Theresa May pledged at her opening conference speech on Monday that Government would invest a further £10 bn by 2021 in the Help to Buy scheme which allows people to purchase homes with five percent deposits supported by twenty percent equity loans from the state. The Government claims this will help an additional 135 000 to buy homes by 2021.
Some young people currently unable to afford deposits will no doubt be assisted by this new investment. Around 130,000 have already bought through the scheme since 2013, and the Government claims 80 percent of these are first-time buyers.
However the major beneficiaries of the initiative will be existing home owners – who will (more…)
Last week’s report from Alan Milburn’s Social Mobility Commission, Time for a Change, provides a useful assessment of the impact of government policies on social mobility between 1997 and 2017. Ranging over policies for the different phases of education and early working life, it finds that, despite some successes, these have had limited impact in enhancing opportunities for today’s younger generation.
The report concluded that today’s social divisions are not sustainable ‘socially, economically or politically.’ It calls for new ten-year, cross-sectoral targets for social mobility improvements, including a ‘social mobility test’ to be applied to new policies. In my new book, The Crisis for Young People, I have argued for a similar test to judge the effects of policies on intergenerational inequality (which is much the same concept as absolute social mobility).
However, despite the Milburn report’s range, in at least one area – housing – it (more…)
The Government’s new white paper on housing, entitled ‘fixing our broken housing market’, is not going to fix anything except the share prices of the large private development firms. As Simon Jenkins writes in The Guardian: ‘it is a stew of fake news, old clichés and pretend solutions’. It is long on consultation and very short on the radical measures needed to solve the UK’s housing crisis. It dodges all the big issues on reforming housing taxation, including the council tax, regulating rents and tenures, and on public responsibilities for housing provision. Even the very small measures it does propose come hedged with qualifications and get-out clauses.
As our research at the Llakes Centre for Learning and Life Chances shows, home ownership amongst 18-34s is only half of what it was 25 years ago, and the decline has affected all social groups. But the Government’s proposals won’t create the genuinely affordable housing to reverse this trend for young people.
The White Paper’s diagnosis of Britain’s housing crisis is simplistic in the extreme. It claims that the problem is ‘simply’ that we do not build enough homes, because of excessive planning regulation and lack of competition in the building sector. It is certainly the case that we have not been building enough homes, but the wider truth is not so (more…)
Early school leaving has always been a blight on the English education system. Throughout the nineteenth century children tended to leave school earlier than elsewhere in northern Europe. This continued well after the 1944 Education Act introduced free ‘secondary education for all’. By the early 1980s, barely more than 30% of 16-18 year olds were in full-time education and training, compared with well over 70% in Japan, Sweden and the USA. The proportion gaining a higher level qualification was also relatively low. UK-wide, only10% gained three A levels compared with over 20% gaining the Abitur in Germany and an even higher proportion achieving the Baccalauréat in France.
Wanting to understand this startling disparity, along with the exceptional underdevelopment of vocational education and training in (more…)
The latest OECD Survey of Adult Skills (SAS) generated much commentary on the relatively poor level of adult skills in England – particularly the revelation that on both literacy and numeracy tests young people scored no better than older generations and worse than their peers in all other countries except Italy and Spain. There was less discussion about how skills are spread around the population, but this is just as important. On this dimension the news is no better, because the distribution of adult skills in England is very unequal.
There is a larger gap in literacy and numeracy scores between the highest and lowest achievers than in most other countries and the impact of parental background on skills attainment is stronger than in most countries. Despite some evidence of a narrowing in the dispersion of skills in England over the last 16 years, the skills of the youngest cohorts are still more unequally distributed than in almost all other countries.
Difference in Average Numeracy Scores of Top and Bottom 20 Percent of 25-29 Year Olds
There are large gaps in the skills of the 16-65 year olds, particularly in numeracy. Scores in SAS are measured out of 500 but the actual range of scores is much lower. In England the average score in numeracy of those in the lowest-scoring 20 percent is 153 points below the average score of those in the highest scoring 20 percent. The gap in literacy scores is somewhat smaller at 134.3 points. Only two countries, France and the USA, are more unequal in numeracy and in literacy only Finland and Canada are more unequal. However, the situation for the younger age groups is even more alarming. For the 25-29 year olds there are no countries with more unequal skills distributions in either numeracy or literacy. England is also the only country where skills are as unequal amongst the younger age groups as the older ones.
