It seems that although only some 7% of all secondary school pupils in the UK are privately educated and around 14% sitting A-level examinations are from private/independent schools, these young people comprise 25% of all university entrants and over 40% for Oxford and Cambridge universities. Nicola Dandridge, Chief Executive of Universities UK, considers this more the result of the lower A-level attainment performance of state school pupils rather than accepting the position adopted by Simon Hughes, the Liberal Democrat deputy leader and also now the Coalition government advisor on access to higher education. Mr Hughes sees the universities as having failed to take more students from disadvantaged backgrounds and has suggested universities should aim to limit their privately-educated intake to the same (i.e. 7 or 14%) proportion of all (private plus state), secondary school pupils.
While still in opposition, the Conservatives pledged to transform these underperforming state schools through the creation of Free Schools, based on experience from such reforms in Sweden and the US. Now in Coalition government, it becomes necessary to bring their Liberal Democrat partners within a common Free School policy drive but which takes time. Considering the strong and seemingly inflexible union opposition already lined up against the practical implementation of the Free Schools policy, and the key importance to the UK of excellence in education for its young people, the challenge for David Cameron might then be seen by some as having a certain resonance with the situation Mrs Thatcher faced with the National Union of Miners. Those who disagree with this policy of Michael Gove, the Education Secretary, include the National Union of Teachers (NUT), another teaching union the NASUWT and the Anti-Academies Alliance (AAA), backed by others such as the RMT transport union and its general secretary Bob Crow, together with the Fire Brigades Union and the GMB.
Already in a letter to the Times last Sunday, Christine Blower, General Secretary of the NUT, is citing the decline in educational standards in Sweden and quoting Bertil Ostberg, the Swedish Education Minister, as having declared that their free schools (three-quarters of which are run by profit-making companies) had been a failure and warning the British government not to introduce them. Ms Blower also says that the NUT is not complacent about standards in schools but suggests a better example to follow in improving education would be Finland, top of all international educational comparison tables and with a truly comprehensive system.
It is good to learn that Michael Gove is already responding to the challenge and planning a high-profile promotion of Free Schools around the Country, to accelerate progress and counter the opposition of unions and hostile councils on the ground. In the meantime, Alasdair Smith, National Secretary of the AAA, accuses Labour of complacency, considering the scale of what he sees happening. There again, it was in the year 2000 that David Blunkett for Labour first announced the creation of City Academies, similar to Free Schools in being outside local council control and also campaigned against by the educational establishment. Tony Blair, Labour Prime Minister at the time, wanted these Academies to replace the (his) quote – Bog Standard – unquote Comprehensive Schools, which have resulted from nearly 50 years of decline in educational excellence in the UK.
Attack on Aspiration?
décembre 29th, 2010Bagehot writing in The Economist magazine of the 18th of December, finds it a shocking failure for a Conservative-led government that, in too many families, its plans for increased tuition fees are seen as an attack on aspiration. The government is said to have been too much on the defensive in the tuition fees debate and should have turned the argument around more and better presented its case that e.g. students will also be more empowered to shop around for the best value for their degree courses. This approach could then link increased tuition fees together with more decentralisation and power to local government, a volunteer-based Big Society and the more autonomous Free Schools, within a single, radical and Conservative concept aimed at limiting what should be expected from the State.
The opportunity is there to win such an argument if one considers the results of an opinion poll by ComRes, taken just after the first student protests in November. Although 70% of the public agreed that higher fees will deter poorer young people from applying to university, the same poll found that 64% of the public agreed that students should share the burden of public sector spending cuts.
Some Conservatives believe that higher tuition fees will empower students because the resulting higher, upfront loans, repayable only after the recipients are earning above a certain level, will in practice encourage students to seek out those courses seeming to offer the best value for money in getting a degree. Such competition for students will in turn force colleges to improve their teaching and offer innovations such as shorter, more intensive courses, courses more tailored to meet the needs of prospective employers, thereby making degrees more accessible not less.
As it is, the Independent School sector is already preparing itself for the impact of increased university tuition fees, which could force middle-income parents to think twice about private education in order to save for the university stage of education. There is concern about competition from top state and grammar schools when children could be withdrawn from private school e.g. at the 6th form stage to cut costs before a degree course. The Education secretary is also planning to allow high-achieving comprehensive and grammar schools to expand, which will in turn create more places for those who might otherwise have gone for private education. Although the independent sector is responding e.g. by freezing school fees for next year, there is concern that Independent Schools will instead become much more the domain of the elite, with middle-income parents hardest hit.
