Monday, December 20, 2010

The Conferderation of British Industry has lowered its growth forecast for the coming quarter; it now forecasts quarter-on-quarter growth of just 0.2 per cent over the period from January to March 2011. It does, however, still expect growth of 2 per cent over the coming year.

Meanwhile, the Nationwide consumer confidence index fell further in November, and is now close to the low point that it reached in January 2009. (The index stands at 45 in November; it was 43 in January of last year.)

I have, on a couple of occasions over the last few months, reported the predictions of a neural network forecasting model. Over the coming 18 months, that model is currently predicting modest growth for the UK, and suggests that the danger of a double-dip is receeding. It should, however, be borne in mind that this model is based on output data (monthly data on industrial production, to be precise); the model may not adequately allow for the threats to the economy that come from sluggish consumer spending, fragile overseas demand, and government austerity packages. Nonetheless, the model offers a little festive cheer.

Thursday, December 09, 2010

The Institute for Fiscal Studies has reported on the government's proposals for student finance. Its findings cast some useful light on a debate that has been dominated by political spin. An important conclusion is that 'graduates from the poorest 30% of households would (under the government's proposals) pay back less than under Lord Browne's proposed system, but more than under the current system'. Many politicians would have you believe otherwise.

Browne's proposals, which involved a 'soft' cap on tuition fees at £6000, with universities being allowed to raise fees above that level while being subjected to a steeply rising tax, have been replaced by a 'two cap' system - where the cap is either £6000 or £9000 conditional on widening participation. Both Browne and government proposals involve a loan for tuition fees and maintenance that is repaid once the student graduates and is earning £21000 or more per year. Concessions made by the government include the annual uprating of this £21000 figure, and tuition fee discounts to students from the poorest families.

The media has portrayed this as a three-fold increase in tuition fees, indicating an expectation that many universities will pitch their fees at or near the higher cap. Indeed, it is quite possible that, by introducing the higher cap, the government will already have encouraged some institutions to set fees higher than they would otherwise have chosen. This would appear to be good for neither students not public finances, and appears to have been driven by a political need to retain a cap of some sort. Yet surely it is almost inevitable that the cap will go some day, and Browne's suggestion of protecting students and the taxpayer by imposing taxes on universities that charge high tuition fees was eminently sensible. In this respect, politics seems to have trumped common sense.

The universities, meanwhile, will suffer severe cuts to their teaching budgets from the coming tax year (which starts before the end of the current academic year), and will - if the legislation goes through - be able to charge higher tuition fees only from academic year 2012-13. They will face a more robust competitive environment, and will need to innovate rapidly - and constantly - if they are to prosper. These are interesting times indeed in higher education.