I was discussing the political economy last night. This is not especially surprising: it is something I am inclined to do. It so happened that the conversation was with someone broadly of my own age. And rather unsurprisingly the election was debated. But our concern was with how this election still appears to be ignoring the needs of the younger voter and is focussec instead on the whims and desires of those looking forward to, as my friend put it, their well earned three cruises a year.
Three themes were discussed. The first was housing. My friend has a passion for the issue, and is actually doing something to raise funding for house building. His passion is matched by a hatred for the carbon inefficiency and taxic elements in conventional house building, cement being his particular gripe last night. Powder coated, foam filled, dual layer steel is his favoured material. Think about it. Have you seen any of those industrial sheds built of the stuff go rusty? And you can have your house any colour you like. The supposed inability of this country to meet housing need because of a shortage of bricks and their layers could be solved in other words.
Then there was the issue of education. The cud was chewed.
But that rapidly morphed into discussion of tuition fees. My friend shares my hypothesis that pensions involve an inter-generational contract. This requires that one generation agrees to leave enough real capital for use by the next generation in exchange for that next generation giving up part of its income to maintain those in retirement. Capital in this sense is the stuff that the next generation can use that means they can afford to give up current income to maintain the elderly — because that is exactly what we ask them to do via the pensions system. And as we agreed, tuition fees fail this test. Instead of leaving the next generation with the capital (higher education) they need to make income they can use to keep the elderly in retirement we are charging them for it.
No wonder the young are disengaged with a political system so heavily rigged against them. Our solution was simple. Student debt needs to be cancelled. New long term bonds issued at an effective zero per cent interest cost can be used for the task. The net cost is nothing because redemption could be set for a considerable time in the future. And we should accept the practical reality that our society can and actually does in real current terms afford the cost of training young people to first degree level. After all, given that most student debt has not been repaid the current real cost has actually been incurred to date but just shuffled via some dubious accounting onto the balance sheet where it is hoped an uncertain recovery of the cost might be possible.
So, we discussed three issues and ended up with two pro-younger people policies. One is sustainable housing to meet modern need with lower carbon impact . The other is to write off student debt. Bith can be done. I am not expecting takers this time round.
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Quite a lot of young people are registering to vote apparently:
‘More than 100,000 people under the age of 25 have registered to vote since Prime Minister Theresa May announced three days ago that she would call the General Election on 8 June.
Nearly 58,000 applied to vote on 18 April — a huge increase from the previous day when just 2,465 young people registered.
In total, 103,439 people under 25 signed up between 18 and 20 April. In addition, 99,106 people aged between 25 and 34 also signed up.’
Some mobilisation happening but needs to build – the under 25’s are ‘generation hope’ unlike our ‘sold on neoliberalism’ generation vacuity (with the exception of us of course!).
Wow. Some £90bn of student debt and you would write it off? That would more than double the deficit in the year in which you do it. Are you sure that would have no adverse macroeconomic effects?
The impact per year is vastly smaller than £90bn
And then think of the impact on the economy of all that debt burden being lifted
Think of the boost it could create
That’s a macroeconomic boost of some size
‘And then think of the impact on the economy of all that debt burden being lifted’
Indeed! I can’t see why people don’t get this side of the coin and focus on the ‘fictitious’ Government debt.
Exactly!
I and many others don’t understand how writing debts off works. We hear that poor countries with debt sometimes have their debt written off but don’t really understand what it’s all about. So could you explain,for example who pays for the debt or does the banks/government simply forget it?
In this case the debt is repurchased by the government from its owner – private or public – and then the student is not asked to repay: the debt is wiped clean. But the obligation to the person the debt has been bought from remains although is meaningless in the event that the debt is still state owned.
I absolutely agree Richard. Student debt should be written off.
Hi Richard, Yesterday I posted your savings idea on facebook – this got a quite enthusiatsic response among Labour/ Corbyn supporters. Today I have posted your views on student debt. I have long argued that cancellation would have an immediate and beneficial on the economy. As young people are freed from the high interest and long term burden of their student loans this money will be spent immediately in the local economy. The main cost would be buying the loan books of those loans already sold to private funds.
How do we ensure getting this & your savings ideas wider prominence.
