Kicking universities is no way to solve the divide between the academic and the rest | Will Hutton

The British class system continues to cast its noxious shadow. For more than a century, British working-class children and teenagers have been offered second-best routes to education and training. By contrast, middle-class offspring will find their way – a significant minority via the queue-jumping privileges of private education – to university or a professional qualification.

Before you object, I’m conscious of eliding class and educational achievement (working-class pupils have been increasing in numbers at university and why shouldn’t a middle-class child favour an apprenticeship?) But in the real world, the divide between the academic and the practical tends to be shaped by background and to acquire a skill, to be an apprentice, is to come second in the British lottery of life. The standards and quality of what is offered are rarely in the same league as what is offered academically. The extent of what is offered is cruelly financially capped.

By contrast, if a sixth form or a university in the academic pathway takes in a student, the funding automatically follows. Get your student loan and there will be a university place for you because the system is designed to respond to demand. However, no such certainty or responsiveness to demand accompanies a young person wanting to train, to learn a craft, and that will remain the case after the current skills bill becomes law.

Instead, the numbers in further education are capped by central government around a pre-determined limit. Indeed, and amazingly, spending on further education has halved in real terms over the last 11 years, to astonishingly little complaint, and will recoup only a third of that loss despite the vaunted recent spending increases. So if a teenager wants or needs to train, there simply may not be a course or a place in her or his chosen field. Nearly 22% of our 18-year-olds are neither in education nor in a job that involves training. It is a rank injustice, fatally undermining our economy and the cohesion of our society.

But the demand-led academic route is creaking; already the stock of student debt tops £140bn, which will rise to 20% of national output by 2040, projects the Office for Budget Responsibility, but with only a fraction of this debt likely to be repaid. It will become a fiscal millstone around our national neck. If it is to be sustainable, more debt must be repaid. Last week, the government overhauled the system to try to do that, while rejecting an overt student cap and so maintaining the demand-led character of university admissions.

Graduates-to-be will still be able to command a place of their choosing, unlike their non-graduate counterparts, but will now repay their loan over 40 years rather than 30 once their salary rises above a threshold lowered to £25,000 from today’s £27,295. To sweeten the pill, the former 3% interest rate premium over the inflation rate has been dropped. In effect, the system will more closely represent a lifelong graduate tax but with university places still offered on demand.

The Institute for Fiscal Studies, modelling the changes, says they will make the system much more sustainable. As much as 60% of debt will now be repaid, so releasing, via the quirks of public accounting, a windfall for the Treasury of £5bn next year. But moving to a surrogate graduate tax will hurt low-earning graduates disproportionately. In the old days, they would rarely have repaid the debt; now they will repay much more if not all of it.

This, argues Philip Augar, author of the review that prompted the changes, may make applicants think harder about whether certain, if any, university degrees are worth the lifelong graduate tax. A good thing. And although there is no overt student cap, the government is consulting on whether only students with two Es at A-level or level 4 passes in English and maths GCSE should be eligible for a loan – a softer way of arriving at what in practice will be cap.

Obviously, the criticism is that the two measures combined hurt disadvantaged students from low-income families and regions more, while a graduate tax, whatever its merits, penalises the young over the old. Both are true, but if a degree has value, at least part of that value should be paid for by the holder rather than the tax-paying public. Equally, data from Ucas suggests that in 2020 only some 20,000 students offered university places did not hold the proposed new GCSE standards.

There is a “reasonable logic”, as former Ucas chief executive Mary Curnock Cook argues, that students are unlikely to prosper at university without basic numeracy and literacy and, paradoxically, in future it will force the education system to lift its game so all students reach basic levels in English and maths. This will be no less important for skills training, which also needs basic literacy and numeracy as much as higher education. After all, the point of both is to know stuff and, as Augar argues, surely a degree has to mean something.

Far more worrying is the impending squeeze on the incomes of our 140 universities: fees are to be frozen until 2025 as inflation surges, implying a real cut of close to 20% in their incomes, with only partial plans to compensate and then only focused on in-vogue subject areas in the sciences and engineering. Some will get through; others will face severe retrenchment.

As for the skills reforms, the centrepiece is a long-awaited and potentially transformatory lifelong learning guarantee to start in 2025. But the question is how generous will be the system of financing its students, so deserving of help. With no mention of reintroducing educational maintenance grants, the omens are obvious. As for apprentices, despite the much-vaunted levy, apprenticeships for those under 25 have steadily fallen; meanwhile, more than half are “in-service training” spent on those aged over 25. We are being fooled.

Britain needs to sustain its great university system and put training of the more than half the population for whom academic education does not work on the same footing, both in terms of financial access and in status. The right words leave government ministers’ lips: an emergent framework now exists on paper. Their intentions may have been genuine, but penny pinching, despite that £5bn windfall doubtless earmarked for tax cuts, and neglect for the non-academic will be their downfall.