Investment in education is key to reducing the deficit

Spending on higher education yields a long-term economic benefit for Britain.

One of the strangest claims in the current debate on education is that raising student fees will enable British universities to compete internationally. If we take just the "elite" universities, this is already happening – four out of the world's top 20 universities are British.

As ever, the devil is in the detail. If you sift closely through the Browne review, you will see he recommends that no extra resources be made available for higher education, the proposed increase in fees being designed to compensate for the withdrawal of funds from central government.

If the government follows Browne's advice, the chronic underfunding of higher education will deepen and Britain will fall further behind our economic competitors. In the space of eight years, the UK has gone from having the third-highest graduation rate among industrialised countries to languishing in 15th place, according to the latest OECD survey.

This irrational approach mirrors the economic debate, which has become dominated by the Budget deficit. However, the deficit is a symptom of the economic crisis, not its cause. And cutting spending will depress activity further, which will depress tax revenues and lead to deficit widening.

Education can and must be allowed to play a leading role in any revival. However, for that to happen, the government needs to follow the advice of the OECD, which recently recommended increasing investment in higher education to create jobs and raise tax revenues.

Annual spending on higher education in Britain is £23bn, for which the Treasury gets back an estimated return of £60bn. This arises from various sources, including jobs, exports, innovation, royalties and so on. There is also a long-term economic benefit, which is slightly harder to measure, that comes from a more highly educated and productive population.

That £60bn is a return on investment and highlights the madness of cutting spending on higher education. Spending cuts will lose jobs, exports and innovation.

The cuts are all made in the name of being fiscally responsible, getting the deficit under control and not living beyond our means – the economic saws of Thatcherism. Yet not only will the economy suffer as a result of education cuts, but government finances will deteriorate as result.

This arises from two effects. First, taxes will fall as a result of a weaker economy. Second, spending will end up higher as the government is forced to shell out millions in welfare payments to those denied places in education and made redundant from university jobs, including teachers and clerical, cleaning and catering staff.

If we look closely, the government's economics simply do not add up. A £1bn cut in spending on higher education leads to £2.6bn in decreased activity. This decrease in activity leads to both lower tax revenues and higher government spending, as mentioned above.

The same process also operates in reverse – an increase of investment in higher education will produce a positive net return to government finances through increased activity and the higher tax revenues, as well as the lower welfare payments that flow from it. Every £1bn increase in investment in this sector would produce a positive return to government finances, which could be used either to reduce the Budget deficit or to fund further much-needed investment, for even greater return.

Sally Hunt is general secretary of the University and College Union and Michael Burke is a former senior international economist for Citibank London.

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There's nothing Luddite about banning zero-hours contracts

The TUC general secretary responds to the Taylor Review. 

Unions have been criticised over the past week for our lukewarm response to the Taylor Review. According to the report’s author we were wrong to expect “quick fixes”, when “gradual change” is the order of the day. “Why aren’t you celebrating the new ‘flexibility’ the gig economy has unleashed?” others have complained.

Our response to these arguments is clear. Unions are not Luddites, and we recognise that the world of work is changing. But to understand these changes, we need to recognise that we’ve seen shifts in the balance of power in the workplace that go well beyond the replacement of a paper schedule with an app.

Years of attacks on trade unions have reduced workers’ bargaining power. This is key to understanding today’s world of work. Economic theory says that the near full employment rates should enable workers to ask for higher pay – but we’re still in the middle of the longest pay squeeze for 150 years.

And while fears of mass unemployment didn’t materialise after the economic crisis, we saw working people increasingly forced to accept jobs with less security, be it zero-hours contracts, agency work, or low-paid self-employment.

The key test for us is not whether new laws respond to new technology. It’s whether they harness it to make the world of work better, and give working people the confidence they need to negotiate better rights.

Don’t get me wrong. Matthew Taylor’s review is not without merit. We support his call for the abolishment of the Swedish Derogation – a loophole that has allowed employers to get away with paying agency workers less, even when they are doing the same job as their permanent colleagues.

Guaranteeing all workers the right to sick pay would make a real difference, as would asking employers to pay a higher rate for non-contracted hours. Payment for when shifts are cancelled at the last minute, as is now increasingly the case in the United States, was a key ask in our submission to the review.

But where the report falls short is not taking power seriously. 

The proposed new "dependent contractor status" carries real risks of downgrading people’s ability to receive a fair day’s pay for a fair day’s work. Here new technology isn’t creating new risks – it’s exacerbating old ones that we have fought to eradicate.

It’s no surprise that we are nervous about the return of "piece rates" or payment for tasks completed, rather than hours worked. Our experience of these has been in sectors like contract cleaning and hotels, where they’re used to set unreasonable targets, and drive down pay. Forgive us for being sceptical about Uber’s record of following the letter of the law.

Taylor’s proposals on zero-hours contracts also miss the point. Those on zero hours contracts – working in low paid sectors like hospitality, caring, and retail - are dependent on their boss for the hours they need to pay their bills. A "right to request" guaranteed hours from an exploitative boss is no right at all for many workers. Those in insecure jobs are in constant fear of having their hours cut if they speak up at work. Will the "right to request" really change this?

Tilting the balance of power back towards workers is what the trade union movement exists for. But it’s also vital to delivering the better productivity and growth Britain so sorely needs.

There is plenty of evidence from across the UK and the wider world that workplaces with good terms and conditions, pay and worker voice are more productive. That’s why the OECD (hardly a left-wing mouth piece) has called for a new debate about how collective bargaining can deliver more equality, more inclusion and better jobs all round.

We know as a union movement that we have to up our game. And part of that thinking must include how trade unions can take advantage of new technologies to organise workers.

We are ready for this challenge. Our role isn’t to stop changes in technology. It’s to make sure technology is used to make working people’s lives better, and to make sure any gains are fairly shared.

Frances O'Grady is the General Secretary of the TUC.