Fabians: Corbyn’s education reforms must be bigger – even if they cost more

Labour’s flagship education announcement yesterday is rather less than it seems. The £1.5bn announced for adult skills is of course a welcome boost, especially for a public service that has been starved for six years. But it’s only a small step towards Jeremy Corbyn’s vision of an adult national education service. The money on offer will be enough to end charges for those who are using further education already – but not to pay for a transformative increase in participation. And it is a similar story with higher education. Labour promised to restore undergraduate grants at a cost of nearly £2bn. But there was no word on tuition fees, which would cost £7bn or £8bnto replace.

A comprehensive offer of free post-19 education will take a lot more money. But Fabian Society proposals published in 2016 presented a way to find the cash, and to transform how we think about education in adult life too. The society recommended that all adult learning – from basic numeracy to masters degrees – should be thought of as social investment and eligible for funding as an entitlement earned through national insurance.

The proposals form part of wider Fabian research on reviving the contributory principle in the welfare state and the idea is that the education accounts would be a central plank of a rebooted system of social insurance. Today people in the UK earn a state pension by gradually building up a record of contribution over many years. With our idea, people would “earn” free post-19 education in the same way, by having debt in their education account written off in exchange for their participation in the labour market and society.

National insurance would therefore become a scheme for investing in people in the first half of their lives, on the basis of their future contributions, rather than just a means of providing insurance and pension income on the basis of previous contributions. For if we are happy to provide generously for pensioners on the basis of what they have done in the past, should we not be prepared to invest as much in young adults, on the basis of what they will offer in the future?

The starting point for reform is to recognise that further education is desperately under-funded and that the university finance system is a disaster. Apart from apprenticeships, the government now spends just £1.5bn on non-university adult education in England. No wonder the country has a skills crisis. And when it comes to higher education, graduates now face typical debts of £44,000 on graduation; three-quarters of new graduates are not expected to pay off their loans by the time their 30 years of liability expires; and throughout that period, they will face eye-watering marginal tax rates of 41 to 56 pence in the pound, which will leave them little better off as their earnings rise.

And because student debt is so unaffordable for graduates, the system is expensive for the government too. In future years the state may have to subsidise and then write off approaching half of the debt it issues. It is a terrible deal for both the exchequer and the individual, because the sums involved are just too great for people to pay. Whatever you think of the principle of higher education fees, the maths on loan-funded tuition does not stack up.

The Fabian Society proposal would unite the funding of further and higher education and create the adult “national education service” Labour aspires to by establishing personal education accounts as a major new entitlement of the welfare state. The plan would end UK-based graduates paying for their tuition, but it would not entail an immediate increase in revenue spending by the government. The education accounts would be a hybrid loan-grant scheme, with education debt issued as it is today but then written off progressively over time. People would start with a notional debt, but each year the government would pay down a slice, staggering the public expenditure on each student to span most of their working life, to mirror the economic returns on the investment.

Some tax rises would eventually be needed but there are lots of ways more could be raised from national insurance without hitting ordinary workers. One option we propose would be to raise national insurance contributions for high earners eligible for the account by one or two pence. But there are also lots of loopholes employers use to reduce their national insurance payments which could easily be closed.

Over their working lives people would benefit from free university or quality adult training and would simply pay their usual national insurance contributions – and the new accounts would sit alongside the state pension as a central pillar of our contribution-based welfare state. This is a policy that Labour politicians of all stripes can endorse. When the sums add up, the national education service is a policy for the whole party to get behind.

The proposal for national insurance education accounts was developed as part of a wider project Social security in the 2020s which was kindly supported by Shelter and Legal and General. For Us All: redesigning social security for the 2020s is published by the Fabian Society.

Andrew Harrop is general secretary of the Fabian Society.