In the case of the poorest would-be university students, Professor Eric Thomas, Vice-Chancellor of Bristol University and the next president of Universities UK, thinks that students from families on the lowest incomes should not pay tuition fees, in order to allow university Vice-Chancellors to charge other students the maximum amount. Therefore, he plans to scrap fees for the poorest students in an effort to widen participation, arguing that applicants from disadvantaged backgrounds do not want to get into debt. Indeed there is evidence from Ivy League universities in the US that the most effective way of increasing social mobility is to excuse those in most need from paying for their own tuition. In the case of Bristol University, the Vice-Chancellor proposes not only waiving tuition fees completely for the poorest students but also covering the cost of maintenance for such students. Professor Thomas also thought it apparent that as higher education was expanded in the past, it would not be possible for the taxpayer to carry all the cost, therefore making it inevitable that fees would have to increase.
The Higher Education White Paper is expected to set out rules governing universities that choose to charge fees above £6000 per year; there will have to be proof that the additional income is being used to increase numbers of students from low-income families.
Green Energy Reforms
décembre 21st, 2010Increased penalties for pollution and generous subsidies for off-shore wind and nuclear power, were included in a set of reforms announced by the government last week, to launch an estimated £200 billion, low-carbon upgrade of the electricity generating industry. Mechanisms proposed include:
? A feed-in tariff
? Guaranteed payment per megawatt for higher-cost technologies (such as off-shore wind & nuclear power), in addition to the wholesale price paid.
? A defined, minimum carbon price for European Union pollution permits.
? Extra payments to power companies for new gas-fired power plants required as back-up during windless periods.
? New emission standards with increased penalties for fossil-fuel generators.
Although these reforms, if passed into law, should speed up the phasing out of coal-fired power and favour nuclear and off-shore power generation, the consumer it seems will have to pay much higher electricity bills which, according to Ofgem the regulator, could increase from the average of £1,100 today up to £2,000 per household by 2020. This is a consequence of the government having signed up to binding international targets for reducing carbon emissions. To achieve these targets, 30% of electricity generated in the UK will have to come from low-carbon sources (currently at only 7%) by 2020.
Critics respond that replacing all coal-fired plants by modern, gas-fired ones would achieve the same pollution reductions by 2020 at around 10% of the cost, with enough supplies of gas to meet demand for at least another 250 years from e.g. new shale gas discoveries, although this alternative approach would have to rely on viable carbon-capture technologies becoming available by then. The new localism bill giving councils greater powers to veto projects in their areas of responsibility and put before parliament last week by Eric Pickles, the local government secretary, could at the same time undermine key planning for regional, electricity generating and distribution infrastructure, by local councils vetoing the construction of unsightly and disrupting, on-shore wind farms.
Following a period of consultation, a decision by the government next March on a minimum carbon price and a white paper covering these proposed green energy reforms to be published in the spring of 2011, the above mechanisms could be in force by 2013.
Tuition Fees Increase
décembre 14th, 2010The violent student demonstrations in London last week protesting against the increase in university tuition fees, appeared to be aimed less at Labour which had commissioned the Lord Browne report on university funding or the Conservatives in the Coalition government which proposed the increases, than at the Liberal Democrats. The problem for the Liberal Democrats is that before the election they had not only promised the many young people who eventually voted for them, to oppose any increase in student fees, but also had even signed a pledge to do so, despite the opposition at the time of their leader Nick Clegg. On the positive side for them, Nick Clegg has shown himself to be a serious politician within the Coalition cabinet by voting for the successful Commons motion to increase tuition fees; however, with Simon Hughes their deputy leader having chosen to abstain and some 50% of their MPs voting against the increase, the Liberal Democrat party has now found itself essentially split three ways by its unfeasible pledge. The party, therefore, is currently rated at only 9% popularity in one opinion poll and, having lost the moral high ground somewhat, finds itself appearing to be no more trustworthy than Labour or the Conservatives, the harsh reality of their participation in a governing Coalition under severe budget constraints.
