University tuition fees in England: we're not out of the woods yet

There's been quite a lot of head-scratching, and some quiet satisfaction in government circles, about the numbers of students now going into English Higher Education. Overall student numbers are now back to pretty much where they were before the introduction of much higher fees of £9,000 a year in 2012, even in the teeth of rising costs and debt going far beyond the impact of fees themselves. In some places, there's even been a rush to fill some courses as quickly as students could get their hands on them. There has also been a little bit more progress in the very slow business of widening participation amongst young people from less traditional university backgrounds.

So is the debate over, then? Were those of us who warned about spiralling costs and the difficulty of recruiting less well-off youngsters just wrong, just as we're supposed to have been wrong about macreconomic policy?

You won't be surprised to hear this blog issue a resounding cry of 'no'. For one thing, the amount of money the Government will never see back from this scheme is still going up (and up): that alone means that the whole settlement will have to be revised in the next Parliament. Next, as government successively withdraws support, these tuition fees won't in themselves be enough to plug the gap that inflation is leaving in university coffers: that's what's behind Oxford's call for even higher fees if more government support isn't forthcoming. And, lastly, there's no way of knowing how much progress we might have made attracting students from low income backgrounds if we had settled on a more generous system of financial support.

But all of that is to look only at the overall picture. Today it's important to point out another, and less obviously apparent, outcome of the Government's reform: the collapse in the number of part-time students.A new report from Universities UK shows that their numbers are deflating rapidly - down 40 per cent from just a couple of years ago. Given that they make up more than a quarter of the UK undergraduate population, that's some fall. And why has it happened? Because such students often are not eligible for tuition fee loans, making their courses unaffordable.

Everyone - employers, policy experts, universities, even Ministers - agree that lifelong learning and skills retraining are absolutely critical to our economic future. But we're throttling it if we focus only on 18-year-olds, and if we pour all our energy into the young (even though they need all the help they can get in this economic environment).

Yesterday we examined claims that the Government's economic plan has worked. It hasn't. Today we've looked at their Higher Education policies. They're looking a little better - but they're still pretty patchy and risky.

The lesson? Beware of politicians declaring victory.

Memo to Chancellor: Plan A did not work, actually

UK unemployment continued to fall over the summer, which is good news. Though youth unemployment seems stuck, and one of the reasons unemployment has failed to soar is a huge wage squeeze that's hurting every household in the land, this is a better result than during 1980-81 and 191-93, during which periods many more Britons lost their jobs. So this is in part a pleasing result of hard work and pay restraint - overall.

But what this emphatically does not mean is that Chancellor George Osborne (above) and his 'Plan A' - austerity plus low interest rates - can claim vindication in the face of his many critics (including the International Monetary Fund). Mr Osborne has been doing rather a lot of this recently, despite this avowed intention not to declare economic and political victory too soon.

He'd be better off keeping his powder dry, because any such claim would be nonsense.

Point one: all recessions come to an end. We're doing better this year than we thought we might because of what you might call the 'coiled spring' effect. The Government's policies (and, even more notably, its mood music) have kept demand, and particularly investment, so low for so long now that rivers of cash were bound to flow at the first sign of an economic thaw. Macroeconomics dictates that budgetary austerity, at least on the scale presently applied, can only delay recovery; it can't cancel it altogether. And that's what we've seen: to mix our metaphors, one of those slinky stair-crawler toys, held back, and held back, and wound up, and wound up, until it's been released, to quickly rush down the steps in front of this. None of this means that the overly-harsh budgets of recent years haven't held us back. Fact: we're still below our past economic peaks, and we're still shy of where we would have been with a moderately easier policy.

Point two: Plan A was actually abandoned in favour of a more Keynesian 'Plan B' during 2011, in favour of a much easier budgetary stance, deferring all of the Chancellor's aims way into the next Parliament. Remember when Mr Osborne moved into No. 11? The declared aim was (a) to eliminate the structural deficit in this Parliament, (b) to see borrowing coming down by the next election, and thus (c) to 'save' the UK's triple-A credit rating via (d) a 'rebalancing' of the economy towards exports and manufacturing. All of these objectives failed. None of them have been achieved. It is a conclusive economic policy failure the like of which we have not seen in this country since the public spending boom of 1974-76, and the IMF crisis that followed. What's replaced it? A mortgage boom, in which the banks have been told to go out and throw their money around. Mr Osborne has told other Ministers to go out and deny this - while privately accepting that a surge in house prices is exactly what he's aiming at.

