The UK isn't a "safe haven", it's just stagnant

Lower borrowing costs are a reflection of economic weakness, not strength.

"The difficult decisions on the deficit have made the UK a safe haven in the recent economic storm," boasted George Osborne in his response to last week's anaemic GDP figures. Today, the Chancellor and his advisers are pointing to the fact that the cost of borrowing yesterday fell to its lowest level for over 50 years as proof of that claim. A spokesman for Osborne said:

"It's a vote of confidence, one of the key aspects of our plan has been a tight fiscal policy combined with a loose monetary policy, it's the right mix for economic growth, and the need to rebalance towards exports and away from consumption."

The yield on 10-year UK gilts has fallen to 2.76, which means far lower interest repayments on government debt, potentially saving the taxpayer billions of pounds. But is this really an unequivocally good news story, as Osborne suggests? After all, it's likely that the fall in rates has much much more to do with the fact that the Bank of England base rate is unlikely to rise until 2012, than it has with the supposed "strength" of the British economy.

Here's Paul Krugman's take:

Yields in the US have, of course, plunged rather than risen. And they've plunged for the same reason UK yields have plunged: a scarily weak economy suggests that it will be years before the central bank raises rates.

In a wonderful pay-off, he adds:

It's sad, actually: the wolf is at the door, and Osborne thinks it's the confidence fairy.

Over on his blog, Faisal Islam, Channel 4's excellent economics editor, makes the same point and highlights an important experiment by the National Institute of Economic and Social Research. The NIESR points out that one would expect a fall in rates, if the result of increased economic confidence, to correlate with a rise in the FTSE-100. But after crunching the numbers, the body found no such relationship. NIESR director Jonathan Portes concluded: "Low long-term interest rates appear to reflect economic weakness and lack of market confidence in the prospects of the UK economy, not the reverse."

Over to you, Mr Osborne.

George Eaton is political editor of the New Statesman.

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The price of accessing higher education

Should young people from low income backgrounds abandon higher education, or do they need more support to access it? 

The determination of over 400,000 young people to go into higher education (HE) every year, despite England having the most expensive HE system in the world, and particularly the determination of over 20,000 young people from low income backgrounds to progress to HE should be celebrated. Regrettably, there are many in the media and politics that are keen to argue that we have too many students and HE is not worth the time or expense.

These views stem partly from the result of high levels of student debt, and changing graduate employment markets appearing to diminish the payoff from a degree. It is not just economics though; it is partly a product of a generational gap. Older graduates appear to find it hard to come to terms with more people, and people from dissimilar backgrounds to theirs, getting degrees.  Such unease is personified by Frank Field, a veteran of many great causes, using statistics showing over 20 per cent of graduates early in their working lives are earning less than apprentices to make a case against HE participation. In fact, the same statistics show that for the vast majority a degree makes a better investment than an apprenticeship. This is exactly what the majority of young people believe. Not only does it make a better financial investment, it is also the route into careers that young people want to pursue for reasons other than money.

This failure of older "generations" (mainly politics and media graduates) to connect with young people’s ambitions has now, via Labour's surprising near win in June, propelled the question of student finance back into the spotlight. The balance between state and individual investment in higher education is suddenly up for debate again. It is time, however, for a much wider discussion than one only focussed on the cost of HE. We must start by recognising the worth and value of HE, especially in the context of a labour market where the nature of many future jobs is being rendered increasingly uncertain by technology. The twisting of the facts to continually question the worth of HE by many older graduates does most damage not to the allegedly over-paid Vice Chancellors, but the futures of the very groups that they purport to be most concerned for: those from low income groups most at risk from an uncertain future labour market.

While the attacks on HE are ongoing, the majority of parents from higher income backgrounds are quietly going to greater and greater lengths to secure the futures of their children – recent research from the Sutton Trust showed that in London nearly half of all pupils have received private tuition. It is naive in the extreme to suggest that they are doing this so their children can progress into anything other than higher education. It is fundamental that we try and close the social background gap in HE participation if we wish to see a labour market in which better jobs, regardless of their definition, are more equally distributed across the population. Doing this requires a national discussion that is not constrained by cost, but also looks at what schools, higher education providers and employers can do to target support at young people from low income backgrounds, and the relative contributions that universities, newer HE providers and further education colleges should make. The higher education problem is not too many students; it is too few from the millions of families on average incomes and below.

Dr. Graeme Atherton is the Director of the National Education Opportunities Network (NEON). NEON are partnering with the New Statesman to deliver a fringe event at this year's Conservative party conference: ‘Sustainable Access: the Future of Higher Education in Britain’ on the Monday 2nd October 2017 from 16:30-17:30pm.