This would be a massive boost for the economy
I have no idea how to get Labour to listen
They’re so tribal I am now unacceptable
I talk to other parties quite happily – but I think that’s my crime
“I talk to other parties quite happily”
But which other parties would be up for a Student Debt Jubilee?
An excellent idea, btw. Labour should definitely include it in its manifesto, esp if it wants to attract young voters.
But are the Greens even on board for this?
Certainly not the LibDems, who colluded with upping it to 9Kpa in the first place.
Greens are
I have mentioned it elsewhere
…Hear, hear – and slightly off-topic (but on-theme!) Richard, how about writing off PFI as well? I wonder, could you do a ‘back-of-a-fag-packet’ calculation as to how much is involved, how much of a burden that represents for hospitals etc, how much it would free-up from budgets to ‘trickle down’ (sorry) into the real economy?
Have not done that as yet…
Apparently they (Labour) have just suspended some long term, very loyal members of the Labour party because they were working with other parties to unseat Jeremy Hunt by putting forward a progressive alliance candidate who was not Labour.
Where I live, The Green candidate offered to stand aside with the possibility of the Labour candidate still standing on an alliance ticket.
As you say tribalism rules in Labour and all it does is stoke up mistrust of politicians amongst those who need a better Government the most!!
Clucking Bell!!!
Some figures on PFI here with the usual ‘nonsense’ about taxpayers money:
‘The cost of Britain’s controversial private finance initiative will continue to soar for another five years and end up costing taxpayers more than £300bn, according to a Guardian analysis of contracts that were sanctioned by the Treasury.
‘Despite recent coalition criticism suggesting that the government was going cold on the scheme, recently published figures indicate that repayments will continue ballooning until they peak at £10.1bn a year by 2017-18.
The 717 PFI contracts currently under way across the UK are funding new schools, hospitals and other public facilities with a total capital value of £54.7bn, but the overall ultimate cost will reach £301bn by the time they have been paid off over the coming decades.’ (Grauniad).
Free post-compulsory education to the first undergraduate degree is common sense to most, shame there are many who don’t understand that. There is also another area where joined-up thinking is lacking, namely reskilling. We’re constantly being told immigration is essential to business due to the large skills gap, and while I can understand this, it doesn’t help the unemployed who currently have a skills mismatch. Gutting funding for Adult Education and Training (as the Tories have done since 2010) compounds this, as does lack of investment in training by many UK businesses. I’m glad you have brought this into public debate!
As usual, the Green Party is ahead of the curve. Cancellation of student debt was part of the Green Party manifesto in 2015 and (I expect) will be included in the 2017 edition.
It seems to be that a major function of the Greens is to let Labour know what their policies will be in ten years’ time.
As well as being publicly funded the whole structure and curriculum of post-18 education needs to be re-examined. Our universities have been turned into businesses with grossly overpaid managers and increasingly casualised teachers. To further reduce costs expensive provision in science and technology has been cut and cheap arts and social science degrees promoted. Even then students are ripped off by reductions in teaching hours (3 hours a week in the final year is not unknown) and low quality provision. The conversion of Polytechics into universities may have reduced the stigma of a ‘poly’ degree but it also diverted those institutions from their primary task of educating the technology graduates on whom our industrial development depends.
And don’t get me started on post-16 provision. Tony Blair personally stymied the best chance of reform we ever had, so we’re still stuck with outdated A levels which serve only to bolster the fee-paying schools and their stranglehold on Oxford and Cambridge (which are also in dire need of reform).
Ah yes, the student loan, the first kiss of neoliberalism.
For goodness sake, knowledge is our competitive advantage. Any country not willing to invest in education at all levels will fail in the long term.
China and South Korea are pulling ahead while we sell our souls to the rentiers.
I support Richard and the Green party on this issue.
I like your first line
So true
Labour – tribal? Never!
Meanwhile in Jeremy Hunt’s constituency, 3 long standing and loyal Labour supporters have been reportedly expelled from the party for working with a progressive alliance to unseat the nice but mendacious NHS hatchet man because the candidate would not be Labour.
Where I live, the Green candidate in our possible progressive alliance offered to step aside as long as Labour took a progressive stance at the election.
I know that we do not have PR and FPTP rules but all this does is make people who need better Government just turn off from politics or vote for people who at least look as though they know what they are doing (the Tories by any chance?).
‘Clucking Bell’ as Black Adder would say.
