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Articles > Money June, 15, 2012

Why scrapping EMA was the right decision

Eduard Mead
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From the outset providing an incentive for students from low-income families to stay on at school seemed like a reasonable idea. It encouraged those who the government feared would prioritise the short-term gains of instant employment (often in low-paid jobs) before the long-term benefits of further and higher education, to remain in some kind of education/training.

However, as time went by it became clear that there were some gaping holes in this theory. First of all, given the massive investment behind the scheme (a whopping £560m a year) the government had worryingly little evidence to suggest that the students receiving the pay-outs were remaining in education because of EMA alone. In fact, research from the National Foundation for Educational Research concluded that “90% of students who receive EMA would continue with their education without the payment”. Something that the Chancellor rightfully described as “90% deadweight costs”. This figure was disputed by the Institute for Fiscal Studies and the National Union of Students (who produced figures of 36% and 45% deadweight costs respectively) but still the fact remained that a large percentage of students who already recognised the long-term benefits of education and training were receiving large pay-outs to continue studying – something they had always intended to do.

Those figures hid another astonishing problem with the EMA system: a small number of students from fee-paying private schools, who’s parents had divorced were managing to work the system in their favour, a favour that came in the form of a weekly £30 EMA payment. Feel free to correct me if I’m wrong, but surely someone who is likely to be paying in excess of £12,000 a year for a private education, needs no incentive to continue with their studies. Especially when the incentive accumulates to less than 10% of the amount they’re obviously willing to pay for an education*. I acknowledge that this was not ubiquitous across the system but it highlights just some of its flaws.
* assuming a 40 week school year with fees of £12,000

This is the problem of a government-run pay-out scheme aimed at encouraging students to remain in education. The government had very little idea of who the money should actually be going to, yes they made educated decisions based on the drop-out rates per quintile of the population, but as the data mentioned earlier highlighted: a trend does not necessarily suggest a rule, and the new system (although with far less funding) should go some way to solving this problem. The allocation of the bursaries now lies at the discretion of the schools, who have a far more informed opinion regarding which students are motivated by incentives and those who are not. As Michael Gove put it to the House of Commons: “schools and colleges [will] have the freedom to allocate the bursaries because they [are] best placed to know the specific needs of their students.”

At this point it’s important to mention that EMA had become redundant in another key way: from 2013 onwards the school leaving age will be increased to 18, almost eliminating the risk of students dropping out of school/training (legally).

The final point I would like to address is one that was raised by Harriet Harman during the recent mayhem across England: she appeared to link the the riots to the scrapping of the Education Maintenance Allowance: “There are some things which are short sighted and you should not be going ahead with”, she insisted to the furious education minister. If she’s right (which is incredibly unlikely) and the EMA reform really was one of the causes behind the reckless rioting and looting then it would merely increase the case against EMA; because this would suggest that the allowance has increased people’s perception that the state is indebted to them and that they should expect payment to increase their own skills/knowledge. On the other hand perhaps Harriet Harman forgot that the EMA was meant as an incentive to remain in education not to dissuade people from rioting. If it had infect become the latter (which it almost definitely hadn’t) then it points to even deeper problems within our society.

The bottom line is: the old system was inefficient, even if we go with the lowest deadweight cost figure of 36% that is still an exceptional amount of waste and would suggest that ministers previously underestimated student’s appreciation for the benefits of education. The new alternative is not perfect, but it is definitely an improvement – school’s are in fact, as Gove suggested, at least better placed “to know the specific needs of their students” than the government is. Ultimately, whatever scheme the government pursues in the future they must not stray from the underlying goal of increasing pupils appreciation for the long-term merits of education and training, which will become increasingly more difficult if students continue to see unemployment amongst qualified workers rising and job prospects falling.

Visit Eduard’s Blog: Pointless Economic Musings

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  1. Miles Smith

    There seems to be a false dichotomy within government in the way they perceive dealing with issues. Labour seems to want to throw money into peoples bank accounts & the conservatives want to take it away. I received EMA for all 3 years of my A level education, the first two years it was nice, it was a lot of money at an age where I had never had a regular income past pocket money but it wasn’t essential, I lived within a short walking distance of the school, my parents were struggling financially it’s true but not enough to be a major concern. My third year was a different story, I ended up going to a college which was £20 a week on bus fair, my parents had moved abroad & were struggling with that & I was living with my Aunt & Uncle for free & could not depend on them for money for obvious reasons, then that EMA started going on things that were important like my bus fair, haircuts etc.

    The support from the Government enabled me to get my A levels & get into university, yes I could have got a job but it wouldn’t have been ideal. Now am I suggesting it’s the Governments responsibility to pay for my haircuts? No! What I feel is the Governments responsibility is to make sure I have the means to get to my educational establishment, yes the Schools & Colleges do have money available for travel, but it’s not enough & it’s first come first serve. This is my point? Why throw money at people, why not instead support students, instead of £30 a week paid into my account how about they pay for my bus ticket? That would help me with my studies, would be a huge incentive for me to stay in education & would be a fraction of the cost of EMA.

    Then we have the sheer ridiculousness of how EMA (and student loans) are awarded, what on earth does your parents income have to do with your income? The fact is that parents are different, just because someone income is £25,000 & another parent earns £32,000 says very little about the amount of money the child might be getting, the latter parent might have more children, or a more expensive mortgage. Some parents will pay for their students bus fair, others wont & often it has very little to do with the amount they earn. Look at the ridiculousness of students loans, because I get the maximum amount living in London (including loans, grants & bursaries) I sit comfortably on just under £10000 per annum, friends of mine whose parents are a little better off get barely over half that. It doesn’t matter how much your parents earn, they’re unlikely to give you £4000 worth of additional money so what’s the reason for the difference? I’m sitting here writing this message whereas I have friends too busy working in ASDA just to pay their rent. A little consistency wouldn’t go amiss.

    EMA was a complete flop, but it was destined to be, but the financial support of education in this Country is so flawed that anyone can see it.

    • It’s interesting – as I read your first paragraph I was beginning to plan my reply (that the government should focus on subsidising services than just handing out money) but you then made that exact point in your following paragraph. Excellent points, well made. The government will one day appreciate the true value of properly investing in education.