Wednesday, 8 July 2015

Fancy A Pint?

Lord Bilimoria has opened up to declare that the Budget should invest more in Higher Education.  Checking the bio' in Wikipedia says that he has been top man for the Indian firm Cobra Beer.

Memory tells me that students tend to drink a lot of beer.  This is what people call a "vested interest" and suggests that this member of our new nobility is doing a bit of lobbying on the side.

The bigger question is "what do you mean by "investment" but I will skip the deep analysis of the many meanings of this word.  When it comes to politicians who are also in big business you may assume that to them it is what they say it is, especially when from wealthy families with a military background.

A more sober look at the economics of Higher Education (HE) by The Mises Institute says that in recent decades the HE spending has created a bubble that is still inflating.  Bubbles create winners and losers and bad bubbles mean a lot of very bad losers.  This rule seems to apply just as much to HE as anything else.

This article relates to the USA, but the essential principles apply in any state where HE has been expanded rapidly as a matter of social policy and as a means of reducing unemployment among the young.  In general it has not been challenged because it is seen as "good".

There is an inherent difficulty in that the HE has been expanded on the basis of work structures and technology of the recent past.  But change has been so rapid that much of the HE now on offer relates to that past meaning that many qualifying are left with skills for which there is either none or a reducing market.

If what we see and hear are any guide it is not going to get any better, if anything it is getting much worse. There are fiasco's at present in other sectors.  The UK government has a lot to say about apprenticeships and training for the non HE sector.

But the huge changes involving Ofqual, the awarding agencies and the trainers now current are going to result in thousands under training being deemed as failures because the computer systems cannot transfer personal details from one new system to another.

To return to HE, a major feature of current UK provision is the number of overseas students imported for financial reasons as much as anything.  One major source is India.

So Lord Bilimoria is wanting us to inflate the HE sector more rapidly on that basis to deal with the overseas students, many from India, at a time when the actual reality of the labour markets is that most of them will never realise any economic benefit.

Who are losers as well as the masses of unlucky young saddled with debt and no prospects having lost years of potential real work experience and other opportunities?  The UK taxpayers are one and more HE along with the import of students is a part of the other major bubble, property, in that whole districts of many place are now student enclaves.

The fortunes of the noble Lord are likely to be invested in more than the beer firm or old family assets.  Could some of them, I wonder be in property and perhaps buy to let?


  1. Good point - the rapid expansion of HE with no corresponding accommodation development has opened the door to exploitation on a dramatic scale.

    Where once students were housed in manages halls of residence at minimal rent, even first years are left to take their chances on the open market through commercial agencies. The end result has been to inflate rents in deprived areas - our sons paid much the same despite one living in a property hotspot and the other in a town notorious for low incomes and unemployment. This means either massive student debts or huge housing benefit bills for the taxpayer - and a nice little earner for BtL landlords.

  2. It might be better if more students went in for part time education.

    1. Likewise for the staff. One of the better profs at my tech would spend half his time in industry picking up the newest info.