When employers invest in education, everyone is working together

A graduate levy paid by businesses will help keep tuition costs down while still producing the skilled graduates the economy needs, argues Johnny Rich

November 29, 2018
Clydesdales and pulling a cart
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Every few years, you can count on a return of the Olympics, a farewell tour by Elton John and a review by the government of English higher education funding. The balance is adjusted between taxpayers and students, and as the scales shift from side to side, universities watch the overall weight of their funding rise or fall.

With each review over the past 30 years, it is the students who have consistently shouldered an ever-larger share of the burden. But tripling the fees to £9,000 a year in 2012 (and then to £9,250) proved to be a breaking point, politically at least.

The increase was largely blamed for the wipeout of coalition partners the Liberal Democrats at the 2015 general election (when they dropped from 57 to just eight MPs) and for the poll-bucking 2017 performance by Jeremy Corbyn’s Labour Party, whose manifesto included a promise to end tuition fees.

The response of the prime minister, Theresa May, was…another review, which is due to publish its initial thoughts in the new year. If leaks are to be believed, it looks set to recommend reducing student contributions for the first time in a generation. Whether the gap will be plugged by government grants or funds will just drain out of the system remains to be seen.

However, much as it may be overdue to reset the balance, it seems self-defeating if it is at the expense of a properly funded higher education sector. This is not a delicate balancing act, after all. It’s a cart with three horses – taxpayers, students and universities – all hitched to different sides. The only way it can go anywhere is if one horse loses or the cart is pulled apart.

There is a fourth horse, however – a steely stallion that has been just quietly chewing its bit for fear of being noticed: graduate employers. Businesses benefit from higher education as much as graduates or the wider economy. Like dissatisfied customers, they bemoan skill shortages and the job-readiness of graduates, but their principal financial contributions to the system are through corporate taxes and paying salaries at a graduate premium.

Although employers can feel like they are avoiding the cost of funding higher education by staying out of the game, in fact they are not only paying indirectly, but they are also losing their stake in shaping the sector to meet their needs – and those of the wider economy.

This week, the Higher Education Policy Institute has published Fairer Funding: The Case for a Graduate Levy, in which I have proposed that we hitch all four horses to the front of the cart by focusing on their common goals. We must radically redesign the system to ensure a sector that produces well-educated graduates with minimal debts and the skills that match the nation’s economic and social needs.

To this end, I propose that instead of students borrowing money to pay for tuition, businesses should pay a levy for each graduate they employ. The amounts would be equivalent to the student loan repayments made under the current funding system in England.

Revenue from graduate levies would be paid directly to the university where each graduate studied. Universities’ financial sustainability would be based on a shared investment in the future employability of their students, rather than their ability to maximise their student intake on courses that may not support the graduate’s rounded, resilient and long-term employability.

Meanwhile, there should be a redistribution of funds between universities based on their ability to attract and support students whose future earnings might not fund otherwise their education – such as those from poorer backgrounds. This would give universities an incentive to support social mobility and would ensure that access money is not spent inefficiently by those that find it hardest to make a difference to their patterns of student recruitment, but rather by those who face the higher costs of supporting more diverse students.

At the heart of this proposal is a better understanding of where the market really lies in higher education. The current system elevates the student as the customer buying an education, but that’s wrong. The student and their university are partners, investing together in creating their employability for a market of businesses and taxpayers with economic, social and cultural needs. According to those needs, that is where the funding must come from because only then are we all pulling in the same direction.

Johnny Rich is chief executive of the Engineering Professors’ Council, chief executive of Push and a higher education consultant. This article is written in a personal capacity.

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