Gove's exam reforms are a "throwback" to the 1950s, says former Tory education secretary

Kenneth Baker launches damning attack on the Education Secretary in an interview with the New Statesman.

What does Kenneth Baker, the most transformative education secretary in recent history, make of Michael Gove's revolution? I interviewed the Conservative peer at the Millbank offices of Edge, the education foundation he chairs, earlier this week and he was strikingly critical of the coalition's approach. The full piece will appear in the next issue of the NS but for Staggers readers here are some highlights.

Gove's English Baccalaureate: "a throwback" to the 1950s

Baker described Gove's English Baccalaureate (EBacc), which will replace GCSEs from 2015, as "a throwback", comparing it to the School Certificate he sat as a 16-year-old in 1951. He told me: "The EBacc is very similar to the exam I sat in 1951 when I was 16, the School Certificate. It’s exactly the same, exactly!

"I was the last year that took it, because it simply wasn’t broad enough for most children. Only seven per cent of young people went on to post-16 education, I was part of a privileged elite. And the EBacc is a throwback to that."

"I like Michael, he's a friend, but I’m in favour of doing something different, obviously," he said.

With the school leaving age rising to 17 this year and 18 from 2015, Baker questioned the need for an exam at 16. "If you go up to 18, why would have you an exam? What is the purpose? There was a purpose when I was educated because only 10 per cent went on. But now 100 per cent will go on in one way or another, so why have an exam at 16?"

Shadow education secretary Stephen Twigg said of Baker's comments: "When even Conservatives say that Michael Gove's exams are a throwback to the 1950s, you know he's got the wrong approach. We need an education system that prepares young people for the future, not a narrow and out of date exam system that risks undermining our economic strength in innovation and creativity."

TechBacc: why won't the government support it?

In his new book, 14-18: A New Vision for Secondary Education, Baker argues that the age of transfer should be raised from 11 to 14 ("11 is too soon to change and 16 too late," he said) and that pupils should be able to choose between four types of schools: traditional academic, technical (Baker has overseen the opening of five University Technical Colleges, with 12 to follow this year and 15 the next), career-based and creative or sports.

It is an approach markedly at odds with that of Gove, who often appears entirely preoccupied with the first of these four. While Labour has adopted Baker's proposal of a Technical Baccalaureate (TechBacc), the government remains resistant.

"The government approves of a TechBacc at 18 but not at 16, which is double dutch really, because if you have a TechBacc at 18 you’ve got to have some technical subjects that your students are required to take at 16."

On Gove: he thinks "If I did it, others should do it"

Baker argued that the 317 technical schools that existed in 1946, which he is seeking to recreate in the form of University Technical Colleges (UTCs), were "closed by snobbery."

"Everyone wanted their children to go to the school on the hill, the grammar school, not the one down in the town with the shabby premises."

Is Gove guilty of a similar bias? "He had a tough education, he came through it, and did very well. And there’s always a feeling, ‘If I did it, others should do it.’"

Scrapping GCSEs: "I don't know how they're going to do it"

It was Baker who introduced GCSEs in 1986 and he said he was doubtful that Gove would meet his target of replacing the exams with the EBacc in 2015, with the first papers sat in 2017.

"It takes a long time to introduce a new exam. It took Keith Joseph three years to plan GCSEs and me nearly two years to implement them. It’s quite demanding, to say the least. I don't know how they're going to do it."

He added: "2017 is quite ambitious and I think there’s a good chance that deadline will be missed."

Baker said it was "unlikely" the EBacc would survive a change of government and noted that "there will still be GCSEs around, I don’t think they’re going to abolish GCSEs as such."

Free schools: "the jury's out" and profit-making is not the answer

The former Tory education secretary also sounded a note of scepticism about Gove's "free schools", remarking that "the jury's out" until their pupils have sat exams.

"I think that the jury’s out on free schools, quite frankly, it must be because none of them have taken any exams yet. If you start a primary school, there’s not an exam until the age of six or seven. If you start a secondary school, there’ll be no results for five years, so that to extent the jury’s out on them, we’ll have to see how they go."

Of Gove's predilection for grassroots involvement, he sardonically remarked, "Their success depends very much on the commitment of the local community. And the parents. Well, the private sector, on the whole, has got the attitude to parents correct: parents are only allowed to approach the school with a cheque book in their hands."