Victory? One has to wonder what defeat would look like.

Congressional Republicans and network effects

What on earth are the Republican Party's representatives in Washington DC thinking of? First they said they wouldn't pass a budget without 'defunding' the Affordable Care Act (or 'Obamacare') - whatever that meant. Then they argued for a delay. Then they refused to pass a budget, shutting down large swathes of central government. Now they're basically pleading for any sort of spending concession at all, so that they can return to their activists and say that the White House has thrown them a bone.

All while the clock ticks down to a catastrophic default - one that might not hit home right away on Friday, but will as sure as eggs are eggs glue up the global economy next week. No-one knows what will happen if the US begins to turn away its debtors. Perhaps the entire banking and exchange system will be at risk, and we'll be right back where we started in 2008 - facing a renewed Great Recession. What in the world could motivate a few hundred members of the House of Representatives and the Senate to risk opprobrium, unpopularity, fury among their own constituents, renewed recession (if we're lucky) and an easy, easy political win for their opponents?

Some point to the gerrymandered borders of House seats, which are often drawn by state assemblies dominated by partisans. That means that you don't have to worry about your right-wing electorate; they're not going to elect a Democrat any time soon. What you really have to worry about are your far-right activists, who might just decide to go for someone more extreme in a contested party primary. So there's nothing to be gained from compromising.
 
But it's at least as possible that Republicans are exhibiting the effect of tightly-knit networks of thought, belief and sentiment - reinforced by their (often-exaggerated) relatively cosy electoral boundaries and alliances, to be sure, but not actually caused by them. Such network effects are analysed in Paul Ormerod's recent and fascinating work of popular economic explanation, Positive Linking, which despite its terrible title is a lively and funny introduction to mob groupthinks, drawing on examples from football hooliganism to Reformation martyrology.

How does this work? Well, the individualistic, calculating, revenue-maximising revenue of economic legend - of the equilibrium, Received Expectations economics that most Republicans choose to adhere to - would say that every single rational citizen arbitrages their profit-and-loss decisions until they reach a sweet or 'optimal' point where they spend their resources wisely. Those in turn add up, overall, to the best possible outcome for society as a whole, with everyone's choices well represented. What would this have looked like? A lot of to-ing and fro-ing about the budget, some compromises on both sides (though not on 'Obamacare', which the White House always made clear was not on the table), and then a settlement on the brink of the shutdown. Honour served; everyone happy.

You won't be surprised to hear that life isn't like that.

What in fact happened is that some Republicans up on the hill egged others on; others refused to compromise, forcing their leaders into ever-more absurd positions; others got enraged when the Obama administration and Senate Democrats had the temerity to start fighting back; and some others got pulled along by all the shouting and the shoving. As Ormerod argues on page seventeen of Positive Linking, we've tended to think of the 'widom of crowds' as being unquestionable. But that's not always the case:

The crucial assumption needed for the average of the collection of individual opinions to be more accurate than a single expert is that they do indeed form their views independently, without reference to those of others. Once this independence vanishes, once the agents become fused into a single whole, often the outcome is not so much the wisdom, [but] more the 'madness of crowds', as it was described by Charles Mackay as long ago as 1841.

There's a deeper theoretical insight here. Uncertainty affects everything. We can't see what's ahead of us - or even around us - very well. We're bound up with the narrative, and tied into the acts of others. Our apparently 'rational' choices are constantly shaped and reshaped by the world around us. One other example of such phenomena - the structural effects of information known to sellers, but not buyers - is known as the 'market for lemons'. But we're all going to look like lemons, if things keep up like this.

There'll probably be a deal, starting first in the Senate, where cooler heads have been prevailing. But herd effects mean that we can't count on it. And the clock is still ticking.

'Help to Buy' is a mouse: what a relief!

One thing that's very noticeable about the current administration (and was a hallmark of its predecessor) is the massive gulf between rhetoric and action. There are lots of reasons for this. Globalization has reduced the ability of national governments to do anything; so have the rising complexity of modern life, and the mounting, conflicting demands of consumers and voters. So have the gradual transfer of powers from the United Kingdom Parliament at Westminster to Edinburgh, Cardiff, Belfast, Brussels and international bodies such as the World Trade Organisation.

But another reason is their own poor decision-making: policy-making driven by inexperienced amateur Special Advisers, advised by poorly-resourced think tanks who have little sense of yesterday's experiences, let along the long history of policy failures in the UK. Whose sense of interlocking, organic, complicated economic processes often stretches no further than 'I want this and this and this to happen' - without considering the unintended consequences and quicksand nature of each and every one of their actions.