England also does relatively badly on equality of opportunity – in terms of the degree to which social background influences skills attainment. The only country where the parents’ level of education has a greater effect on children’s skills attainment in literacy and numeracy is the Slovak Republic. Young people with graduate parents are likely to score 67 points higher in numeracy and 58 points higher in literacy than those whose parents only have GCSE level qualifications. English-speaking, ‘liberal’ countries generally show less equality of opportunity than other countries, and England and the USA the least.
Inequality of Opportunity in Numeracy Skills for Younger and Older Age Groups
Inequality of Opportunity for Numeracy and Literacy for 16-24 Year Olds by Country Group
Why are adult skills in England so much more unequal than in most other countries? Some possible explanations can be ruled out. Differences between age groups play no part in England since the skills levels of younger age groups are much the same as for older age groups. Inward migration seems to contribute a small amount to adult skills inequality in England but no more than in most countries and rather less than in some. Adult learning does not appear to play a greater role in exacerbating the skills inequalities amongst adults in England than in other countries.
However, there is one likely explanation and that has to do with initial education. Skills and educational qualifications are very closely related. In England, each of the different age groups has a very high level of inequality in education qualifications compared with other countries. Since most qualifications are achieved before the age of 25 this implies that the initial education system has been producing very unequal outcomes going back to the 1950s. Our research (pdf) concludes that the primary cause of adult skills inequality in England is the exceptionally unequal skills outcomes of the initial education system sustained over a long period, fuelled and supplemented by an especially strong influence from social background.
The research was funded by the Economic and Social Research Council. Grant Number: ES/J019135/1
This blog post first appeared on The Conversation
This month’s OECD Survey of Adult Skills revealed, yet again, the shockingly low levels of basic skills of many young people in England compared with their counterparts in other countries. Like the International Adult Literacy Survey (IALS), conducted 16 years ago, it shows that England has an exceptionally large proportion of adults with very low levels of literacy and numeracy – the so-called long tail of under-achievement. But more disturbingly, the new report reveals that there has been little improvement amongst our 16 to 25-year-olds during a period when their peers in other countries have advanced rapidly.
Uniquely, in England there is very little difference in skill-levels between age groups, and yet inequality in adult skills, measured by the variance in the scores, is still worse than in almost every other country.
Politicians have responded by bickering about which administration is most to blame – the Coalition or New Labour. But, as the comparison with the IALS results shows, this is beside the point since national performance in the mid 1990s was also relatively poor. In fact the relative failure of mass education in England has a long history, implicating governments of all complexions, with deep political and cultural roots which are not amenable to quick policy fixes.
As I argued in my book Education and State Formation – first published in 1990 and now re-issued in an extended edition – England was one of the last major powers to develop a national education system and the most reluctant to put it under state control. This relative underdevelopment in state education, which to informed 19th century commentators seemed so anomalous in the world’s most industrialised nation, had a number of historical causes.
Whereas educational development in many advanced countries was driven by an intensive process of nation-building, in Britain the state was already largely consolidated, so there was little incentive to use public education for this purpose. Successful early industrialisation, owing little to educational provision, taught the wrong lessons, and enabled deep complacency about the importance of skills to economic development. That this was a problem only became evident to the elites during the “second industrial revolution” in the late 19th century, when Britain’s shortcomings in applied science and craft skills became self-evidently a major barrier to industrial innovation and efficiency. It was the belated recognition of England’s relative skills deficits that finally spurred the construction of a public education system.
Underlying all other causes of England’s educational backwardness, however, was the pervasive culture of political and economic liberalism, with its veneration of free markets and hostility to the state. This deep-rooted individualist creed blocked the development of national education for many decades after it had become obvious that voluntary provision – by Churches and charities – could not meet the educational needs of the people or the economy.
