Thursday, 16 December 2010

Cutting EMA (Education Maintenance Allowance) Will Widen the Deficit

By Michael Burke

The Institute for Fiscal Studies (IFS) has issued a devastating critique of the Tory-dominated coalition’s decision to abolish the Education Maintenance Allowance (EMA), the grant of up to £30 per week to help 16-19 year olds from poorer families stay in further education. This decision was devised n Conservative Central Office, with David Cameron refusing to give any assurances that the EMA would be kept as far back as November.

The IFS had already examined the impact of the pilot studies for the EMA, which showed a significant increase in further education participation among students from poorer families - and that the response was disproportionately higher still among women and students from black and ethnic minority communities.

On average, participation rates increased from 65% to 69% of 16 year olds and from 54% to 61% for 17 year olds, the latter representing an increase of almost 13% in total participation. In terms of education quality, UCAS points increased on average by four points for all students where EMA was first piloted.

This educational improvement reduces the incidence of unemployment and increases incomes over a working lifetime. SEB has previously highlighted OECD analysis which shows the very large benefits to public finances arising from higher educational attainment.

The take-up of EMA has steadily risen from 430,000 in 2005 to 576,000 in 2009, by which time 67% of those surveyed said they would not have continued with their course without EMA and with 61% going on to further education because of it.

In the last Financial Year the government spent £530mn on EMA. The investment returns to public finances are such that the taxes from less than 1.4% of those eligible are required to complete higher education (university or equivalent) to pay for the entire scheme. Alternatively, at current rates, all EMA recipients would need to be spared an average of less than 3 months on jobseekers’ allowance alone throughout their entire working life to pay for the scheme. Government finances also benefit from all those in between whose higher pay yields higher income and consumption taxes. Clearly, greater investment in EMA would help to reduce the deficit.

This is all known to the government - much of the information is quoted from a House of Commons Briefing 1. Government policy is not about deficit-reduction at all. The reduction in education participation will hit the poor, women and black and ethnic minority communities the hardest. However, its effect will to enlarge a surplus pool of labour, forced to take lower-paid jobs. Employers will be able to access bright but untrained workers for much lower rates of pay. It is this that Marx called the ‘reserve army of labour’ whose function is to depress wages and thereby boost profits.

The aim of government policy is not to restore government finances at all, but to increase the rate of profit.

Sources

1. House of Commons Library, EMA Statistics, (SNSG/5778), 14 December 2010

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