That's why we get ridiculous proposals like the idea that landlords will check tenants documents - a law that will very likely be ineffective, intrusive and destructive all at once. But I digress.

The one really good example of this over the past week has been the much-derided second stage of the Government's Help to Buy initiative. In case you've been asleep for the past year, the idea goes like this: issue state guarantees for 15 per cent of people's 95 per cent mortgages, in return for a fee from the banks. And then, hey presto! Frustrated young tenants who might be able to meet mortgage repayments, but don't have massive twenty per cent deposits, would suddently be able to buy houses. The gummed-up mortgage market that's been refusing to disgorge cash to the under-40s would start working again. Just like that.

Except that it won't.

It's an inherently bad idea, actually, pouring petrol on the flames of a London housing market that's now showing dangerous signs of spinning entirely out of control - and putting houses even further out of the reach of those unlucky enough not to pile into the market over the next few months or years. That's not usually been financed by UK mortgages at all, actually, but the savings of the global rich. Even so, pumping in even more demand isn't any way to restrain the steadily-mounting social costs of South-East England's absurdly high property prices. 'Help to Buy' should be cancelled forthwith, or at least withheld from purchases in London and the South East and only paid out to first time buyers - as this blog has argued again and again. It's all just so reminiscent of all those disastrous government schemes of long ago - Option Mortgages, Mortgage Income Tax Relief and the like - that have sucked up so much British capital for so long.

But put that to one side. The scheme's not even going to work in practice, because the banks' actual terms tell us exactly what they think of the risks involved. They're charging pretty high interest rates on these products, of above five per cent - much higher than the sub-three per cent deals you can get with a sizeable wad of cash in your back pocket. One estimate is that Help to Buy mortgages might end up £6 a week cheaper than existing products, and might be just as hard to get because of the stringent credit histories that that banks are going to insist on.

So we were all worried that Help to Buy was going to turn into an economic Godzilla, ripping up our economic future like a rampaging monster. Instead, it does now seem as if a tiny mouse has scuttled out of the skirting board. It's all an enormous relief - though one in no part attributable to HM Government.

The tragedy of the 'Daily Mail'

The recent furore over the Daily Mail's treatment of Ed Miliband's father is a tragedy. The family are clearly hurt. The way we speak to each other in public life has been exposed as a bit of a nasty old bear pit. But you know what? Most of all, this is a tragedy for the Daily Mail itself.

We need a lively, rumbustious, fearless press - most of all at a time when printed news circulation is in precipitous decline. The Mail has done better than most: unfortunately for them, that still means that they're losing readers hand over fist. Why else would they put so much effort into their website, showcasing photographs of celebrities with not-very-many clothes on?

Chucking mud at dead veterans of the Second World War is hardly the way to fight back. This blog is sympathetic to the difficulties of striking a balance between story-hunting and cool-headedness. Its writer has been a journalist. It's hard to write to very tight time deadlines without sometimes dropping a massive brick. Trust me. I've done it. But the Mail's desperation to grab the headlines and set the agenda has let it looking increasingly isolated these days. It's just going too far, too often.

The Mail could be so much more. So much more. Let's have a look at the original offending article, that ran under a photograph of Ralph Miliband (above) and the headline 'The Man Who Hated Britain'. It was a hatchet job, basically, and a not very interesting one at that - as even its defenders accept. It relied on a single diary entry, written by Ed Miliband's father when he was a teenager, and an assortment of other newspaper cuttings - mainly pertaining to a time when lots of other Brits and non-Brits were commenting on how much there was to loathe about the British class system and British complacency. The Mail could have chosen to mount a two-page splash debating the question - 'the man who hated Britain?' That would have been better - though still rather absurd. They could have commissioned a more sensitive, 'human' colour piece about Ralph Miliband's legacy, and got some nice quotes from friends and family - while still emphasising his leftist views. Either would have fitted the paper's agenda. Neither would have looked out of place. And both would probably have helped circulation more than this crude, nasty and vindictive piece of one-dimensionalism: an error of judgement which they continue to defend, in the teeth of public opprobrium. It would then have been far better to have printed the Labour leader's reply to their original piece without comment, and then launched a 'debate': instead, they compounded the error by talking of an 'evil legacy'. Upping the ante has made things worse - for them.