Despite the vote in favour of increasing tuition fees up to £9000 per year for the most sought after university places, taxpayers including many on relatively low incomes and with no chance of higher education, will still be subsidising these students. The demonstrators should remember, therefore, that to succeed they need not only a just cause but also public support, the latter likely to be at a rather low level after the uncontrolled behaviour of last week and the disruption to ordinary, working taxpayers in the Oxford Street area, blocked by students chanting about their rights and even aggressive towards the heir to the throne and his wife.
Nick Clegg having fielded a lot of the political pressure leading up to the vote, now is the time for the Prime Minister and his government to stand firm in the face of aggressive demonstrations against measures which, although we are told will still favour students from poorer backgrounds, need to be more convincingly communicated. For this segment of the future student population, increased funding for educational support and keeping tuition fees low address only part of the overall problem. Such students can find it difficult to succeed alone with no help or support or motivation from within the family, particularly those families with no previous experience or history of higher education. Schools also cannot do all the work although they can help to foster or not, ambition and aspiration in their pupils to offset somewhat the lack of support at home. There is an additional cultural aspect it seems with e.g. families with Asian origins much more successful in general at getting their children into top universities such as Oxbridge compared with their black or white working-class equivalents, with the secret here said to lie in sheer hard work and application, rather than funding or entitlement.
FIFA & the Prime Minister (PM)
décembre 6th, 2010One wonders what the Prime Minister (and indeed Prince William our future King) had in mind last week in Zurich when fronting the final presentation and last minute lobbying efforts towards FIFA, in an effort to secure hosting for England of the FIFA Football World Cup in 2018. Perhaps he was trying to emulate Tony Blair who, when Prime Minister, was his usual high profile self in the final successful attempt to snatch from the favourite Paris, hosting of the 2012 Olympic Games in London. It could be said that Prince William as Honorary President of the Football Association (FA) had no choice but to be there in what now seems in retrospect to have already been a lost cause (or already decided in the favour of the absent Russian Prime Minister), their efforts having more impact on the media (with David Beckham also up-front) than the key FIFA decision makers who remained unconvinced, despite making suitably polite noises of encouragement.
It is not in the job description of either the PM or Prince William to be commercially astute or masters of the art of successful lobbying and they appear ill-served and tarnished by those responsible for this bid. Certainly earlier allegations of corruption within the opaque decision-making process of FIFA carried by the Sunday Times and the BBC Panorama television programme, will not have helped but they do not explain why England only secured 2 votes out of 22 delegates and were, therefore, eliminated in the first round of votes cast. Rather it would appear that the England bid team had very few sources of effective influence and feedback on their relative chances of success due to the very limited representation by the FA within the FIFA organisation. FIFA had certainly acknowledged previously that the England bid was the safe option, given that all the stadiums were already built, matches would be well attended, football could save disaffected youths in our inner cities and the sale of the overall television rights would be guaranteed money spinners. However, other European bids were not that dissimilar (apart from that of Russia it appears) with Spain for example having not only bigger stadiums available but also better weather and food, when FIFA were looking for something more. It wasn?t then sufficient to have offered what is said by England to have been the best technical bid.
The final decision in favour of Russia, however it was arrived at, also has merit. This will be the first time that Russia, a major European power and football nation, will host the FIFA World Cup. Of course a significant number of new stadiums will have to be built as in South Africa for the last World Cup. However, these can be easily financed by the revenues from the major Russian oil and gas resources and will expand the influence of international football and open up a vast, remote continent to the outside world, still only some 20 years after the collapse of the old Soviet Union.
Having thrown his weight behind the England bid shortly after becoming Prime Minister, David Cameron had put himself into what now appears to have become a no-win situation. Whatever he might have been advised on the relative England chances of success, not to have gone would have left him open to the criticism that, in the final effort when top political support might have been critical to secure success, he was not there. However, in the harsh commercial world, the top politician (and/or royal) is normally only seen at the final signature stage of such high profile negotiations, to provide not only the important prestige and media interest in the event for the customer but also benefit to the politician, particularly when jobs back home will be created as a result of the business secured. Hence, Mr Putin the Russian Prime Minister arrived only after the final decision had been announced by FIFA in favour of Russia.
