budget verdict next Monday, the impact of the ongoing recovery on the deficit would be less than currently predicted.
Fitch concludes that the current circumstances warrant a “strong medium-term strategy for fiscal consolidation”, including a much faster pace of deficit reduction than that set out in Labour’s last Budget or the plans announced so far by the new Tory-Lib Dem administration.
Such an assessment highlights the bravery of the Treasury in sacrificing this aspect of policy autonomy in the name of accountability and accuracy – and demonstrates the consequences of doing so. Although it restores greater credibility to aspects of Budget statements that became meaningless in the Brown/Darling era, Osborne may find his hands tied by his own proud desire to “fix the budget to fit the figures, not fix the figures to fit the budget”.
No wonder he wants some help in solving the difficult choices and dilemmas so long swept under the carpet by his red box-brandishing predecessors. But heaven forbid such a task be left to the masses.
Wednesday, 2 June 2010
A New Deal For A New Politics
A story that was somewhat buried yesterday by the continuing (and well-justified) outrage over Israel’s latest abomination, and the frankly farcical ‘announcement’ of England’s World Cup squad, was the release of details of senior civil servants’ salaries.
This latest attempt to signal the beginning of a new, more transparent era in politics featured the astonishing revelation that at least 172 individuals are paid more than the man who runs the country. (I say ‘at least’ because this statistic does not take into account the £7,500 pay cut David Cameron imposed on himself upon taking office.)
The list shows that the highest-paid civil servant is John Fingleton, the head of the OFT (a non-ministerial government department) who earns almost £280,000. Perhaps equally interesting is the appearance of Sir Gus O’Donnell – the head of the Civil Service – at just 5 on the list, below the heads of departments that he oversees.
Other striking revelations include the presence of no fewer than 28 Ministry of Defence officials among the public-sector pay elite, and – not unexpectedly – the circa 140-30 gender split above this particular glass ceiling.
But does this list really tell us any worthwhile? After all, it identifies less than 200 individuals (most of them based in London) among an organisation of 500,000 employees working across the country. Also, it must not be forgotten that the heads of similar-sized corporations in the private sector earn much, much more than the sums revealed here.
Nevertheless, in times like these, anything that involves large sums being drawn from the public purse is sure to spark criticism and controversy. Why should 170-odd people, however talented they may be, be paid more than the elected leader of the country?
The rationale cannot be the need to stave off public-sector competition (an argument that is so often used to defend bloated BBC pay packets), because the end results clearly do not go far enough to achieve this on their own.
Another easy answer is that people work for the government partly because of a uniquely altruistic sense of job satisfaction; it’s a convincing argument, and I share the sentiment to a certain extent, but if it were true, why has constraining top-level civil servants’ pay been so unpalatable for so long?
Perhaps the true disproportion between the salary scales of senior politicians and their civil-service equivalents lies not in the lucrative deals offered to the latter so much as the slim pickings of the former. It is doubtless an unpopular argument and it would surely take a brave man to argue for a better deal for any MP, but it’s clear to me that ministers’ salaries – on the face of it – do not reflect the level and variety of responsibilities associated with the job.
On the other hand, of course, a hidden and very substantial supplement to any MP’s basic wage is the plethora of allowances and other perks that they all enjoy to a greater or lesser degree depending not only on their rank but also on other factors like the location of their home constituency.
Therefore, an obvious solution to this unwieldy pay structure would surely be to get rid of most of these much-abused allowances altogether, sparing only a much smaller fund for those with particularly long distances to travel. In return, all MPs’ and especially ministers’ salaries should be greatly increased to properly reflect their position within the parliamentary hierarchy.
If only the tabloid press and the public at large could swallow hard and see beyond the headline rise in salaries to read the finer print, this move would put to bed, once and for all, the controversies of the past few months. After all, the system of allowances itself was initially introduced in the Thatcher era precisely to obscure pay rises for MPs’ and thus to avoid the anticipated public outrage.
Ever since then, everyone both inside and outside of Westminster has been either kidding themselves or just plain deceived about how much we pay our elected representatives, legislators and governors.
What better time and what better rationale to clear the smokescreen, and what better way for the architects of our ‘new politics’ to put their money where their mouth is?
This latest attempt to signal the beginning of a new, more transparent era in politics featured the astonishing revelation that at least 172 individuals are paid more than the man who runs the country. (I say ‘at least’ because this statistic does not take into account the £7,500 pay cut David Cameron imposed on himself upon taking office.)
The list shows that the highest-paid civil servant is John Fingleton, the head of the OFT (a non-ministerial government department) who earns almost £280,000. Perhaps equally interesting is the appearance of Sir Gus O’Donnell – the head of the Civil Service – at just 5 on the list, below the heads of departments that he oversees.
Other striking revelations include the presence of no fewer than 28 Ministry of Defence officials among the public-sector pay elite, and – not unexpectedly – the circa 140-30 gender split above this particular glass ceiling.
But does this list really tell us any worthwhile? After all, it identifies less than 200 individuals (most of them based in London) among an organisation of 500,000 employees working across the country. Also, it must not be forgotten that the heads of similar-sized corporations in the private sector earn much, much more than the sums revealed here.
Nevertheless, in times like these, anything that involves large sums being drawn from the public purse is sure to spark criticism and controversy. Why should 170-odd people, however talented they may be, be paid more than the elected leader of the country?
The rationale cannot be the need to stave off public-sector competition (an argument that is so often used to defend bloated BBC pay packets), because the end results clearly do not go far enough to achieve this on their own.
Another easy answer is that people work for the government partly because of a uniquely altruistic sense of job satisfaction; it’s a convincing argument, and I share the sentiment to a certain extent, but if it were true, why has constraining top-level civil servants’ pay been so unpalatable for so long?
Perhaps the true disproportion between the salary scales of senior politicians and their civil-service equivalents lies not in the lucrative deals offered to the latter so much as the slim pickings of the former. It is doubtless an unpopular argument and it would surely take a brave man to argue for a better deal for any MP, but it’s clear to me that ministers’ salaries – on the face of it – do not reflect the level and variety of responsibilities associated with the job.
On the other hand, of course, a hidden and very substantial supplement to any MP’s basic wage is the plethora of allowances and other perks that they all enjoy to a greater or lesser degree depending not only on their rank but also on other factors like the location of their home constituency.
Therefore, an obvious solution to this unwieldy pay structure would surely be to get rid of most of these much-abused allowances altogether, sparing only a much smaller fund for those with particularly long distances to travel. In return, all MPs’ and especially ministers’ salaries should be greatly increased to properly reflect their position within the parliamentary hierarchy.
If only the tabloid press and the public at large could swallow hard and see beyond the headline rise in salaries to read the finer print, this move would put to bed, once and for all, the controversies of the past few months. After all, the system of allowances itself was initially introduced in the Thatcher era precisely to obscure pay rises for MPs’ and thus to avoid the anticipated public outrage.
Ever since then, everyone both inside and outside of Westminster has been either kidding themselves or just plain deceived about how much we pay our elected representatives, legislators and governors.
What better time and what better rationale to clear the smokescreen, and what better way for the architects of our ‘new politics’ to put their money where their mouth is?
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