Well PSR, what can one say? On any reasonable level, Labour’s tribalism is utterly infuriating. I’ve travelled through Hunt’s constituency many times, and simply by looking at what is (on the surface, who knows how much private debt is held by people keeping up appearances) a very wealthy area, you’re never going to get a Labour candidate elected.
So using common sense, a progressive alliance is the only chance of defeating the wretched Hunt, even if it’s a slim chance. But no, they just expel 3 committed long standing local party members instead! I mean, WTF, how clueless can you get?
I suppose this stupidity was why Labour didn’t give us PR when they were in power for 13 years. Why can’t they recognise that FPTP will nearly always favour the right? And in any case, For God’s sake, my entire voting life has been rendered futile by this wretched voting system. A progressive political party should care about things like that. And it’ll almost certainly be the same this time, in a safe Tory seat. Still, I imagine Labour will be so unpopular in my constituency that the anti Tory vote will be less diluted and the Lib Dems will have a better chance.
Or maybe I should vote for the party I’ve always wanted to vote for, both because of their principles, commitment to intelligent use of the vote, and a leader I can really wholeheartedly admire – the Greens.
WTF indeed
Cancelling student tuition fee debt is perhaps a bit messier than you’re making out. This is because I think there’s an obligation to reimburse those students who have already paid down some of their student debt. That covers students dating back to the late 90s, when tuition fees were first introduced.
Reimbursement all at once would be ideal, but may be politically difficult and would cause budgetary issues in the year the reimbursements were made. So, some mechanism to space out the repayments over several years would likely be needed.
Those who have paid off some of their student loan over the last 20 years must by definition be in a reasonably high earning bracket, and are likely to contain a disproportionately high number of Tory voters. They won’t be the really rich Tory voters though — in those cases, the parents pay tuition fees, and a loan is never taken out. Given the voter profile of the people who’d get reimbursed, a side-effect of the act of reimbursement could be to buy the votes of affluent young professionals between the ages of about 25 and 45. Such people are likely to be influential with swing voters. This is another reason (i.e. other than being the right thing to do) that cancelling student tuition fee debt would be good policy.
Why would there be that obligation?
At least two reasons, off the top of my head.
1. If it is correct to cancel the tuition fee debt now, it was also correct to cancel it any time between 1998 (when it was introduced) and now. This is not so long ago that it can simply be forgotten about — people who have incurred student debt are barely mid-career.
2. Ex-students who have paid down tuition fee debt will be (rightly, in my opinion) furious that those who have not paid down the debt would never have to do so, and also that new students don’t incur the debt in the first place. These contradictions are unlikely to play well in the tabloids.
We don’t do retrospection
That’s life
A policy of cancelling student debt does not need to include reimbursement of student debts already paid. No one expected former students to pay for their higher education was introduced, it was a “from now on…” policy, as would a new policy to cancel existing student debt!
That should read “No one expected former students to pay for their higher education when tuition fees was introduced,”
@ Richard
What was the name of your friend talking about housing? Also, did your friend talk about passive houses as these are a great example of sustainable housing (they are designed to use 80% less energy than a conventional house)
Just a bit off topic, have you seen the following video by Paul Johnson from the IFS – would love to hear your thoughts on his points?
http://www.bbc.co.uk/news/av/uk-politics-39835432/would-it-help-to-tax-the-rich-more
I am not disclosing names
I have heard the Johnson interview
He’s wrong on avoidance and evasion – there is plenty of room to collect there
And he should have discussed wealth tax, CGT, CT rates and more
What’s the advantage of the long-term bonds compared to ‘simple’ QE? I can’t see why we can’t PQE them both off (although I would prefer that PFI would be repayed at the original price of the capital investment).
The debt has to be paid for with something: the bonds do that. At low rates they are virtually costless. They can be QE’d if required but I’d suggest that right now there is little need. QE is a backstop, not a routine measure and as I have also argued, we do need more bonds. This is a good way to create them.
Richard, as the student debt (or most of it) has been sold off in tranches ( like mortgage-backed securities?) what would the mechanism to pay it off be -would the Government swap bonds for these MBF type things?
Yes
With compulsory purchase
And no appeal to the ECJ…..
Simon, just a ‘thank you’ for the PFI figures you dug out. How very, very dispiriting.