Economic Performance and Higher Education: The Lessons for Britain

After the 2010 general election the ConservativeLiberal Democrat coalition embarked on a radical new policy for funding higher education in England which involves transferring all the costs of tuition to students, with the exception of the STEM subjects. This article evaluates the implications of this policy for Britain's economic prosperity in the future by modelling the relationship between higher education enrolments and economic growth in the advanced industrial countries. It evaluates the potential costs of the coalition government's radical funding experiment, if it has the effect of deterring large numbers of young people from enrolling in higher education. The results show that higher education is an important driver of economic growth in advanced industrial countries like Britain, although there is no evidence to support the idea that special treatment for the STEM subjects stimulates growth. If the policy does deter students from enrolling in the future the long-term costs are likely to be significantly greater than any short-term gains to the Exchequer.