Examination of Witnesses (Questions 140-159)
DEPARTMENT FOR
INNOVATION, UNIVERSITIES
AND SKILLS
& HIGHER EDUCATION
FUNDING COUNCIL
FOR ENGLAND
29 OCTOBER 2007
Q140 Mr Davidson: But it is a pretty
poor result, is it not? When is it not a poor result? You would
have said the same thing if it had been 0.1. The point has been
made.
Could I ask about the percentage from public
schools, which does not appear in these figures? What is the percentage
of the population from public schools and how many of them go
to full-time first degree courses during the same period?
Ruth Thompson: I am not sure that
I can remember that figure accurately.[9]
Q141 Mr Davidson: But it is not a
minority that is under-represented, unless I am mistaken?
Ruth Thompson: No.
Q142 Mr Davidson: Okay. Well maybe
we can have the same figures for that as well. If the Government
policy were working it would be normal to expect that the percentage
of people at University from working class backgrounds would overtake
the percentage from public schools, would it not, given the disproportionate
numbers in the population, notwithstanding the fact that one is
declining? The minutes do not record that you nodded.
Ruth Thompson: I am sorry.
Chairman: Grimaces, smiles and nods are
not much good to us.
Ruth Thompson: What is going through
my mind as we speak is that the NAO is on the point of embarking
on work with us on widening participation and is hoping to Report
in June or July next year. This will come before the Committee
in due course.
Q143 Chairman: You are doing a note
for us on that public school question. You must have those figures.
Ruth Thompson: Yes. Well, we have
state school figures.
Q144 Mr Williams: What evidence is
there to show that 50% is the correct proportion to have going
to University?
Professor Eastwood: If you look
at the latest OECD statistics, participation varies a lot. It
can be as high as 85% We are working with the Government. We are
certainly demonstrating that there is unmet demand for higher
education. As the sector has grown—
Q145 Mr Williams: I am sorry, but
you are not answering my question. My question is what evidence
is there that 50% is correct? It seems a coincidental figure.
It is too smooth, is it not?
Professor Eastwood: The two countries
that I would point to, which I visited recently, are Australia
and Japan. They are not dissimilar countries and they are at 50%
participation. Their evidence is that that is the point at which
you achieve a kind of equilibrium.
Q146 Mr Williams: But they are different
economies from us. What is right for them is not necessarily right
for us. You cannot say that because Australia has 50%, Britain
should have it too. Why Australia? It just happens to fit, does
it?
Professor Eastwood: No, there
are some structural similarities in the way that their higher
education system and ours work and in the relationship between
higher and further education in our system and in their system.
I was construing your question as being whether it is sensible
to have a target—
Q147 Mr Williams: I asked what evidence
there is. Is it empirically based, or is it just aspirational?
Professor Eastwood: There is a
target to continue to grow the sector.
Q148 Mr Williams: It is aspirational?
It has no scientific base?
Chairman: Yes or no?
Professor Eastwood: It is an aspiration
to continue to grow the sector, yes.
Q149 Mr Williams: Okay, so it has
no statistical validity. It is just an aspiration. That is fine,
as long as we understand that.
Ruth Thompson: May I elaborate
on this, because the most recent announcement of the comprehensive
spending review puts forward a proposal on the new schema for
public service agreements under which there will be two targets
for higher education. The first is the existing target of moving
towards 50% for the 18 to 30-year-old cohort. Secondly, there
is a target for the proportion of the working-age adult population
with qualifications of level 4 or higher. In response to Lord
Leitch's Report on skills for 2020, the figure is for 36% of the
work force to be qualified to level 4 or higher by 2014. That
is a sub-degree level, such as a higher national diploma or a
foundation degree. It is certainly a higher education level.
Q150 Mr Williams: So it is a target
figure that has largely been plucked out of the air. That is the
reality, is it not?
Ruth Thompson: The reason I mention
the work done by Lord Leitch about the needs of our economy in
the context of the global economy between now and 2020 is that
it does analyse the demand for higher level skills in some detail.
In response to that, we decided to run these two indicators concurrently.
They do not conflict with one another. In order to get to the
36% target by 2014, we will need to be making progress towards
the 50% target.
Q151 Mr Williams: We are not getting
very far on this line of questioning, so let us move to another
one. Why has the lifetime benefit of having a degree fallen from
£120,000 to £100,000 in the PricewaterhouseCoopers Report?
