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Deploy universities to fix England’s regional divide

Spreading growth around. The_Virgo/Paul Callan, CC BY

Imbalances in the share of growth across the regions continue to be deep-rooted, the Office of National Statistics has confirmed. By 2012, the South East was the only region that had only just crept ahead of the performance that it had achieved in 2008. Four years after the recession, London had pulled even further away from all other regions in England.

With the economy and the cost of living remaining key battle grounds in the longest general election campaign in history, regional growth – or the lack of it – is back on the political agenda.

Local initiatives or policies focused on the core cities outside of London are unlikely to resolve sharp variations in regional performance. Politicians from all parties need to be much more ambitious – and the potential role of universities as “economic and cultural powerhouses” needs to be placed centre-stage.

Gradation of graduates

In a recent report Smarter Regions Smarter Britain: Boosting regional growth through universities, the university think-tank million+ (a group I chair) set out a manifesto for the regions and outlined innovative ways in which ministers can capitalise on the strength and potential of all universities.

The analysis draws on new economic modelling which confirms that graduates add real value to the regions in which they study. It demonstrates that investing in higher education not only delivers substantial regional pay-offs but also long-term benefits for the treasury as well as individuals.

Contrary to common assumptions that most graduates seek work in London, the analysis reveals that the majority of the economic impact generated by universities that educate graduates in the regions “resides” in the regions.

Universities in the North East, for example, generate £1.7 billion, and a staggering 80% (£1.4 billion) of this is generated by those who obtained employment in the North East after graduation. Put another way, almost 80% of the graduates in employment in the North East studied in the region. In the North West, the figure was 76% while nearly 63% of graduates working in Yorkshire and the Humber studied there.

Graduate destination by region. million +

While these findings are impressive, there remain stark variations in university participation across the country. In the South West, the proportion of people with graduate level qualifications is less than 35%. This compares with London where almost half the working-age population has obtained a degree.

Flexible courses

Arguably, George Osborne’s plan to abolish the cap on student numbers in 2015 may help to increase participation, but the big losers from the 2012 higher education reforms in England have been part-time and older students (the two are not necessarily the same thing). A recent report by the Higher Education Funding Council for England, found that the number of part-time UK and EU undergraduates has halved since 2010-11.

Employer co-funded courses and postgraduate participation have also taken a hit, in part because of the increase in fees and in part because of the recession. As Gavan Conlon from London Economics has pointed out in a recent blog there is a risk that these markets suffer permanent damage.

We have proposed that some of the proceeds from the sale of the student loan book should be used to promote and incentivise work-based, flexible courses, new opportunities to study for a degree later in life and to fund 50,000 additional postgraduate places linked to part-time courses with a professional, industry or public service focus.

More dispersed funding

But universities do not just drive growth through the supply of well-qualified graduates. Translational research in particular adds real value to regional economies, stimulates innovation and underpins university-business collaboration.

However, research funding has become even less dispersed under the coalition government. The government has cash-limited the budget for university research at the same level since 2010, meaning grants are not adjusted for inflation. Yet research by million+ found that by 2012 a small minority of universities received 1.4% more funding than in 2009, while all other universities suffered reductions.

While the policy of hyper-concentration of funding has favoured a few universities, it is much less clear that this is a winning formula for the regions.

We have called on the government to establish a new funding stream for translational research and separately, to ensure that all universities with research-degree awarding powers receive funding for research infrastructure – a policy adopted in some of the Nordic countries. This type of direct investment in university research is more likely to drive regional growth and provide positive spill-over effects for employers and, in particular, small businesses.

There is also a need to do much more to stimulate demand for jobs demanding tertiary qualifications and to support university-business collaboration at regional level. This is why we have called for a new scheme of tax credits, innovation vouchers and knowledge transfer arrangements. We’d also like the government to set up a Small Business Agency along the lines of that given new powers by the Obama administration, and a clear brief to focus on more economically depressed states and regions of the US. It would also help if the government’s new British Business Bank were given a specific regional remit.

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