As Sunder Katwala reminds us, the Mail does have its better angels too: witness its campaign to bring Stephen Lawrence's killers to justice, or its campaigns against big business 'rip offs'. Nothing will be served by demonising your ideological opponents: isn't that what objecting to their treatment of Ralph Miliband should really mean in the first place?

When the left-wing journalist Mehdi Hasan criticised the Mail last week, he was immediately whacked by the release of a letter he'd written asking to write an occasional column for the paper. What did he say there? That the Mail has 'passion, rigour and boldness'. Okay, he was looking for some work, but in many ways Hasan was right - the Mail could and should be the source of some good old wrassles over what we are or might be as a nation. Instead they're trying to slash and burn their reputation with personal attacks. Lots of conservative commentators have said so too. The conclusion? The Daily Mail should know, and aspire to, better.

Mrs Merkel's real challenge

So Germany's centre-right Christian Democrats won their general election. Convincingly. Resoundingly. At one point there was even talk of an overall majority - a rare event indeed in the history of the post-war Federal Republic. Angela Merkel (above) is to be congratulated. Safe, unsurprising, managerial and above all conservative with a small 'c' as well as a big 'C', she has managed the rare trick of becoming the nation's 'mother' - reassuring, capable, respected and safe.

But where does she go from here? With her preferred Free Democratic coalition partner outside of Parliament for the first time, she's probably going to have to team up with her major rivals, the Social Democrats. That'll involve the creation of a broad-based coalition that'll be able to tackle problems with no fear of defeat in parliament - but which might also proceed very, very cautiously.

That's going to be a problem for the rest of Europe. For although the Social Democrats might pull Mrs Merkel further towards the centre in her dealings with the Eurozone's debtor nations (which can only be a good thing), there's no sign whatsoever that any changes will be anything more than superficial. Why should there be, the Christian Democrats having been sent back yet again with a better bargaining hand? There's also every sign that official German attitudes to the United Kingdom's much-maligned renegotiation of the terms of EU membership will harden, given the Social Democrat's hostility to the development of any such a la carte Europe.

What might genuine radicalism look like, though? Well, it'd see Germany engage in much more debt relief to Ireland, Spain, Portugal and Greece - and Italy, too, if that nation can finally break the logjam of its stiflingly personal and poisonous electoral politics. Most importantly, there'd be the creation of a true European currency, rather than the simulacrum of a 'Euro' that we have now. One debt; one set of bonds; one powerful Finance Ministry to match its central bank; one budget. That, and that alone, can possibly stabilise the Euro and allow the citizens of Europe's economically smaller and weaker nations some relief: for interest rates and risk will then abate somewhat.

That's where Britain (and some others) come in. If that's going to happen, the bonds of EU membership are going to have to loosen a little, for these countries just don't sit very well within that system. Germany's going to have to allow that, too, for the European Union to thrive.

So there we have it: a deepening, and a paradoxically loosening, Union. Liberated by her electoral triumph, a truly radical leader would seize the initiative and build a really powerful set of European financial institutions, before letting nations who don't want to join out of some of the tighter knock-on regulations that will inevitably follow. For now, Mrs Merkel commands all she surveys. She is Europe's true leader.

But will she seize that moment? Probably not. She's built a career on caution, conservatism, and step-by-step incrementalism. She hasn't got where she is today by defying the voters - and Germans are tired of 'paying for other people', as they see it. The vision is probably a fleeting one, for Germany's political class, no less than Britain's, is rather stunted in its ambition and its imagination.

Which is a pity for everyone, but especially for the citizens of Greece and Spain, driven into ruin by a Europe that can bring itself to be neither one thing nor the other.

Political conference season: four badly-drawn ideas

So it's been political conference season in the UK. Time for political activists to get together and have a few drinks. Time for politicians to make speeches to the faithful - though, in light of their dwindling membership rolls, 'time to talk to lobbyists and journalists' might be a better way of thinking about it.

And time for more of those bad, mad and dangerous ideas that presently afflict us to keep tumbling out. Landlord checks on tenants' immigration documents? Life sentences for dangerous dogs' owners if they end up killing people? Help to Buy, that disastrous shot of neat steroids straight into the arm of the housing market? They're all out there, and they're all likely to do more harm than good.