He dismissed those on the right who argue that the success of the schools depends on them being run for profit.

"I don’t think allowing them to be run for profit would necessarily change very much, quite frankly. I really don’t think it would."

Tuition fees: "the jump to £9,000 was just too much"

As the man who introduced student loans in 1990, sounding the death knell for fully state funded university education, one might expect Baker to favour the decision to raise the cap on tuition fees to £9,000-a-year, but he told me that it was "all too sudden".

"There was a case for an increase, but by doing it so quickly they’ve guaranteed that applications will fall for years to come.

"A lot of prospective students will ask, if I’m going to have a debt of £30,000 at the end of a three-year course, is it worth it? I strongly believe that students should make a contribution their education but it has to start in a very modest way, to go slowly, the jump to £9,000 was just too much, quite frankly."

The coalition promised that universities would only charge £9,000 in "exceptional circumstances" but three-quarters of universities are planning to charge £9,000 for some courses this year, with a third charging the maximum fee for all subjects.

Gove has "no interest in further education or universities"

Baker also criticised the decision not to return control of university policy to the Department of Education from the Department for Business. "Michael [Gove]'s got no interest in further education or universities," he said.

Michael Gove speaks at last year's Conservative conference in Birmingham. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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We're racing towards another private debt crisis - so why did no one see it coming?

The Office for Budget Responsibility failed to foresee the rise in household debt. 

This is a call for a public inquiry on the current situation regarding private debt.

For almost a decade now, since 2007, we have been living a lie. And that lie is preparing to wreak havoc on our economy. If we do not create some kind of impartial forum to discuss what is actually happening, the results might well prove disastrous. 

The lie I am referring to is the idea that the financial crisis of 2008, and subsequent “Great Recession,” were caused by profligate government spending and subsequent public debt. The exact opposite is in fact the case. The crash happened because of dangerously high levels of private debt (a mortgage crisis specifically). And - this is the part we are not supposed to talk about—there is an inverse relation between public and private debt levels.

If the public sector reduces its debt, overall private sector debt goes up. That's what happened in the years leading up to 2008. Now austerity is making it happening again. And if we don't do something about it, the results will, inevitably, be another catastrophe.

The winners and losers of debt

These graphs show the relationship between public and private debt. They are both forecasts from the Office for Budget Responsibility, produced in 2015 and 2017. 

This is what the OBR was projecting what would happen around now back in 2015:

This year the OBR completely changed its forecast. This is how it now projects things are likely to turn out:

First, notice how both diagrams are symmetrical. What happens on top (that part of the economy that is in surplus) precisely mirrors what happens in the bottom (that part of the economy that is in deficit). This is called an “accounting identity.”

As in any ledger sheet, credits and debits have to match. The easiest way to understand this is to imagine there are just two actors, government, and the private sector. If the government borrows £100, and spends it, then the government has a debt of £100. But by spending, it has injected £100 more pounds into the private economy. In other words, -£100 for the government, +£100 for everyone else in the diagram. 

Similarly, if the government taxes someone for £100 , then the government is £100 richer but there’s £100 subtracted from the private economy (+£100 for government, -£100 for everybody else on the diagram).

So what implications does this kind of bookkeeping have for the overall economy? It means that if the government goes into surplus, then everyone else has to go into debt.

We tend to think of money as if it is a bunch of poker chips already lying around, but that’s not how it really works. Money has to be created. And money is created when banks make loans. Either the government borrows money and injects it into the economy, or private citizens borrow money from banks. Those banks don’t take the money from people’s savings or anywhere else, they just make it up. Anyone can write an IOU. But only banks are allowed to issue IOUs that the government will accept in payment for taxes. (In other words, there actually is a magic money tree. But only banks are allowed to use it.)

There are other factors. The UK has a huge trade deficit (blue), and that means the government (yellow) also has to run a deficit (print money, or more accurately, get banks to do it) to inject into the economy to pay for all those Chinese trainers, American iPads, and German cars. The total amount of money can also fluctuate. But the real point here is, the less the government is in debt, the more everyone else must be. Austerity measures will necessarily lead to rising levels of private debt. And this is exactly what has happened.

