Something which might change a lot of the assumptions underlying the various policy claims.

It is also not reasonable to judge think tanks by the standard of whether or not our famously risk-averse local campaign leaders can put it on a t-shirt without offending anyone. Good ideas are not necessarily easy or popular ones and real political leadership is evident in people who can sell difficult change, as well as easy populism like the party’s tuition fees policy.

I was filled with enthusiasm for the Centre for Reform (as it was originally) but my biggest concern with it these days is that for all its scattergun policy ideas, it seems to have no idea about or interest in politics or liberal philosophy, so it’s not really a lot of use to the party. It might as well be any other think tank … and we get much better ideas from our own Lib Dem policy working groups.

Just because it’s right-of-centre doesn’t mean it’s automatically progressive – that is something CentreForum and others in the party need to understand.

If you pay back your loan slowly it is because you are earning less money, which means in turn that you are still paying back a larger proportion of your income overall.

It also means you spend many more years with a large debt hanging over you, which as Vince and others have explained very convincingly, is a bad thing.

“Around 21% of graduate women can expect to have some debt written off, with their repayment capped at the 25-year cut-off, whilst this is the case for only around 2% of graduate men.”

So overall around 10% will earn so little as graduates that they will get some of their loan written off.

Within the other 90%, which includes a large proportion who will earn at or below average earnings, the repayment system is regressive.

“This is because more than half of government revenues come from taxes other than income tax. And since indirect taxes are regressive, they cancel out the progressive impact of the income tax system”

It’s a bit more complex than that! A lot depends on how higher education imopacts on which income levels. If the main effect is to take people from average to a bit above average then they will pay more through income tax and NI as a result, regardless of how progressive the overall tax system is.

The main unfairness in the tax system is between quite and very high incomes and low incomes. The vast majority of graduates and potential graduates will be somewhere in the middle.

But anyway, if the problem is the tax system, then we should concentrate on changing the tax system so that it is fairer rather than developing a student repayment system designed to accommodate an unfair tax system.

If our concern is for a more progressive system then we could look at raising the basic allowance for income tax and the starting rate for NI, we could look at having progressive rates for NI rather than the ridiculously regressive rates we have now, and we could reconsider the 50% rate on very high earners. And we could adjust those rates at the same time to recoup the cost of fees.

You both assume that paying off your loan quickly is preferable to paying it off slowly. But it isn’t. The IFS paper I pointed you towards explains why.

On page 17, for example, it says: “The number of years taken to repay the loan (Fig. 6 and Table 4, panel c) is also decreasing in lifetime earnings – it ranges from 25 years for the lowest earners (at which point all outstanding debt will be written off) to between 10 and 15 years for the highest earners. The average time for repayment is around 17 years for women and around 13 years for men. Around 21% of graduate women can expect to have some debt written off, with their repayment capped at the 25-year cut-off, whilst this is the case for only around 2% of graduate men. These results all highlight the fact that the longer the loan is held by a graduate, the bigger is the taxpayer contribution to the repayment of that loan. This of course runs counter to a commonly held notion that holding graduate debt for a long time is an indication of the ‘heavy burden’ of that debt.”

Counter-intuitive it may be but, from the graduate’s point of view, it’s better to pay back your loan slowly as you will receive more subsidy. Which is why a graduate in the bottom income decile who owes £9,000 in fee loans, will end up paying less than £4,500 while a graduate in the top income decile with the same debt, will end up paying more than £8,000.

It’s a much more sophisticated system than the Lib Dems have ever understood/admitted. Not only are there generous grants and bursaries available to students who come from low income families, but there is a significant insurance element to the income contingent loan system to protect graduates who end up with low incomes themselves.

With regard to your final point Neil, the fact that the income tax system is progressive, doesn’t mean that the poor aren’t subsidising the rich under the Lib Dems’ student finance policies. This is because more than half of government revenues come from taxes other than income tax. And since indirect taxes are regressive, they cancel out the progressive impact of the income tax system, with the consequence that overall, the tax system is quite flat (although, as Vince Cable regularly reminds us, the poor actually pay a slightly higher proportion of their income in taxation than the rich).

However you cut it, I’m afraid the conclusion remains the same: the Lib Dems’ HE funding policies are regressive.

Thanks for that link, very helpful.

If I’m reading the figures correctly they do indeed demonstrate the regressive nature of the system.

