Tory plans to axe rip-off degrees don’t go far enough
Too many university courses waste students’ time and energy leaving them loaded with debt and costing the taxpayer billions. Cutting low-value courses is a good start, but the system needs much more radical reform, says Daniel Herring
The Conservative Party’s pledge to cut low quality university courses should be welcomed by anyone concerned with the UK’s economic trajectory in the coming decades .
Overall, most people are economically better off having gone to university. But for a large proportion of people, going to university does little to enhance their lifetime earnings. The Office for National Statistics, for example, estimates that, in 2021, one third of all graduates, including 40 per cent of recent graduates, were working in non-graduate roles. The IFS estimated in 2020 that one in five students would be better off financially if they had not gone to university. In economic terms, their degree was a waste of time and money.
As highlighted in a Centre for Policy Studies report, ‘The Value of University’, the numbers vary widely by subject type. Unsurprisingly, graduates from medicine, economics and law get a significant economic boost from their degrees. However, graduates from creative arts are likely to see very little difference to their lifetime earnings. For the 20 worst performing courses across the UK, less than a third of students actually complete the course and go into graduate employment. The impact of taking on student debt without any reward is even more harsh when we consider that it is disproportionately poor students who end up doing poor quality courses.
But we have not only been wasting young people’s time and energy, leaving them with tens of thousands in debt and poor employment prospects. It’s costly to the taxpayer as well, with around £8bn in student loans being written off every year.
The Conservative plan is a good start, allowing the Office for Students to shut down courses based on high dropout rates, poor progression to graduate jobs, and low earnings potential. This will ensure that the worst “rip-off degrees” are no longer subsidised by the taxpayer.
But more can be done to focus on the two core problems.
The first is incentives: universities are paid for enrollments, not the outcomes for their students. The government carries the risk for poor performance, ultimately bearing the cost of unpaid student loans. A better solution would be for the government to lend money to the universities, who would then loan to students. After graduation, the students would agree to repay a portion of their income to the university, who would repay the government. This would make universities carry more risk, and therefore become much more interested in the future earnings of their students. If there are courses where the economic return is low but social value is high, the government can fund these courses through bursaries.
The second problem is information – it’s not always clear to prospective students what a good quality degree is, especially if they are the first in their family to go to university. Students need better information. The Office for Students can ensure that every course advertised provides an estimate of lifetime earnings. While, it’s important to recognise that university is not just about job prospects, the economic value of a degree is of interest to anyone setting aside years of their life and thousands of pounds. We can make it easier for them.
The Conservatives’ plan to shift £885m of savings on poor quality courses to apprenticeships is another welcome step. The UK’s tertiary education system is unbalanced: there are too many university graduates and not enough skilled technical workers. According to the OECD, around 20 per cent of 25-34 year olds have a vocational qualification as their highest level of education, compared to 40 per cent in Germany and France.
Worryingly, we are going backwards here. The number of people starting apprenticeships has fallen from 510,000 in 2015/16 to 340,000 in 2022/23. At the same time, employers are finding it harder to hire skilled workers. Funding a further 100,000 places will begin to improve the situation.
And not only will this improve the prospects of young people, but the returns for the country are enormous. A 2015 report estimated an annual economic return of between £26-28 for every £1 invested in Level 2 and 3 apprenticeships (roughly GCSE and A-Level equivalent, respectively).
This policy is a win-win for the UK and students. Better information and choices for post-secondary education will allow all young people to choose a career path that is suited to their interests, highly skilled and well-remunerated. And if the UK wants to overcome its productivity challenges and lead the world in advanced manufacturing, the energy transition, building homes, and life sciences, it will need a steady stream of well-trained workers with the practical skills that are gained through apprenticeships and high-quality vocational training.
Daniel Herring is fiscal and economic researcher at the Centre for Policy Studies