But this conference season, we've had even more. Let's take four, shall we? Two from Labour and two from the Conservatives, just for the sake of balance. They're not terrible in and of themselves, you understand, though most of them are in terms of their actual execution. They're simplistic, they've been written on the back of an envelope, and they're never going to happen as intended. That's the real tragedy - and the really disingenuous nature of their announcement, intended to cheer up party members and attract a few headlines rather than really address our problems. Anyway, in no particular order, here's our four:

Making the long-term unemployed work for their benefits. This isn't all that bad on face value. If we conceive of society as an organic whole, composed of rights and responsibilities, some work for benefits is unobjectionable. Except, except... Chancellor George Osborne (above) announced that this would be for 30 hours a week. Such a policy might be popular. But nothing is more likely to make the labour market malfunction. How on earth are you supposed to look for a job, think about your skills, or (I'm sorry if I'm sounding a bit sympathetic to actual people here) feel good about yourself and your choices if George Osborne forces you to break rocks? Let's have a bit of aggregate macroeconomics in here, shall we? There are simply not enough 'jobs' to be taken up: what we're talking about with this 'idea' are pseudo-community service tasks. Labour had a great deal of success, in office, with reducing the level of long-term unemployment: the Coalition still might, if it focuses on growth and continues to cut the marginal rate of income tax for people moving from welfare to work. But this? The only effect will be to make Mr Osborne look 'tough' on welfare recipients.

Funding apprentices in line with immigration numbers. We've bashed this one before, but perhaps we didn't spell it out enough. This Labour idea makes precisely no sense. None. Nada. Put aside the legal questions over the move, because although of course anyone from within the EU can apply for apprenticeships in the UK, in practice few actually do so. No, the problem here is the link between two completely different areas of policy, which should (a) remain separate, and (b) don't impact on one another in ways that politicians expect. Companies recruiting Spanish workers won't have to take on more apprentices; firms employing Russians will. The effects on labour productivity can only be imagined: in the particular slight, but in the aggregate probably harmful. This one's a duffer. It should be dropped forthwith.

Withdrawing benefits from the under-25s. This one's the nastiest, and the one likeliest to do most damage. Again, on the surface, no-one could object to saying that all young people should be in work or training. But this is just not practicable or realistic. Some of our young people are highly vulnerable. Some are less than able to tackle either education or full-time employment without a lot of support. Are they really to be thrown back on their parents, and if they have no parents (or not ones ready or able to take them in), onto charity? At this point one feels like saying: there was a reason that Beveridge and Keynes recommended universal welfare that applied to all. Not because people would be able to 'fall back' on it, like a comfy sofa, but because to do otherwise risked tinkering with very complex processes that should be allowed to work themselves out under a single system. Narrow down your focus too much, and you'll end up with consequences you never imagined: in this case, a medium-sized group of indigent (and, increasingly, homeless) young people, drifting towards city centres with little hope and less to do. To make things worse, Liberal Democrat leader Nick Clegg has successfully muddied the waters on this one today, saying that his total failure of a Youth Contract will cover young people who've completed two years in the Government's similarly useless Work Programme. The right response? A sad shake of the head.

Freezing fuel costs. This Labour announcement the most intriguing one in our list, and potentially the one that's the runner. We know from study after study that our big electricity providers might well be colluding against the consumer, potentially to the tune of many billions of pounds. Breaking them up, and creating a much tougher regulator, may well therefore help to reduce costs - and bills. They're too big, and they're too powerful. Remind you of anyone? Yes, it's the pre-2007 banks. Except that not one estimate of these malignant practices adds up to enough cartellisation to bring down costs immediately upon the election of a Miliband government, or even to cover the costs of a seventeenth-month freeze once legislation has been put in place. Not one. What this means is that (a) the taxpayer would have to plug the gap - perhaps a more equitable solution, given the relatively progressive nature of the tax system, than relying on consumers of the actual power, but hardly likely to encourage sparser and more environmentally-friendly use of gas and electricity. Or, alternatively what might happen is (b), that given the uncertainty - and unless you nationalise the entire system - power companies will spend and invest less in power generation. Either of these routes to perdition will cause a strong political backlash if taxes have to stay high, or the lights go out - exactly what happened, by the way, to the Attlee government in 1947.

The conclusion? Our political class isn't up to its job. We face so many real challenges - from environmental degredation, to the US debt crisis, to what we're going to do with NHS general practice as more and more people age, and health 'consumers' become more and more demanding. And these aren't solutions. They're unlikely to serve as even mildly effective sticking plasters.

The answers we've been presented with over the last few weeks are inadequate to the seriousness of our times. You know it. Every other voter knows it too.