The Madness of Money by Calum Cashley



Politics became lost at the end of 1976. That’s when the Labour Government of the day finally realised that it had lost control of public spending, messed up the economy and sent the UK into chaos (something they’d been arguing about for a year by that time); it’s when Denis Healey, as Chancellor of the Exchequer, went to the IMF to ask for a loan to keep the state afloat until the revenues from the North Sea started rolling in. It’s also when the UK found out that the IMF doesn’t give loans without collateral and that the mortgage terms were not exactly easy.

Enter Dr Johannes Witteveen, born in Zeist, former Finance Minister of the Netherlands and economics professor in Rotterdam turned Managing Director of the IMF, who made himself comfy at the Cabinet table, got a wee cup of tea and a couple of chocolate digestives and set about curing Labour’s mess.

The IMF administered a medicine that tasted bitter – sour enough to poison the well from which the Labour Government and the trade unions had been drinking, vicious enough to last into the Winter of Discontent, the fall of the Labour Government and the rise of Margaret Thatcher. Healey had promised the Labour party conference of 76 that there would be no new spending cuts just as his Prime Minister had been telling the BBC that only Labour could dig the UK out of the financial mess that Labour had got it into and Labour conference was voting to nationalise the major banks and a big skelp of the insurance industry. It seems that some things, indeed, never change. The measures brought by Dr Witteveen changed the course of the UK monetary policy abruptly and, it might be said, viciously but they did more – they also changed the nature of political debate in the UK; no longer were the big debates about different ideologies and different policies, the debates became about the money needed to fund policies rather than about the policies themselves – a phenomenon nicely described a while back by Ian Bell of the Herald as “budgets driving policies instead of policies driving budgets”.

The refrain of ‘how much does it cost?’ often drowns out any intelligent policy debate which may be going on and it’s been constant for all of my active political life, sometimes focussed, acute and at the forefront, often obtuse, monotonous and draining – the muzak of politics in the UK, and just as enervating.

It’s why the debate on Scottish independence has descended into a fiscal rammy. It’s why the debate over nuclear weapons often finds itself in the grey cul-de-sac of arguments over what the money could be better spent on rather than why we have the things in the first place. It’s why George Osborne can cut Child Benefit and not get roasted. It’s why we find even the sensible and dedicated politicians in the SNP getting caught up in it, promising that any Barnett consequentials resulting from the UK’s spending review will be spent on health but not why. It’s why the future of Higher Education has been reduced, in political discourse, to arguments about funding. It’s why the to and fro over private prisons is about money more than effectiveness. It’s why so much has been privatised, tendered out, outsourced, and driven away from the public realm. The debates are no longer about what should be done, they’re all about where to spend money.

Now we have the monster of all fiscal panics for politicians frightened of policy debates to hide behind, cowering from the responsibility of engaging in an exchange of ideas, shirking the duty of examining the options presented and, instead, arguing about which pot to put the pennies in – and which pot to empty. That robs us of the political discourse that should inform our decisions and it squeezes the civic discourse which should guide us forward; it’s the equivalent of putting your hands over your eyes and thinking that if you don’t look then the scary thing won’t be there. The truth is, though, that the curtains are still moving and when our eyes are finally opened we might be staring at a landscape that we don’t recognise, didn’t choose and don’t want – and there’s always the danger, remote as it may be, that while our attention is diverted someone with their hands on the controls of government pulls us away and away and away from where we would rather go, celebrating each little victory with the joy of la petite mort and leaving us moving ever so slowly towards une grande mort.

It was Curran who said; “It is the common fate of the indolent to see their rights become a prey to the active. The condition upon which God hath given liberty to man is eternal vigilance; which condition if he break, servitude is at once the consequence of his crime and the punishment of his guilt”, so let’s take his advice and remain vigilant, let’s start taking back some of that discourse, let’s reclaim our right to politics and political debate never free from economic and fiscal considerations but not dominated by them either. Let’s have a look first at a couple of areas which have been blanketed and smothered by the fiscal argument in recent times and see if there is a political debate beneath them.

