Influential British economist Andy Haldane has said that too many degrees are “not value for money”, adding that the UK’s “poorly designed” student loan system is emblematic of a struggling higher education sector.

Giving the annual lecture of the Lifelong Education Institute, Haldane, a former chief economist at the Bank of England, said that large parts of the higher education sector are “troubled”, adding that many universities are “locked into a business model that worked like a dream 10 to 20 years ago and now has become something of a nightmare”.

Haldane, who is reported to have advised prime minister Andy Burnham during his leadership bid, pointed to the composition of the student loan book, saying: “the student loan system is not…well designed [and is] emblematic of us having got this wrong for too long”.

Asked whether degrees are fit for purpose, Haldane, currently president of the British Chambers of Commerce and chancellor at the University of Sheffield, said: “The numbers suggest too many of them are not value for money, that’s for sure. And that does need looking at.”

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He referenced Alan Milburn’s government-commissioned review investigating the rising number of young people in the UK who are not in education, employment or training (NEETs), saying it was “frightening” that “there are more graduate NEETs now than there are NEETs having finished A levels”.

However, Haldane said that “many of the more forward-thinking, enlightened higher education institutions are adapting their offerings to offer a smoother passage into the world of work”. Although he said he suspected the changes are not happening at “the right pace and scale”.

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Universities UK has recently proposed that every undergraduate in England should be given the chance to do work experience as part of their studies.

Haldane said this requires “greater granularity and flexibility, and clearly a better blend to smooth the pathway into the world of work”.

On the value for money issue, Haldane said: “I do think bringing employment prospects and business into the equation earlier and overtly is part of the answer to that. So, in my ideal world, degree apprenticeships would become the norm, rather than the exception.”

Haldane said the time for degree apprenticeships “absolutely has come” but “demand for them is now far...outstripping their available supply”.

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Encouraging more opportunities to open up “requires universities to want to make the effort, to engage businesses, large and small, at the earliest of stages”, he said, but it also needs a “total rethink of the apprentice levy”.

This 0.5 per cent payroll tax on larger employers with an annual pay bill over £3 million co-funds apprenticeship training with contributing businesses. But if the levy is unused by employers, the government will redistribute the funds.

Haldane said repurposing the levy “could help fill the financial holes being faced by a great many HE institutions” rather than “flying back to the Treasury to be used for other purposes”.

He said that he was “worried” about the number of employers that are “thinking twice” about hiring for entry-level graduate jobs, saying it could cause “a hole in your pipeline”.

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“I’m not sure we’ve yet found a solution to that as everyone wants to hire experienced people, but how do you get experience?” he asked.

Haldane suggested that the government introducing training tax credits – modelled on the R&D credits currently in place to incentivise businesses to invest – could “nudge and nurdle” companies into investing in a pipeline at the graduate and postgraduate level.

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frances.jones@timeshighereducation.com