Beacuse while your figures …

“The result is that a graduate earning £10K repays nothing; a graduate on £20K repays £450, or 2.25 per cent of earnings; a graduate on £30K repays £1,350 or 4.5 per cent of earnings; a graduate on £50K repays £3,150 or 6.3 per cent of earnings; and a graduate on £100K repays £7,650 or 7.65 per cent of earnings.”

.. appear to demonstrate that the sytem is progressive, wht you don’t show is that those on lower graduate incomes will still be paying years after those on higher incomes have paid off their loans.

The result of this is that over their whole career those on lower than average graduate incomes pay a significantly larger percentage of their income in repayments than those on higher graduate incomes.

You are correct to point out that those who earn at very low graduate incomes of £15K or less don’t have to repay at all, but that is a fairly small proportion.

The vast majority of graduatues will earn above that threshhold and will repay all or nearly all of their loans, and within that large majority the system is regressive.

You the go on to provide the figures for the extra monay a graduate is likely to earn – 15 to 30% more than those on the next highest qualification level – typically between £100K and £200K more.

Surely the extra tax they will pay on this higher income will more than cover the cost of their higher education, and under our tax policies, even more so?

This isn’t true I’m afraid. The whole point of the income contingent loan system is that it provides real protection for graduates on low incomes. That is why the £15,000 repayment threshold and the 9 per cent earnings link (as well as the 0 per cent real interest subsidy and the debt write-off provision) are so important.

The result is that a graduate earning £10K repays nothing; a graduate on £20K repays £450, or 2.25 per cent of earnings; a graduate on £30K repays £1,350 or 4.5 per cent of earnings; a graduate on £50K repays £3,150 or 6.3 per cent of earnings; and a graduate on £100K repays £7,650 or 7.65 per cent of earnings.

And because graduates on low incomes pay back less, they also receive more subsidy. Which is why graduates in the bottom income decile end up, on average, having more than half their debts paid off for them by the tax payer.”

Not really true.

A graduate on a starting salary of £20k will pay back less per month as a proportion of total income than a graduate on £30k. They will, however, spend far longer paying it back, affecting their ability to e.g. buy a house.

You say (at 9.15 pm): “One of the problems with the current system is that it is directly regressive – the lower your graduate salary, the larger proportion of it you pay back”.

This isn’t true I’m afraid. The whole point of the income contingent loan system is that it provides real protection for graduates on low incomes. That is why the £15,000 repayment threshold and the 9 per cent earnings link (as well as the 0 per cent real interest subsidy and the debt write-off provision) are so important.

The result is that a graduate earning £10K repays nothing; a graduate on £20K repays £450, or 2.25 per cent of earnings; a graduate on £30K repays £1,350 or 4.5 per cent of earnings; a graduate on £50K repays £3,150 or 6.3 per cent of earnings; and a graduate on £100K repays £7,650 or 7.65 per cent of earnings.

And because graduates on low incomes pay back less, they also receive more subsidy. Which is why graduates in the bottom income decile end up, on average, having more than half their debts paid off for them by the tax payer.

For more information about the impact of fees and loans on graduates, see this IFS paper http://www.ifs.org.uk/wps/wp1807.pdf

Then (at 9.29pm), you say that my claim that the the benefits of the Lib Dem policy flow largely to individuals at the top of the income scale is “another glaring factual error” because “Nearly all students are near the bottom end of the income scale”.

But this too misses the point. The benefits of the Lib Dem policy don’t flow to students. They flow to graduates who, under Lib Dem plans, no longer have to repay their fee loans. So the important point is not really that students come disproportionately from high income families (which they do), it is that they tend to go on to enjoy relatively high incomes themselves. Precise estimates vary, but all studies conclude that the average graduate will earn between 15 and 30 per cent more over the working life cycle than someone with the next highest qualification (2 ‘A’ Levels). To give an idea of what this means, 25 per cent is equal to an additional £160,000.

So yes, the benefits of the Lib Dem policy do flow to individuals towards the top of the income scale.

Technically, they don’t. We volunteer. Or that’s what HMRC defined it as!

Why do they need to employ people to look after adults?