Why is it that university students and graduates, uniquely (I think) among users of our public services were required, and the argument appears to be getting made now that they should in future be required, to spend years repaying the cost of the public service they receive – over and above the taxation on their incomes? We don’t face a bill for calling the police, we don’t get slapped with a cost when using social services, we don’t face tuition fees in schools and we don’t have to pay to see a doctor, why are university graduates singled out? The usual argument floated is that they gain lifelong benefits from the education and they earn more over their working lives (the government estimate of additional earnings has shrunk somewhat and now stands at around £100,000 – you’d probably get a better return over your working life from putting your tuition fee in the bank). The usual riposte to that claim is that society benefits as well and income tax from those additional earnings goes to help fund state operations. It’s a ping-pong, so let’s try a different approach.

If you gain lifelong benefits and additional earnings from a university education, don’t you gain the same from life-saving medical treatment? In this instance life itself is a benefit and any money earned is, of course, more than would have been earned without the life-saving treatment – why is the patient not presented with a bill? What about the lifelong benefits and additional earnings of going to school – why are they not charged separately? What about the benefits and additional earnings that come from maintaining good health by having clean streets and a decent rubbish collection service? Of course, there was an attempt made at one point to introduce an individualised charge which would recognise the benefits of life under Scotland’s local authority system, it didn’t go down too well as I remember.

More pointedly, perhaps, why is there no talk of a graduate tax for college students who also get lifelong benefits and additional earnings, or an apprentice tax for apprentices, or one for those trained on the job at public expense? Why are university graduates singled out? They shouldn’t be.

Universities are autonomous bodies, not strictly part of the public sector but largely funded through the state. If we agree that government should fund universities to teach our people then we are agreeing that universities should be regarded as part of the public sector and there is no reason why one of our people being taught in one area of the public sector should have different terms and conditions to another. If we believe that all of us should be treated equally by the state then the arguments for tuition fees, graduate taxes, graduate payments and the like all fall away. Unless, of course, we decide that others who receive public services should pay for them individually.

There is the growing “woe is me” with universities arguing that they can’t keep up with the funding that English universities get through central funding and fees and that this will worsen when the expected changes are made south of the border in response to the Browne report. Anton Muscatelli has even suggested that Glasgow University might go pop on his watch because it runs out of money unless it can charge large tuition fees (I wonder how it managed to survive all of the 559 years it has been around) and Andrew Cubie of the infamous Graduate Endowment has suggested a Graduate Tax is the only way to match England’s march to wealth. You would think, if you listen to well-paid professional academics, that Scotland’s universities have been ill-served by everyone who has come near – the truth is slightly different.

Vince Cable and David Willets cut £449 million of funding from the English universities in June – to add to the cuts that Mandelson had already made, and that’s not all. In 1998/99, the year that tuition fees were introduced in England, the teaching grant for England’s universities was £4.68 billion. For this academic year teaching grant and government-funded fees amount to £5.1 billion – that’s a real-terms cut of £1.1 billion – 17% of what the English teaching grant would have been if it had just kept pace with inflation. Universities UK in evidence to the Browne Report estimated that fees will bring in £1.5 billion this year to universities and colleges. Tuition fees haven’t added to the income of English universities, they’ve reduced government funding and instead dipped into the pockets of the students.

In Scotland the teaching grant for 1998/99 was £435 million and research and strategic change grants took the total up to £574 million. Grants for infrastructure were embedded into these grants at that time and they have continued to be done that way. This year’s General Fund allocation included £666 million for teaching and £241 million for research as part of the overall £988 million grant – a real terms increase of £243 million, representing a 42% real terms increase in government funding. We should also remember that some Higher Education is delivered in Further Education institutions which have a separate funding stream so the actual spend on Higher Education in Scotland is higher than this.

There are 131 Higher Education Institutions in England and 19 in Scotland (20 if you count the Open University); English universities receive just under £39 million each on average from central government while Scottish universities receive £52 million each on average. Scottish universities get better central government funding than English universities and even adding tuition fees on to the income of the English universities they still lag behind their Scottish counterparts by a couple of million pounds each. I suspect that the poverty pleas from our universities do not quite match the reality and they give no indication of the contribution to our society made by our universities. Universities who still worry do, of course, always have the option of following the example set by the University of Buckingham. Founded about 30 years ago, it is completely independent of government, takes no government money and is not directed in any way by government. If you want to go there you pay the fees – approaching £18,000 for the degree done over two years, four terms a year. It isn’t clear whether any Scottish university might be keen to work this way.

