Mixed blessings in a working Budget

March 13, 1998

HOW will next week's Budget affect higher education? Will it be "stop" or will it be "go"? Our productivity levels would make any chancellor of the exchequer green with envy if it could be reflected in the economy as a whole. Our product has never been so highly valued. According to Incomes Data Services, large employers will increase graduate employment by 17 per cent and offer "golden hellos" and interest-free loans to take account of higher student debt.

Our future input, however, will be impoverished both literally and in the sense that the desirable mix of mature entrants will be missing. Perhaps potential mature entrants are wise to stick to their jobs. If what the TUC calls the government's "old-fashioned financial orthodoxy" continues there will be a downturn in the economy towards the end of 1998 and a rise in unemployment.

Some people say that the Bank of England's new monetary policy committee does not care about employment in its thinking on interest rates and the super-heavyweight pound.

I think this is unfair. The committee is extremely concerned about jobs - if there are fewer that is all to the good as it will prevent wage inflation and instability. Students, expecting nothing from the Budget, will work their way through college and displace the unskilled and semi-skilled in the catering and retail sector.

This way of attracting the unemployed to the New Deal cannot have been the chancellor's intention. However, Gordon Brown intends to squeeze public sector pay. He is very honest about that. The budget may do something for the very lowest paid university staff. We pay less to our manual and lower clerical grades than anywhere else in the public services. However, St Patrick's Day on March 17 is unlikely to help the underpaid and overworked majority.

There is real uncertainty as to whether the government has any room for manoeuvre on adopting the European standard definition of public spending, the general government financial deficit (GGFD). This measures the difference between spending and revenues in the general government sector.

Put simplistically, under this method privatisation receipts and public sector borrowing for investment purposes would be excluded from public spending headings. This might make Private Finance Initiative projects in universities become much easier and mean that student loans could be counted as future revenue.

If student loans were to be sold off as a job lot to the banks, that would be ruled out as a long-term prospect. Depending on your point of view, any move from the present public sector borrowing requirement method of measuring government debt to the GGFD would be a mixed blessing for universities.

Although PSBR discourages long-term planning and will keep us in an economic straitjacket, moving to GGFD might lead to an explosion of PFI projects where generations of university income would be tied to pay-backs to the private sector with the same long-term inflexibility that we suffer at present.

Clearly, Gordon Brown's priority will be to try to help low-income families and to assist those on benefit into work.

No other country in the European Union has as many children living in poverty as the United Kingdom. However, spending on education has fallen from 5.4 per cent to 4.9 per cent of gross domestic product during 1978-97 and that is a sign of a country where education is increasingly becoming a private sector industry subject to boom and bust. That is a drop of the hard stuff we could well do without.

Rita Donaghy is permanentsecretary of the Institute ofEducation student union and a member of the TUC General Council, the European TUC executive and the nationalexecutive of Unison.

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