Tuesday, May 13, 2003

The Conservative Party has just released details of its new policy on higher education in the UK. In a nutshell, the policy is to scrap tuition fees and to fund this by scrapping the current government's target that 50% of the relevant age cohort should enter higher education by 2010.

At least the second part of the policy is good. However, the Conservatives have refused to say what the age participation index should be if their policy is going to balance the books - as they promise. The likelihood is that their policy would entail a substantial reduction in the numbers of young people proceeding to higher education. While there is some evidence to suggest that 50% is too high a target, it is likely that the outcome of the Conservatives' policy would be that too few youngsters are given the opportunity of higher education. Either that, or the sums won't add up.

The scrapping of fees is surely a tilt at the middle class vote, and is likely to prove quite popular amongst this group - until they start to think about it. Fees have been introduced, partly, because it is right that the main beneficiaries of higher education (that is, graduates) should pay for their education (at a time in their lives when they can afford to do so). It is not right that taxpayers who have not benefitted from higher education should pay for job tickets (good job tickets at that) for other people - my dustman should not have to pay through the tax system for my children's education.

But most fundamentally, what the Conservatives are proposing is strongly anti-libertarian. Their proposals would deny people the right to spend their own money in order to 'better themselves' by acquiring a university level education. Given the love of freedom that has traditionally characterised that party, this is quite astonishing.

Tuesday, May 06, 2003

The first modern toll road will open in Britain in a few months time, and today the level of tolls will be announced. Paying tolls has long been a political hot potato in the UK, though it is not clear why. We routinely pay tolls for bridges and tunnels, we pay for parking, we pay hefty taxes on petrol. We routinely choose to drive on toll roads in neighbouring countries.

When Ken Livingstone introduced road taxes in central London earlier this year, many thought that this would be a controversial and unpopular move. It wasn't. Road pricing has long been deemed a sensible policy by economists. Now that we have the experience of London to draw on, drivers understand that the benefits of road pricing - uncongested roads - are real and tangible. The Birmingham toll road is sure to be the first of many. The real task facing the authorities is how to re-engineer existing motorways at key congestion points so that tolls can be introduced there too, without simply moving the congestion onto other roads.
The results of the UK Treasury's five economic tests for whether or not Britain should join the Euro are shortly to be announced. The second of these tests concerns the issue of whether or not there is sufficient flexibility in the economic system to cope with economic change. This is, of course, a loaded test. While Britain has a separate currency from the Eurozone, it can either allow the pound to shadow the Euro or it can let the pound vary in value relative to the Euro. We have a choice. If we join the Euro, we can only pursue the first of these options. So it is obvious that joining the Euro implies less flexibility. Once that simple fact is appreciated, it becomes clear that the whole import of the second test depends on one's interpretation of the word 'sufficient'. One man's sufficient is another man's poison. The tests serve political fudge more than economic reality - while they have served both pretty well up to now, it is time for the government to realise that this is no way to make policy.

The answer to the question of whether, on economic grounds, joining the Euro would be beneficial is one that can be answered by cost-benefit analysis. The five tests do not set costs against benefits. They are an inappropriate tool for the analytical question that has been posed. Rather than postpone a decision on whether the tests are passed, the government ought now to initiate a full cost-benefit exercise.