Slow Recovery (OBR)
décembre 1st, 2010The Office for Budget Responsibility (OBR) formed in May, 2010 to provide an independent assessment of the public finances and the economy for each Budget & Pre-Budget Report, has increased its growth forecast for 2010 from 1.2% to 1.8% of GDP but cut its forecast for 2011 from 2.3% down to 2.1% and the estimate for 2012 down from 2.8% to 2.6%. The stronger growth in the middle of 2010 is attributed to temporary factors such as unsustainable activity in construction and companies rebuilding stocks. The recovery then would be the weakest for any downturn in the UK since World War II, taking a projected four (instead of the three of the two previous recessions) years overall.
On the more positive side, the OBR reduced its forecast of 490,000 job cuts in the public sector, down to an estimated 330,000 job losses with private sector job creation likely to offset these public sector losses over the next few years. The OBR also said that the Coalition government had a greater than 50% chance of achieving its deficit reduction goals. It added that it would be unprecedented in the post-war period for economic growth to not exceed 3% of GDP in a calendar year over the recovery phase of the economic cycle and warned of the considerable uncertainty around its main forecasts, particularly on levels of government spending and revenue. Overall, the deficit at 10.0% of GDP in 2010 is seen as falling to 1.9% in 2014-2015.
George Osborne the Chancellor in his own autumn report to the Commons, seized on the projected fall in public sector job losses as justifying his cuts to the Welfare Benefits System, which in turn had made more budget money available for other government departments to protect jobs. The Labour opposition, however, criticised the OBR for being too optimistic in its forecasts, although these would appear to be in line with the expectations of the financial markets. The pick-up in tax revenue from the increased growth in 2010 has still to come through and, in the key export markets of the Euro-zone, growth is continuing at the core.
That said, last week George Osborne put aside his much-advertised white paper on growth (with the associated prospects for job creation) and there remains the need for a narrative on economic recovery for those facing austerity. Otherwise, the view of the Institute for Fiscal Studies that the poorest are bearing more than their fair share of the cuts programme, will only add credibility to the accusation made by opposition Labour leader Ed. Milliband that the government is reducing economic policy to deficit reduction. The Social Market Foundation Think Tank also sees it as inevitable that the costs for the new Universal Credit System for Welfare Benefits, will end up as being much higher than many now expect and significantly outweighing the savings after 2014/15 when the system is fully up and running, with its associated universality and simplicity much less impressive than billed.
Euro-Zone Tensions
novembre 25th, 2010William Hague, the British foreign secretary and known as a Euro-sceptic, should still have been able to have shown more confidence on behalf of the UK in the future of the Euro-zone, when interviewed recently on the BBC Radio 4 Today programme. Speaking from Lisbon during a NATO summit, he saw it as very much in the British national interest for the Euro-zone to be stable (some 60% of British exports are towards Euro-zone markets). There was also a specific although separate (from the Euro-zone) case for assisting Ireland with its current financial problems (British and German banks are amongst its biggest creditors). However, he failed to reject the suggestion that the Euro-zone was in danger of imminent collapse, pointing out instead his own view over the years of the inherent tensions in having a Euro currency zone which essentially locks together the exchange rates and interest rates of countries with very differently functioning economies.
The problem for the UK is perhaps encapsulated in the opinion of Dominique Strauss-Kahn, at the head of the International Monetary Fund (IMF) and a potential challenger to Nicolas Sarkozy for the French presidency, who considers the only solution to the financial crises now facing Ireland and impacting Greece, Portugal and Spain, is for more centralisation within the European Union, especially in financial, economic and social policy.
However, the German chancellor Angela Merkel also did not build confidence in the financial markets when, in response to political pressure from voters opposed to bailing out weaker countries, she increased nervousness amongst lenders by suggesting that banks and investors should in future not just be bailed out by taxpayers but take some of the losses themselves. This drove lenders to charge more for their loans to reflect their perception of added risk and increased the pressure on Ireland, where a run on its crisis-hit banks was essentially already underway as companies quietly withdrew their deposits.
Being outside the Euro-zone has allowed the UK the same flexibility in monetary policy it has used in the past to allow the pound sterling to depreciate against the Euro and other trading currencies in an effort to stimulate growth in the economy particularly from exports. However, a break-up of the Euro-zone would hurt not only the UK but also seriously undermine the current global recovery, given the major trade imbalances and talk of currency wars between the major trading nations.