Ruth Thompson: The PricewaterhouseCoopers
Report, I believe, has the figure of £160,000.
Q152 Mr Williams: That is not what
it says in this Report. Paragraph 1 states that, "over their
working life graduates earn ... over £100,000 more (in today's
terms) than similar non-graduates with A-levels." The footnote
attributes that to PricewaterhouseCoopers in 2007. You have signed
up to the Report, so I assume that you accept the figures.
Ruth Thompson: Indeed, but the
figure that you quote is the Department's estimate.
Q153 Mr Williams: The Department's
estimate was £120,000 a couple of years ago, was it not?
Ruth Thompson: The Department's
estimate that we now use is comfortably over £100,000 net
and discounted to present values.
Q154 Mr Williams: Comfortable is
a relative term, is it not? It is as relative as your 50% figure.
What is "comfortably over £100,000"?
Ruth Thompson: I am unable to
give a precise figure because it moves about.
Q155 Mr Williams: Ministers could
do so a couple of years ago when I put a parliamentary question
as a Bill was going through. I got the simple answer that there
was a £120,000 lifetime benefit over people with two A-levels.
There was no doubt in the Department's mind at that time. Now
it has fallen to £100,000 and no one seems quite sure of
how that figure was arrived at.
Mr Bacon: It used to be £400,000.
Mr Williams: Let us take it a stage further.
I will use the figure of £120,000 as an example, but we can
always scale it down because I recognise that everything will
be lower than what was originally claimed. The parliamentary answer
said that the Government would reclaim £30,000 of that over
the lifetime in extra taxation. Does that include National Insurance?
Ruth Thompson: As I do not have
the estimates before me, I do not want to mislead you, but I think
that that is possible.
Q156 Mr Williams: On the old figure,
the graduates had to pay to go through university and then would
pay an extra £30,000 in tax because they have graduated.
That is according to the Department's own figures in a parliamentary
answer. That means that, on the Department's own figures, the
graduate's net benefit is £90,000. If the working life is
from 22 to 65, or 43 years, the net benefit is £1,600 a year.
That is not a lot, is it?
Ruth Thompson: By comparison with
other OECD countries, it is a very good return.
Q157 Mr Williams: Once you pay back
the fees that you owe and any other debt that you have built up
at university, it is even lower, is it not? A graduate still has
to make up the pension that he did not pay while he was a student.
He has lost three years of pension contributions. The financial
benefits of a degree are substantially overestimated. I am in
favour of getting degrees—I was in favour of doing one myself—but
I am trying to point out the presumption. I did not like the idea
of the £3,000 fee. It seems to me as if the state is getting
a benefit in extra taxation from people who are paying for their
education anyhow, retrospectively.
Professor Eastwood: Let me make
two comments. First, you are quite right that there has been variation
in the estimate of the lifetime graduate premium. That is because
different surveys have used different methodologies. It is perfectly
fair to ask whether we could have an agreed methodology to try
to determine that.
My second point picks up on the point that
you have just made about learners at different stages in their
lifetime and how they might most appropriately study for higher
education. That is why we are seeking both to promote flexibility
in the way in which people can learn and, as Ms Thompson was saying,
to consider ways in which we can deliver higher education more
effectively through the workplace and so on in response to Sandy
Leitch's Report.
Q158 Mr Williams: Let us take the
PricewaterhouseCoopers figure of £100,000. Having deducted
the extra tax that the Government will get out of that £100,000
over the remainder of a lifetime's work and the repayment of loans
and so on, what is your estimate of the net lifetime gain of getting
a degree?
Professor Eastwood: My recollection
of the PricewaterhouseCoopers Report was that that was a net figure,
and that it was net of other costs. That is the premium.
Q159 Mr Williams: It goes on to say
that: "The Exchequer receives associated tax from higher
salaries of graduates, amounting to 11% over and above the cost
of higher education", whatever that means. It is not net.
It is gross.
Professor Eastwood: We should
probably get you a note on this. My understanding was that that
was a separate calculation of the benefits that flow back to the
Exchequer over and above the public investment in that higher
education. It is therefore outwith the individual's return on
her or his higher education. [10]
Ruth Thompson: It is exactly that.
It is a separate calculation relating to the state's expenditure
rather than to the individual's returns.
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