Tony Blair report: HE expansion ‘props up’ UK economy

Higher education expansion has “propped up” the UK economy in recent years and the Westminster government risks a “grave mistake” in turning away from the sector, according to a Tony Blair Institute report making the economic case to set a target for 70 per cent participation by 2040.

In his time as Labour prime minister Mr Blair set a target – now met – for 50 per cent of young people to enter higher education.

Now the non-profit organisation he set up to support leaders and governments around the world has published a report warning the Conservative government in Westminster that its “cold feet about HE and…desire to curb participation” in England, setting up a “false choice between HE and technical, vocational education”, will damage the nation’s economy.

“We wanted to ascertain whether the [50 per cent target] was as far as we should go or whether the government has got this wrong,” said James Scales, skills and future of work lead at the Tony Blair Institute for Global Change, one of the authors on the report, titled We Don’t Need No Education? The Case for Expanding Higher Education.

One key new feature of the report is the “growth accounting” analysis, using Office for National Statistics and Labour Forces Survey data, conducted by the paper’s authors, who also include Ian Mulheirn, a former economic adviser at the Treasury and now the institute’s chief economist. They aimed to pinpoint the contribution to national economic growth of three different factors (physical capital, human capital and technology/know-how), then to look at the contributions to growth of the different factors within human capital (number of workers, hours spent at work, experience, level of education).

Between 2008 and 2019, per capita GDP growth in the UK averaged just 0.6 per cent annually, says the report. Low investment meant physical capital contributed “just 0.3 per cent to growth each year”, technology/know-how a negative contribution of -0.2 per cent, but human capital lifted the economy by 0.5 per cent “accounting for almost all of the overall growth rate”.

And the analysis “shows that education levels and the size of the labour force have been the two most important contributors to human-capital growth in recent decades”, while since the global financial crisis education has “accounted for all” growth in human capital, says the report.

What the growth accounting analysis “really brings out is that the already very modest economic growth that we’ve experienced in recent years has been propped up in large part by human capital and in particular expansion of education”, said Mr Scales.

That means that between now and 2050, the authors estimate, if there were to be no further increase in educational attainment, this would result in human-capital growth of just 0.01 per cent per year on average, which would mean “a meagre 0.78 per cent annual growth in output per capita – around half the average growth rate between 1997 and 2019”.

But with 70 per cent of young people entering higher education, growth would average 0.94 per cent per year, they estimate, which would make the economy “around 4.5 per cent larger by 2050 and tax receipts in 2050 some £57 billion higher, in today’s prices, as a result”.

The report also looks at demand for skills from employers and pinpoints a skills shortage in high-skill jobs likely to grow in future, arguing higher education is best placed to deliver the blend of skills needed here.

One of the report’s most important messages is that “we cannot just think about skills demand in a static way; we must also plan for a future economy that will look very different to the one we currently occupy”, that “as we continue to mature as a knowledge economy, more jobs will be generated in sectors that disproportionately employ graduates”, says Lord Johnson, the former Conservative universities minister, in his foreword.

To meet a 70 per cent target, says the report, low school attainment “would need to be significantly improved” and “non-traditional routes” into higher education “would also need to be improved, including through sound lifelong-learning policies”.

The report concludes that it is “beyond doubt” that “turning away from HE now would be a grave mistake for the future prosperity of the UK. Radicalism and much greater ambition are required.”

Mr Scales said follow-up work by the Tony Blair Institute would focus on “what expanding to 70 per cent would entail in practice”, and “the best way to move towards that by 2040”.

john.morgan@timeshighereducation.com