£18,000 Education Pot – a good idea?

The papers today have been full of Vince Cable’s proposal that all 16-year olds should have access to an £18,000 endowment for education.

Here is an extract from The Sun:

Teenagers should get £18,000 to spend on further education to re-balance inequality between the generations, Sir Vince Cable has said.

The Lib Dem leader today unveiled his plans for an “endowment fund” which would be used for young people to spend throughout their lives.

And from the Daily Telegraph:

A new wealth tax could extract some of the housing value owned by older Brits, which Cable wants to use to give all 18-year olds a lump sum to spend on education of their choosing, at any point in their adult lives.

This “endowment” could be worth £18,000, he said, covering two years of university fees.

The Times:

…plans for an “endowment” for all young people at 16 or 18 to “invest in education and skills over their life”. The policy is still in gestation, but Sir Vince said that at £18,000 each, it would cost £15 billion a year. Funds could be found from a “wealth tax or removing reliefs on capital gains tax”.

What do you think? I have three teenagers, so it is a topic of interest for us, especially as one will definitely go to university, one is already at a local college, and the other one is looking at the training/apprenticeship route.

This fund equals opportunity for all forms of education, levelling the playing field which tends to favour university degrees.

Businesses want a well-trained work force, full-stop. An endowment fund, for each young person, enables them to pursue their dreams and develop their talents, whatever the mode of training/education. The pot is also available for life, so those who work early and then wish to retrain have access for further education.

Hopefully I’ve started the debate – do say whether you think this is a good idea or not….

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  • Red Liberal 9th Nov '17 - 6:05pm

    Let’s just make university free, or affordable, like most European countries, instead please. Oh and some funding for those of us who’d like to expand their education later in life (Masters degree in my case) but have no means to fund it.

  • nigel hunter 9th Nov '17 - 6:26pm

    It will have to be paid for. Apart from Vince’s existing plans for raising the money he could reintroduce the 50p tax position levied when income gets to a certain point ,say 1 million pounds. This could be linked to new laws in place in overseas territory or some sort of sweatener to keep the money in the UK, just a thought.

    Good idea We do not always know what we want to do when leaving school. Thoughts can change over time as to what sort of talents we have . Leaving shoo; I obtained one O level , My first job needed account bookeeping skills. As i grew ,married, income was needed. Obtained Maths. English which added to my past knowledge. I grew in confidencei and to cut a long story short ended up with a degree., My confidence knew no bounds.
    Education can also be involved in job searching retraining identifying skills as you get older ,you learn all your life. In this world of rapid change with robots taking over!!?? (yes, no) new skills will be needed in peoples lives. Train in robotics for example. With the increase in the elderly population looking after others in say,their own homes with nursing skills is possible for those who will identify their ability as they develop.
    Yes it is a good idea. Over to you.

  • David Evans 9th Nov '17 - 6:27pm

    It’s a great policy in theory, but will need a lot of selling to make it in any way a vote winner except among the true believers. In particular introducing a new tax for something that is not a clear need to everyone is never easy.

    How it deals with the tricky areas will be vital. For example a young man or woman who in the Arsenal academy team, playing for their U18 team or whatever – will we subsidise Arsenal’s training programme? A youngster who wants to play guitar in a band? Someone who wants to become a model? Training for call centre staff? Shelf stackers? All are jobs, but should the state be subsidising what has always been on the job training?

    As an aside, I can’t find anything on this initiative on the Lib Dem website. We definitely need some good briefings on it to make it work.

  • Removing certain reliefs on capital gains tax could be counterproductive. If we look at entrepreneurs relief it directly encourages job creation. Having setup, run and now sold a business if this did not apply I would have been better off investing the initial capital and taking higher initial wages and a better pension with another employer. At final count 100 people were working in the business and their jobs are still secure. Not huge, the final product for the owners was equivalent to a moderate pension, but anything that makes it less attractive stands to harm job creation.

    People risk a lot to create smaller companies, often remortgaging, taking lower or even zero income and putting life savings into their companies. I know a great many business owners who see their company as their pension – often because they are the ones sacrificing income (and therefore the ability to save for a pension) as the company is grown. This relief is not a generous gift, it is often the thing that makes it worth the risk to invest money and time into a project.

  • Proper Liberal 9th Nov '17 - 9:37pm

    If we’re going to match capital gains tax with income tax then we need to start looking at scrapping corporation tax. Cable’s talked at length about how it’s a bad tax and the OECD has labelled it the most regressive tax in countries’ tax systems. If we’re going to look at making capital gains tax equal to income tax while doing nothing about corporation tax it could end up being more anti-business/anti-investment than Labour’s corporation tax raise to 27%.

  • Yes, better training is absolutely crucial, but sorry – this is a really, really bad idea.

    It just throws money at the problem which is easy to do but it won’t work as hoped. Some will justifiably need far more than £18k so how will they manage? Others will need far less than £18k so it will finish up burning holes in too many pockets and much will be wasted. Providers will pop up selling wonderful-sounding but ultimately dodgy courses to those that don’t really need them. It’s happened before.

    In short, one size does NOT fit all.

    The mandarins will never be able to tell who should have more and who less so they will, in all probability, do what they usually do and end up erecting a thicket of pettifogging rules costing a fortune to administer while driving everyone mad with frustration and, very likely, acting as a barrier to entry.