Within the Euro-zone, Germany has followed through with its normal, correct economic discipline and maintained its competitiveness by only allowing its unit labour costs and pay per employee to rise by 10% or less from 2000 to 2009. Today, therefore, it is showing a healthy trade surplus as customers have continued to buy the German-made quality goods they value, despite the appreciation of the Euro. Over the same period, however, most of the problem-hit economies such as Greece, Spain & Ireland have allowed labour costs to rise by 20- 30% compared with Germany and are now suffering the consequences. Other European countries such as Italy and France have also lost significant competitiveness compared with Germany over the 11 year existence of the Euro. There is a need, therefore, for greater economic discipline by the weaker members of the Euro-zone.
If we consider the options, one view is that Germany cannot expect these very different but weaker economies to be able to emulate its own very low inflation, weak domestic demand and export driven model for the Euro, based on the Deutschmark experience. Germany, therefore, has to find a more middle way with its Euro-zone partners by reducing its current account surplus and stimulating its own domestic demand for imports, in an effort to generate more stability in the Euro-zone. Otherwise the only other solution would appear to be that proposed by Dominique Strauss-Kahn for more centralisation and fiscal consolidation within a viable single currency union, backed by a European federal budget to enable e.g. the poorer, less competitive regions to be supported by the richer ones, an option not likely to be popular with German voters (see Categories/Chairman?s Blog/Federal EU? In the right hand index column) or indeed the UK.
In the meantime, a monthly Reuters poll has 34 out of 50 economists questioned, predicting that Portugal will likely follow Greece and Ireland in requiring bailout funds. Already 10-year bond yields in Portugal and Spain are increasing rapidly, with Spanish banks also major holders of Portuguese bonds. The tension between the Euro-zone periphery and the core is then demonstrably clear with the German and French economies having been performing well, now indicating the case eventually for higher interest rates.
Jobs in Biotech and R&D.
novembre 16th, 2010Continuing with the themes of job creation together with creative financing & where Britain has a competitive edge (see Categories/Chairman?s Blog/Fairness/ Job Creation & Creative Financing in the right hand column index), there are major players in the pharmaceutical industry with important Research & Development (R & D) facilities in the UK, such as GlaxoSmithKline (GSK), its biggest drugs company and the Swedish-British merger of AstraZeneca. However, job redundancies result when local research budget funds are diverted to other lower cost parts of the world e.g. GSK has now opened a research facility in Shanghai, China where there is then the additional prospect of major higher-value sales. The industry is also under financial pressure when governments worldwide are expecting to pay less for medicines to cut their health budgets and lucrative drug patents are expiring allowing competition to sell cheaper, so-called generic copies. Pfizer,the largest pharmaceutical company in the world, will now work with Biocon, the largest biotech company in India, to market « biosimilar » (i.e. genetic impersonations but not identical generic copies) insulin treatments designed and manufactured by Biocon. Here in France, Sanofi-Aventis announced the closure of four research facilities last year. The problem is global for the industry with the financial hurdles to successful medical drug innovation becoming ever higher and then the regulators to convince before final launch.
The UK is said to be one of the most conservative countries in Europe when regulating clinical drug trials and, with a separate body NICE – the National Institute for Health & Clinical Excellence ? responsible for advising the NHS on drug supplies, considered one of the slowest adopters of new medicines. There is also not the final prospect of major sales in the local market. Indeed, GSK spent 39% of its R & D budget in the UK last year but the country only represents 5% of its worldwide sales. However, in an effort to become more efficient the industry is looking to focus internally on fewer areas and to also buy in other work from an increasing number of smaller Biotech companies, often backed by the big drugs companies themselves e.g. GSK with its 18% participation in Convergence Pharmaceuticals, a Cambridge Science Park start-up. This offers a potential source of financial backing for R & D scientists looking to launch new businesses in the field of biotechnology.
There is seemingly room for improvement in Britain which to date has been nowhere near as successful as e.g. the US in producing successful biotech companies. However, there is a market there in the major pharmaceutical companies for such products and the opportunity to exploit the innovative benefits of spreading such creative work over a much larger number of smaller laboratories, when the likelihood of coming up with something new could be enhanced. This is why it is important that the government is considering a so-called patent box to foster R & D in the UK. If introduced the system would provide tax breaks for revenues from ideas patented in Britain and, together with the right regulatory and economic environment, provide a boost for the development of more innovative companies and their associated jobs.