It also left a potent legacy. The public education system finally put in place at the end of the 19th century remained exceptionally fragmented and socially divided, with elite interests still dominating in the provision of secondary education – not least through private schooling – and with technical and vocational education still fatally undervalued.
These underlying flaws in the organisation of mass public education have never been rectified. Comprehensive education – introduced half-heartedly and with so much organisational variation that it never looked like an integrated national system – is now being dismantled. There was no national curriculum until 1988, more than a century and a half after most continental nations had one, and it has now been made optional for thousands of state-funded schools.
We are the only country in the world to persist in the absurdity of having national examinations organised by commercial organisations. And since the 1980s, all governments have been hell-bent on marketising education, creating, in the name of diversity and choice, a byzantine complexity of school types, and a school “system” so fragmented that it barely warrants the name. As a consequence, the idea of education as an essential public good is progressively undermined, and the inequalities which have always been the hallmark of English education become ever wider.
I concluded the first edition of my book with a clear warning to policy makers:
“If the past has any lessons at all it is that the mechanisms of the market and the ideology of laissez-faire serve education very ill indeed. It would be a sad irony if the country which was last to create a national education system, and which never quite completed the job, should be the first to dismantle it. It remains to be seen whether, in the name of market liberalism, England again becomes the ‘worst educated country in Europe.”
After three decades of reforms, which draw on a failed 19th century liberal model of education for inspiration, we are now where we have always been, with an education system which serves the elites but manifestly fails to promote a high standard of education for all. With such policies our performance relative to other, rapidly improving, countries can only deteriorate, with England’s labour force starved of the skills to compete effectively in the global economy.
Education and State Formation: Europe, East Asia and the USA offers an explanation of the long-run causes of England’s relative educational underdevelopment. In its new chapter on Education and State Formation in East Asia, it also shows how the newly industrialised countries of the East are using education to overtake us.
“Get lost – rich tw*t” was French newspaper Libération’s headline riposte last week to the news that Bernard Arnault, France’s super-rich head of the Louis Vuitton empire, has applied to be domiciled in Belgium, supposedly to avoid President’s Hollande’s proposed tax rises for the wealthy. The paper’s response would seem to echo the feelings of many in France. Hollande’s most popular election pledge last year was his proposal for 75% taxes on incomes over a million Euros. He is also proposing hikes in the wealth taxes and capital gains taxes on property sales.
We will see whether the new tax regime will indeed drive the wealthy out of France. If it does so in large numbers we may see the policies dropped. But maybe not. Nordic countries remain competitive despite their high-tax regimes. Perhaps Hollande’s patriotic calls for France’s rich to help ease the public debt will shame some of the would-be tax exiles into staying put. On the other hand, maybe the rich bankers and others have over-hyped their opportunities to up sticks and move to friendlier tax regimes and Hollande is shrewdly calling their bluff. It’s certainly a high risk strategy but I’m glad he’s having a go.
It would be good to see a bit more bold thinking on Britain’s Left, which currently seems determined to let a good crisis go to waste. The British press are generally hysterical about proposals to increase taxes, but is it so unthinkable in Britain? People forget that in the 1970s top rates were over 80% after the otherwise moderate Chancellor, Denis Healey, announced he was going “tax the rich until the pips squeak”. I don’t know how many of the wealthy it drove out during those lean years, and whether it really did lower the overall tax take on the rich as the Right has always claimed. No doubt economists can give me the usually divergent views.
But I do know that the figures show that household income inequalities declined during that decade, despite the cuts in public spending, whereas they continue to rise during our current economic crisis, not least because the tougher austerity measures hit the poor the most and because this inequality is not offset by significant increases in the taxation of the better-off. During the 1970s it was the trades unions which the Right claimed were “holding the country to ransom”. Whatever the truth of that then, this is precisely what the rich are doing now in most western countries.
Higher income taxes on the rich would probably get considerable political support in Britain, as in France. A bigger problem politically would be to tax those on high middle incomes more, which is what Labour would need to do if it were to make taxation take more of the strain of reducing the deficit, and cuts less, as it promised before the last election. There is much to recommend this course, particularly if it were coupled with demand-enhancing public works programmes, such as building new homes on a grand scale.