    Training is an investment made by individuals and (usually) employers so the way in which it’s delivered should be structured to reflect that. That means devising a framework – a model if you prefer – with built-in checks and balances so that all stakeholders have ‘skin in the game’ incentivising them to act prudently and cut their losses when things go awry.

    So, the key is devising a framework which will empower people to make their own decisions while Whitehall retreats to a good distance once it’s set up. That’s what empowerment means; I imagine most here subscribe to the principle so we should act as if we really believe in it.

    If people are empowered in this way they will, by and large, make good decisions – and certainly better ones than anyone else might make. And that solves the financing ‘problem’; borrowing is perfectly sensible provided it leads to greater productive capacity – via a better-trained workforce in this instance.

    Conversely, I very much doubt that people will be happy to pay higher taxes knowing or suspecting it will be spend with the usual poor focus.

    As it happens (and as I argued before on LDV) an excellent framework, as proven by an outstanding track record, has long existed in this country so this is a perfectly reasonable ambition.

  • David Blake 9th Nov '17 - 11:11pm

    The administration of it could get very bureaucratic.

  • Little Jackie Paper 9th Nov '17 - 11:13pm

    As interesting as the idea is, wouldn’t it just be easier to reduce fees? This just feels like hard work – or am I missing something?

    The day may yet come when all post 16 education has some sort of HE style fees.

  • I have three teenagers, so it is a topic of interest for us, especially as one will definitely go to university, one is already at a local college, and the other one is looking at the training/apprenticeship route.

    The only relevant difference between this and the current student loan system is what extra has to be found to fund the time in further education: £18,000 won’t cover the costs of a three-year university degree.

    Which then raises the questions what is the cost of funding that difference and who will pay: parent or student and is this really going to be vastly different to what it would cost the student under the student loans scheme.

    Currently, as a parent, it is obvious: unless you can afford to pay for the education upfront (for ALL of your children) then the student takes out the maximum student loans, leaving you to fund (hopefully) a small delta. This serving to keep more of the family assets invested and so should result in a bigger inheritance (if you don’t end up needing care) that doesn’t get taken into consideration in the student loan repayment calculation.

  • Ed Shepherd 10th Nov '17 - 7:37am

    Lifelong education should be free at the point of delivery and paid for by a progressive tacation system not by loans. Politicians should make it clear that everyone in society benefits from an educated population. They should make it clear to employers that to benefit from an educated workforce they might have to pay higher taxes.

  • William Fowler 10th Nov '17 - 8:10am

    This is half of a vote winner but the funding should come from a turnover tax, variable depending on the company (low for manufacturing, high for energy finance etc) rather than threatening a wealth tax on people who have spent 30/50 years making banks and associated hanger-ons rich via paying a mortgage on money that has already been incredibly heavily taxed from their paypacket. Expanding NI to all forms of income/capital gains would be another option but a vote loser compared to taxing companies. A small sales tax on property, again variable and linked to postcode, might be another option but again not popular.

  • I think the figure is about £6 billion a year to to take tuition fees back to £3000 per year. A situation that was an equitable balance of contribution v benefit. It would have cost £18 billion to apply it retrospectively as of last year. As for wealth tax, it’s a complete none starter IMO and will consign us to a political backwater. What this party needs more than anything is a dose of common sense.

  • The first thing to do is to remove the link between funding and university education. If people want to take other routes then that sbould be great. The same should apply to when in their lives people should access education. As part of any consideration we need to consider the future of universities. We have seen a huge growth in numbers going to universities. We have also large skills gaps. Shortage of doctors is a good example. Governments are simply not good at planning these things.

  • David Becket 10th Nov '17 - 11:30am

    This is an idea worthy of consideration, though not in isolation from other policies. Tom Harney sums it up well. Our skills gap and our lack of retraining options is one of the main reasons for low productivity and policies to address that are essential. However some of the warnings in this thread need to be addressed. Under the Tories the Student Fee system has got out of hand, it needs a review. However is it fair to totally fund further education for the 40%, leaving 60% high and dry? In any event this proposal will cover some of the fees.
    One size does not fit all. training in pottery skills can be essential in Stoke on Trent, but a hobby for the retired in Tunbridge Wells. Administration of Education needs reform, with a greater role for Local Education Authorities, including administration of this grant. As for wasting money, the grant is only payable for approved training, no training no grant.
    The Paradise Papers have shown that a major overhaul of taxation is required, particularly on wealth.

    As part of a total radical Liberal policy this has a great deal going for it, but on its own is a non starter.

  • @William Fowler
    Turnover is the worst measure for any tax on a business, tax on profit and give relief against job creation..

  • Gerald Francis 10th Nov '17 - 6:27pm

    I think this is an excellent idea. We can argue about the amount and how to pay for it but the principle is sound.
    Hopefully students will think hard about
    how they spend the money and choose
    wisely. It is also good that this money will
    not be only for university education.
    Universities are important but not the
    only form of valuable education
    The money does not have to be spent immediately allowing people change career or simply come to education late.

  • Think I’ll be needing some more detail on this, because I’m with Jackie – wouldn’t it just be easier to reduce tuition fees?

  • wouldn’t it just be easier to reduce tuition fees?

    This raises the question of how do universities etc. actually receive funding. I suspect, for undergraduate studies, it is wholly via the tuition fees. Thus for a reduction in tuition fees, another mechanism will need to be established, so that universities still receive the same funding.

    The issue with tuition fees isn’t so much the fees but how they get paid and by whom.

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