Now, if this seems to have very little to do with the way politicians talk about such matters, there's a simple reason: most politicians don’t actually know any of this. A recent survey showed 90 per cent of MPs don't even understand where money comes from (they think it's issued by the Royal Mint). In reality, debt is money. If no one owed anyone anything at all there would be no money and the economy would grind to a halt.

But of course debt has to be owed to someone. These charts show who owes what to whom.

The crisis in private debt

Bearing all this in mind, let's look at those diagrams again - keeping our eye particularly on the dark blue that represents household debt. In the first, 2015 version, the OBR duly noted that there was a substantial build-up of household debt in the years leading up to the crash of 2008. This is significant because it was the first time in British history that total household debts were higher than total household savings, and therefore the household sector itself was in deficit territory. (Corporations, at the same time, were raking in enormous profits.) But it also predicted this wouldn't happen again.

True, the OBR observed, austerity and the reduction of government deficits meant private debt levels would have to go up. However, the OBR economists insisted this wouldn't be a problem because the burden would fall not on households but on corporations. Business-friendly Tory policies would, they insisted, inspire a boom in corporate expansion, which would mean frenzied corporate borrowing (that huge red bulge below the line in the first diagram, which was supposed to eventually replace government deficits entirely). Ordinary households would have little or nothing to worry about.

This was total fantasy. No such frenzied boom took place.

In the second diagram, two years later, the OBR is forced to acknowledge this. Corporations are just raking in the profits and sitting on them. The household sector, on the other hand, is a rolling catastrophe. Austerity has meant falling wages, less government spending on social services (or anything else), and higher de facto taxes. This puts the squeeze on household budgets and people are forced to borrow. As a result, not only are households in overall deficit for the second time in British history, the situation is actually worse than it was in the years leading up to 2008.

And remember: it was a mortgage crisis that set off the 2008 crash, which almost destroyed the world economy and plunged millions into penury. Not a crisis in public debt. A crisis in private debt.

An inquiry

In 2015, around the time the original OBR predictions came out, I wrote an essay in the Guardian predicting that austerity and budget-balancing would create a disastrous crisis in private debt. Now it's so clearly, unmistakably, happening that even the OBR cannot deny it.

I believe the time has come for there be a public investigation - a formal public inquiry, in fact - into how this could be allowed to happen. After the 2008 crash, at least the economists in Treasury and the Bank of England could plausibly claim they hadn't completely understood the relation between private debt and financial instability. Now they simply have no excuse.

What on earth is an institution called the “Office for Budget Responsibility” credulously imagining corporate borrowing binges in order to suggest the government will balance the budget to no ill effects? How responsible is that? Even the second chart is extremely odd. Up to 2017, the top and bottom of the diagram are exact mirrors of one another, as they ought to be. However, in the projected future after 2017, the section below the line is much smaller than the section above, apparently seriously understating the amount both of future government, and future private, debt. In other words, the numbers don't add up.

The OBR told the New Statesman ​that it was not aware of any errors in its 2015 forecast for corporate sector net lending, and that the forecast was based on the available data. It said the forecast for business investment has been revised down because of the uncertainty created by Brexit. 

Still, if the “Office of Budget Responsibility” was true to its name, it should be sounding off the alarm bells right about now. So far all we've got is one mention of private debt and a mild warning about the rise of personal debt from the Bank of England, which did not however connect the problem to austerity, and one fairly strong statement from a maverick columnist in the Daily Mail. Otherwise, silence. 

The only plausible explanation is that institutions like the Treasury, OBR, and to a degree as well the Bank of England can't, by definition, warn against the dangers of austerity, however alarming the situation, because they have been set up the way they have in order to justify austerity. It's important to emphasise that most professional economists have never supported Conservative policies in this regard. The policy was adopted because it was convenient to politicians; institutions were set up in order to support it; economists were hired in order to come up with arguments for austerity, rather than to judge whether it would be a good idea. At present, this situation has led us to the brink of disaster.

The last time there was a financial crash, the Queen famously asked: why was no one able to foresee this? We now have the tools. Perhaps the most important task for a public inquiry will be to finally ask: what is the real purpose of the institutions that are supposed to foresee such matters, to what degree have they been politicised, and what would it take to turn them back into institutions that can at least inform us if we're staring into the lights of an oncoming train?