Raising taxes, like all deficit reduction measures, reduces demand and stifles growth but at least it is simple to implement and quickly reversible. Draconian public expenditure cuts (and we have only seen a quarter of those planned so far) are difficult, if not impossible, to implement, cause immediate large-scale jobs loss, and are harder to reverse since they damage the whole infrastructure and cause a permanent loss of skills amongst the millions who are laid off. Forget the private sector “picking up the slack” mantra. Clearly that’s not happening, just as many predicted.
A major increase in the tax take would require a much wider range of measures, some of which would be unpopular. My favourite candidates would be a wealth tax, such as they have in France and a number of other continental countries, and the imposition of capital gains on all house sales, not just on second homes. A wealth tax is easily justified, given the massive increases in wealth inequalities in recent years, and might be easily sellable politically. Taxing the profits made on home sales would be less popular, since it would affect a significant number of home owners who still make large profits from buying and selling houses, and would pull the rug out from under the system of housing asset inflation which has been one of the main sources of social mobility in Britain – and not just for the middle classes – for three decades. Home ownership, and the chance to amass wealth through it, has been fundamental to the British mind-set since Thatcher set the band wagon rolling with her – highly popular but socially catastrophic – measures to sell off council houses. So it would be hard to roll back. On the other hand, it is already a myth for many in Britain, and particularly for young people, so now may be the time to try to change the culture.
Changing attitudes (and policies) on housing (both owned and rented) badly needs to to be tried. It is easy to forget – as the London property bonanza gets going again – that it was the US and UK mortgage markets, and the insane easy-lending policies of the 2000s, which detonated the financial crisis. They remain a time bomb since policy makers have not properly reformed them.
Many – most of us even – are more implicated in this than we like to acknowledge. It was not just the lenders offering so-called sub-prime loans that caused the problem, nor merely the property speculators who profited from preferential buy-to-let loans. It was also the millions of individuals who were prepared to indebt themselves to crazy levels to get on the roller-coaster. This scale of this money-making machine was surreal. I did a little calculation a few years back on the gains in home owner wealth during the 2000s in the UK. The value of the 18 million odd homes in the UK rose on average by about £100,000 in the 2000s. If just 15 million of their owners were owner-occupiers throughout the decade their collective housing assets would have grown by about £1.5 trillion. That is roughly equivalent to our annual GDP and what German taxpayers have spent on unification. It’s also slightly more than the current UK public debt. Even netting out for inflation and home improvements you can estimate private profits of over one trillion. This is a vast sum which has substantially changed the distribution of wealth (and thus opportunities generally) in the UK (in favour older cohorts).
Of course you can’t suddenly take those windfall individual profits back. But what you can do is make it less likely for new property bubbles to emerge – while at the same time increasing tax revenues. The simplest way to do the first, apart from building new homes, would be to remove the tax privileges given to housing profits by taxing capital gains on home sales (first and second homes) like other asset sales. This would reduce property speculation – big and small – and produce more stable property markets, like in France. It would also bring in substantial sums to the Exchequer. If capital gains tax were applied over the next five years at 30% on sales of, say, two million homes owned since year 2000, with an average net profit of £100,000, the total tax take would be £60 bn or £12 bn pa. No mean sum.
It is now very clear that the boosterish, under-regulated housing market in Britain – once so politically popular – has been a disaster. Apart from when housing bubbles bring financial mayhem, as recently, it is bad news even in normal times. A rampant housing market drains private investment from more productive uses, and encourages unsustainable levels of private debt (which is arguably a bigger problem in Britain than the public debt).
Worst of all, continuous property price inflation finally puts home ownership out of the reach of most people. Thus the rise of the new “generation rent” in Britain, most of whom will be denied the chance of mobility through homeownership and will be consigned to the grotesquely unregulated and often exploitative private rental sector for most of their lives. They look like being the first generation in almost a century to face worse prospects than their parents. Do we have to wait for demographic change to allow “generation rent” to out–vote the baby boomers before politicians dare to change their policies?