Same unit cost as anyone else whether my lectures are any good or not. So what do you propose – government inspectors to tell me whether they are any good and pay me accordingly? Forget, by the way, student demand – my experience is that students go on “University X is better than University Y” in some strict pecking order, and that never varies and has nothing to do with the quality of education. Reality is that to a large extent university department are autonomous, so you can have a good department in a bad universty, and vice versa, but students hardly ever look at it in that way they rarely even look as low as individual department level. Let universities charge variant fees, and what will happen is that the ones at the top of the pecking order will charge more and use the money to fund their research, it won’t have any effect on teaching, or maybe they’ll use it to pay PhD students to do teaching so the profs don’t have to do any. It doesn’t matter, because students will tend to think the more they are charged, the better it will be, and the research impact pushes the universities up the league tables, and that’s what counts.

Fixed unit costs per student mean all the incentive for universities is to get extra money from research, so lecturers are pushed to put all their effort into writing research papers and as little as possible into teaching. It doesn’t matter because if half your staff are spending all their time doing research, it makes the staff/student ratio look good, and the spending/student ratio look good (even if that spending is on research facilities), and that bumps the university up the league table, that attracts the students, good teaching doesn’t.

The real currency for buying degrees is A-level points, but until students are more discriminating about teaching quality, there won’t be much incentive to improve it. At the top of the pecking order, they can take the students with top A-levels, and being bright they can mostly teach themselves anyway, so the universities can get away with poor teaching. At the bottom, there’s a scrabble to fill places at all, hence the desperate trendy-sounding degrees and high profile advertising campaigns (look how it’s always the unis at the bottom of the league tables that have the big adverts).

So sure, I’d like to find a way to give more incentives to universities to offer good quality teaching, while I also do accept that being taught by people who are active researchers is a good thing. I currently think the incentives are way too skewed towards encouraging research (not always the best research, however, the RAE process tends to encourage safe research which churns out quantities of publications against more risky blue-skies research). But I don’t think a market in fees is going to do that – the current market in A-level points doesn’t. And I can tell you, having been my department’s admissions tutor for many years, the market in A-level points is a vicious and cut-throat one, because what every academic wants is to have students with high quality A-levels in the right subjects. Please don’t suggest there’s no competition.

Praps then UCU wouldn’t be demanding an 8% pay rise…

The big supermarkets of course build up huge endowments by exploiting the government protected monopoly on land to give free meals to the needy shareholders. So, er, yes.

Why shouldn’t other “trainers” be allowed to establish universities by the way? How did Buckingham come about? That restriction is itself state protectionism that inevitably increases the cost of entry to becoming such an institution and more than likely the cost of buying the services of those who are allowed to call themselves such!

I know about their jobs, because they always anxiously scan the timetables, trying to see how they can fit their shifts in. If you change something to another time slot, they’ll all complain “I can’t, I do my job then”.

The consequence of this is that they really aren’t full time students. They can’t fit the hours in that the degree ideally requires. I have to water down what I teach to accommodate that, but even so I’ve frequently seen good students dragged down and get poor class degrees due to financial difficulties. The, of coure, they are less likely to get those wonderful high-paying jobs Julian Astle is so sure they’re bound for.

Buckingham doesn’t get such a letter.

On the other hand, you get the same unit cost as anyone else, whether your lectures are good or not. Where’s the incentive in that?

Anyway, no doubt you’ll soon have to rewrite your courses so that they teach what the local IT employers want taught – the only new money that’s going to be coming into HE in the next few years is if the universities themselves start funding relationships with employers.

“I would also like to point out my strong opposition to the government monopoly of HE as the reason why most HE institutions are unable to build up significant endowments or offer sufficient bursaries/scholarships.”

Could you tell me what you mean by “government monopoly”? I am a university lecturer. I devise my own courses. The government does not tell me what I should teach in them. Other lecturers in my subject in other universities teach it in a different way with different emphases and a different mix of material. The government does not tell us what to teach. In what way is that a “government monopoly”?

Any private institution is free to set up its own training programme if it wants. It can’t say it is an approved university, but it can train. So it’s not like there’s a ban on training.

You seem to be suggesting that an end to this “government monopoly” would enable training institutions to charge vastly more than their training costs in order to build up huge investments, which they could then charitably hand out to needy cases. How do you suppose this would work? Are there any other businesses which do that? Are there, for example, supermarkets which overcharge on their food, so they can build up endowments and charitably offer free food to needy people?

“This government monopoly has also showed itself incapable of sufficiently regulating examination boards.”

Perhaps you could tell me what you mean by this. I am Chair of my university department’s examination board. The government does not tell me what to do in this capacity. Are you suggesting it should, are you supposing it does?