The prime minister announced nearly a year ago that she was appointing Philip Augar, a former investment banker, to the role of reviewing post-compulsory education in England. His final report is eagerly anticipated, not least by a further education sector beleaguered by years of austerity and funding cuts.

So what will the post-18 review conclude? Augar, understandably, is staying tight-lipped in public about what he might recommend to ministers. Media leaks have suggested a reduction in the £9,250 annual fees that undergraduates currently have to pay.

The review, in any case, is far more wide-ranging. One massive fly in the ointment since Augar began his work has been the decision by the Office for National Statistics to classify the student loan book, at least in part, as direct government spending. Nearly half of all current graduates are unlikely to repay their debts to the taxpayer after maturity of the loans at 30 years; adding £12 billion to public sector finances in 2019 alone. This makes any recommendations about increased investment in FE colleges, for example, very tricky.

Increased spending ‘hard to see’

Augar’s terms of reference state clearly that any recommendations must be consistent with the government’s fiscal policies to reduce the deficit and have debt falling as a percentage of GDP. Unless the current or indeed a future government is prepared to change this fiscal rule, it is hard to see how increased spending levels on post-18 education is anything like achievable in the upcoming spending review.

Inevitably, some really painful choices lie ahead. Spending differently, as opposed to spending more, maybe the only realistic option that he can recommend. In other words, parts of the current post-compulsory education system may have to be made a bit poorer for some other parts to feel richer.

In hindsight, the arbitrary target of 50 per cent of young people being channelled into traditional three-year university degrees was a huge mistake. The target, first set by Tony Blair, has massively distorted public investment in adult learning up to the age of 25, as well as reinforced negative cultural stereotypes against non-academic routes. Social mobility has stalled in many parts of the country, despite the evidence of poorer students participating in greater numbers at university. In leading systems of technical education, like Germany, just 27 per cent of young people go to university. In England, the corresponding figure is 48 per cent.

Apprenticeships overlooked by many

The perverse incentives of the current settlement are obvious: parents encourage their offspring to take bachelor degrees because it is a sign of getting one up on the Joneses; for many students it has become an extended form of socialisation; schools hold on to learners and encourage them to seek university places, too often overlooking apprenticeships and other valid qualification routes, because of the positive glow they receive in their academic-biased performance league tables. When was the last time you heard a headteacher boast about how many apprentices they had supplied to a local company?

To be fair, the current market logic drives behaviour in this way. One justification for putting HE funding on a pedestal is that pursuing degrees results in a so-called “wage premium” of a typical graduate over a working lifetime compared with non-graduates. It used to be the case that all graduates, regardless of degree course choice, could expect to earn above median earnings over their lifetimes. This hypothesis simply no longer holds true.

Empirical research by the Institute for Fiscal Studies, accessing real-time graduate payroll data, has found a more nuanced picture. One indisputable fact is that wage premia depend on what and where you study. To most lay people, this will come as no surprise. A person studying fine art or nursing is unlikely to command as high a salary, compared with a medical doctor or an economist that can write algorithms for the stock market.

A university cartel?

This kind of divide has probably always existed. But what makes the IFS’ findings so toxic for policy-makers is that it shows what a nonsense it is to allow every undergraduate course to charge the same fees. It also paints the universities in a bad light, seemingly operating like a cartel, where competitive forces have not been allowed to operate efficiently.

This is in stark contrast to how qualifications in other markets operate. Awarding bodies that deliver technical and vocational qualifications, including end-point assessments in apprenticeships, will compete on service quality as well as price. There is healthy market competition and consumer choice. Strong regulation prevents cartels from emerging and in areas like apprenticeship policy, the employers directly are fast becoming the purchasers in the new system. Firms have the ability to negotiate with providers on price below a maximum ceiling set by government. In stark contrast, students have nothing like this kind of purchasing power when shopping around for degree courses.

If Augar were being radical, he would tell ministers that the only way to achieve parity of esteem across post-18 routes would be to put in place a new funding settlement that aims for parity of resource. The days of government institutionally discriminating in favour of one type of learning route should be brought to an end.

In practice, this requires giving every adult, when they turn 18 years old, access to a universal learning and skills account. These would create a level playing field of part-entitlements and part-income-contingent loans, regardless of what particular learning or employment pathway an individual decided to take.

Time for learning accounts?

These accounts could operate in a similar way to the current mix of state and occupational pension provision. The government would guarantee all adults a minimum cash entitlement towards formal learning up to level 6; with a combination of “save-to-learn” tax incentives and income contingent loans being made available for all courses above level 3. A student premium could be added to accounts by the state for those from disadvantaged backgrounds, similar to how the pupil premium works in schools. This, in turn, would incentivise course providers to reach out and attract those students with premiums deposited in their accounts.

The pressure on public spending could be eased further by allowing a regulated private sector market to develop in the provision of course loans, similar to the mixed economy model that is available in the United States. Such loans would likely be linked to courses that provide a direct route to skilled employment, as private lenders would want to minimise default rates.

It would leave the government-backed Student Loans Company to operate more as a lender of last resort; for example, where courses are unlikely to lead to strong employment outcomes. Similarly, government could provide interest-free loans via the student loans company for specific skills shortage occupations, with write-off provisions brought in sooner than the current 30 years.

Whatever Augar decides to recommend, his place in history will be judged on the basis of how successfully he manages to bring some semblance of equitable funding to encourage productive training and lifelong learning. For too long, the taxpayer has backed a model of post-18 funding based on the educational prejudices of an elite in Whitehall. With Brexit looming, it feels like the time to implement a real game-changer of a reform. A new funding settlement that will empower the very citizens that have felt so left behind.

Tom Bewick is the chief executive of the Federation of Awarding Bodies