What is clear, though, is that Scotland doesn’t have a university funding gap and doesn’t need tuition fees, graduate taxes or any of the rest of the vaguely daft ideas that are floating around. What we do need is a debate about the value added by universities and by study – the economic value to the individual is bandied around endlessly (and the figures change endlessly), we hear no shortage of that because it suits the purposes of those who want to change the way in which their studies are funded – but we do not hear much about the value added to society by the doctors and engineers and teachers and physicists and geologists who are trained, little about whether an educated society is a happier society, and almost nothing about the benefits to the host city or town of having a university.

There is no proper debate, either about whether we should have more than half of our young people going to university, about where that target came from and what its purpose is, it was a target that seemed to appear without much discussion and with little explanation of its purpose or intent. Reference was made to the Scandinavian countries who have higher HE participation rates than us but no case was made about why it was desirable for us to aspire to higher rates. We have seen a proliferation of degree courses, some of which have been roundly mocked and some of which you could argue should not be degree courses; and we have seen increases in the number of universities. I find myself wondering whether the post 92 universities actually offer more than they did in their previous incarnations; they hand out degrees now but are those degrees more valuable than the qualifications they handed out before? Are their students better educated or better trained than they were before? These debates simply aren’t being had – no long-term view about how we improve Higher Education can be knocked back and forth without the Scrooges muttering dire warnings, lisping portents of doom and ignoring Marley’s warning.

We can’t accept that as being good enough, we can’t simply allow policy to be driven by budgets, we must get back to discussing what should be done, what needs to be done, and how we need things to change for the better then we can discuss how we find the resources to do those things. Not only is the cart before the horse just now, the horse is still behind a bolted stable door.

While we’re talking about universities and colleges, let’s take a minute to think about the students. They end up paying dearly for their education with a student loan debt that is, to all intents and purposes, a small mortgage secured on their future. The arguments rehearsed earlier about tuition fees and graduate contributions apply here as much as they do there – why is this group of people being singled out to have to pay for the public service they receive? There are additional points to consider as well, though, points which perhaps indicate how much of a disservice student loans do our country.

Their repayments limit the disposable income that graduates have, thereby creating a drag on the economy – if that disposable income was spent by those young professionals (by and large graduates fit that description) while they have a bit of space in their lives it would help to drive our economy forward. Instead it is simply recycled as an additional tax.

The burden of the repayments also means that graduates are less able to move on with their lives, it’s harder to get into the housing market, it’s more of a decision to have children, and so on – slowing down many of the drivers of national growth that we need.

Debt has been shown to be a disincentive to study for those from a non-traditional university background and student loans represent the biggest debt that a student will accumulate in Scotland during their study – student loans reduce social mobility.

Finally, though, the one dichotomy which might be found to be the hardest to reconcile is the strangeness of the contrast with those who are unemployed. When one of our citizens is unemployed and seeking work we, quite rightly, support them with benefits to a degree. It simply isn’t the life of ease that some suggest over and over again but it is a contribution from the state to the wellbeing of that person and their family which is, usually, a grant of money. Why is there not a readiness to offer that same contribution to students? Why is it that we have a state prepared to give money in a grant form to those who are workless but that same state refuses to offer similar assistance to other, similar people who happen to be studying in order to improve themselves and, in the process, are making themselves more work-ready? If we can fund a jobseeker for a while why should we not fund a student for a while? We don’t ask the jobseeker to repay their benefits when they get into work, relying instead on the taxes they pay to fill that gap – why should the same principles not apply to students? Why should these two groups of people be differentiated in the eyes of the state?

In the maelstrom of speculation about cuts that we’re experiencing just now there are stories and rumours aplenty but little hard evidence of anything at all. In the midst of it, though, we’ve continued to avert our eyes from that most important of things – political and policy debate, discussion about how we move our country forward. We’re captured by those who want a fiscal fight and imprisoned by those who ask the price rather than the value. We should retake our politics, retake our public discourse, reclaim our right to test our opinions against those of others. We do ourselves down by always counting pennies and never dreaming dreams, we’ll do better when we dare to dream again and dare to test ourselves against our fellow human beings. Scotland will do better when we dare to reach out and grasp the thistle of ideas instead of always checking for the pocketbook.

As MacDiarmid would have it:

O Scotland is
THE barren fig
Up, carles, up,
And round it jig!
A miracle
Oor only chance.
Up. Carles, up
And let us dance!

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