Gove’s reforms will help better equip young people for life

BRITAIN’S poor educational standards are a national scandal and a key reason why the UK’s productivity continues to lag. The problem is not with graduates of our top universities, though even they could do better. The real crisis is that thousands of school leavers and even, in some cases, graduates from other universities, end up with insufficient skills and knowledge; they are increasingly and tragically out-competed by better educated foreigners.

Anything that begins to rectify this dire state of affairs is to be welcome. The new, more rigorous English Baccalaureate (EBacc) exams, which will replace GCSEs by 2017, are an excellent step in the right direction. Standards need to be raised to empower young people and allow them to acquire the knowledge they will need to be productive members of society.

Michael Gove, the secretary of state for education and this government’s outstanding reformer, is also right to be ditching the competing exam board model. In a real market, every company owns its own brand. Coke competes against Pepsi, and so on, and the company that produces a product that customers want at the right cost wins. Companies have an incentive to maintain the quality and integrity of their products.

But in the exam quasi-market, every board awards the same brand of qualification – in this case, a GCSE – but can quietly vary its quality. This creates an incentive for schools to choose the board that gives pupils the best grades, rather than the most rigorous board (because to potential employers, the only thing that matters is grades; all GCSEs are deemed equivalent). In proper capitalist markets, the good drive out the bad; in this warped, fake market, the bad drive out the good. Gove’s reforms are as good as it gets in coalition Britain. He deserves to be backed all the way.

MORTGAGE MYTHS
ONE of the biggest political myths in Westminster is that low interest rates are overwhelmingly popular. They are not. Of course, younger, leveraged individuals and families with mortgages and other kinds of debt love cheap money, as do entrepreneurs and anybody else trying to borrow. But low rates are bad for savers, and not everybody has a mortgage. On balance, polls show that more people prefer higher, rather than lower, rates.

One reason for this is that more mortgages are being paid off than taken up. In fact, 47 per cent of homeowners already own their property outright, according to research from Hometrack. If current trends continue, by 2014/15 there will be more outright owners than those with a mortgage. The majority of these outright owners will be net savers, and hence will see themselves as losers from low rates (of course, cheap money tends to inflate house prices, boosting all homeowners’ wealth, but those without a mortgage often don’t see it that way). There has been another shift: tenants in privately rented accommodation are now almost as numerous as those in social housing. In the early 1990s, private rented housing accounted for just 9 per cent of all housing stock, against 16 per cent today (and around 25 per cent in London); it has surged by 91 per cent in the past twenty years.

For tenants, low rates are a doubleedged sword: those who want to get on the housing ladder need easy mortgages with small deposits – but low rates tend to fuel buy-to-let, boosting demand for properties and hence prices – but also pushing rents down. Like everything else in political economy, it’s more complex than the politicians usually believe.

allister.heath@cityam.com
Follow me on Twitter: @allisterheath

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