How Higher Education can Boost People-Powered Growth

The Economy 2030 inquiry ( a collaboration between the Resolution Foundation and the Centre of Economic Performance at the London School of Economics) is setting out a new economic strategy, and is publishing a series of externally-written policy essays. Each one aims to provoke a public debate on a specific policy area and sketch out an agenda that will contribute towards a wider goal of the UK becoming a higher growth, lower inequality economy. Higher education plays a key role in achieving that.

The OECD estimates that every extra year in education boosts long-term growth by 3% to 6%. For this reason, future participation in higher education is a key factor in its assessment of the long-term growth prospects of different economies.

Key findings

  • Human capital is central to achieving growth. We need to boost investment in human capital and promote the need for mobility, flexibility and dynamism so that investment in human capital does not trap people in particular industries or places. Higher Education can help ensure we are more skilled and more flexible through our careers, with L4 and L5 qualifications being an important but undervalued part of Higher Education.
  • The UK has a comparative advantage in service industries. It is easy to assume this just means financial services but that would be a mistake. Higher Education is a key service industry where we clearly have a comparative advantage. It is at the early stages of globalisation and so far shows no signs of the deglobalisation affecting other key sectors. We can make more of this export sector.
  • Many other advanced economies do better than the UK at sharing the benefits more widely. There may be stronger support for the difficult and uncomfortable measures required to promote growth if more people can hope to benefit from it. Higher Education is part of the solution and is the only stage of education where people from disadvantaged backgrounds actually catch up on those who are more advantaged. We should promote the creation of more Universities and other Higher Educational institutions as drivers of opportunity for less affluent people and in cold-spots where there is no easy access to them nearby.
  • Innovation is a key driver of growth. Most of Britain’s Research & Development  happens in universities. We have universities at the top of global league tables for world class research, but then fail to commercialise our research successfully and apply it in business. Tackling this is a way to boost growth
  • Not enough people get to L3, and of those, too many stop there rather than advancing further. L4 & L5 qualifications are an opportunity to reach these people who may not be attracted to a full honours degree.

Key Recommendations

  1. Funding pots that support both Higher Education Institutions and Further Education colleges to work together to support access to L4 & L5 should be created. There also needs to be a demand strategy that significantly raises employer awareness of the range and value of L4 & L5 qualifications. IfATE should fund the development of new L4 & L5 technical qualifications in areas where skills needs have been identified in the new LSIP. Some form of means-tested assistance for L4&L5 students would be desirable if resources permitted.
  2. There should be an open, evidence-based debate about the calibration of the graduate repayment scheme so the system is adjustable and reflects changing political judgements. That could be achieved through a quinquennial review of fees and loan terms so that the system could be modified without tearing it all up and starting again.
  3. Degree apprenticeships should be funded out of the standard fees and loans model. This would release resources from the levy to focus on younger apprentices and courses at L2&L3.
  4. The student loans company is a fantastic resource with data on graduate earnings and means of contracting both universities and graduates. The obstacles to these contacts need to be removed provided graduates consent for contact to be made.
  5. Banks could be invited to partner with the universities to buy the debt of a university graduate off the Students Loans company.
  6. Our trade negotiators should be able to offer student loans that would cover British students studying in a foreign country. In return, we could ask for more recognition of British qualifications or making it easier for our universities to set up and operate in the country.
  7. The DfE could launch a competition inviting applications to create a new university with a particular focus on places that do not currently have one.
  8. The Government should promote applied R&D in universities with a national innovation voucher programme.

Our Commentary

This is a really interesting and timely essay. The government is considering the changes needed to Post-16 education that will drive skills growth and the link to Higher Education and the role it can play does not seem to be joining up.

The idea of universities playing a more active role in the skills space, and a need for innovation at Level 4 & 5 is interesting. As is the point that it is a university where some aspects of social mobility can catch up.

We know from young people that university is a real opportunity they want to consider in their next steps. But they are worried about the affordability and how well a course will prepare them for their next steps. Young people in university are getting less careers support and work experience which is adding to the issue of young people not feeling prepared for their futures.

The opportunity to really capitalise on what universities do well and reimagine some of their activities could clearly drive our skills economy.

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