Graduate tax is the fairest way of abolishing tuition fees

I was one of the lucky ones. When I went to university in the late 1980s and early 1990s I didn’t have to pay tuition fees. I left for the world of work without thousands of pounds of student debt hanging over my head.

I would like nothing more than to be able to abolish fees for good and make universities free for all. But to suggest that it is possible to do so now wilfully ignores reality.

The fact is the higher education sector has changed beyond all recognition in just a few short years. Universities face a funding crisis. Far more students attend far more universities than they did just a few years ago and far more students are now graduating only to find that the jobs they assumed they would be able to move into simply don’t exist. This is a serious and unsustainable situation.

If we want a thriving university sector that creates the 21st century workforce Britain needs for the economy to recover and prosper; if we want to be a socially mobile country that encourages all young people to pursue their ambitions regardless of how wealthy their parents are; and if we want a Britain with a rich cultural and social life, we need to find a way of solving these very real problems.

What we need to find is a way of funding universities that is sustainable and fair to students, that does not deter people from poorer backgrounds from realising their potential, encourages social mobility, and ensures high teaching standards.

That’s a big ask and it is against these conditions that the Coalition Government will judge the review of university funding that Lord Browne is leading.

The business secretary Vince Cable this week suggested that one way of doing this could be to bring in a graduate tax.

I believe this would be the fairest way of abolishing tuition fees.
A graduate tax would be based on a simple principle: that those who benefit the most from their university education pay the most.

This is not the situation we find ourselves in with the current tuition fee system, which effectively imposes a Poll Tax on all graduates, and it would certainly not be the situation we will find ourselves in if the cap is taken off tuition fees and they are allowed to escalate.

The fact is that not all students receive the same benefit from their education, at least not the same financial benefit.

Those who go on to become investment bankers, doctors or international lawyers will earn far more than those who go into social work, academia or teaching, yet right now they all pay the same rate in the same way. That is unfair and regressive.

A graduate tax would be a progressive tax that ensures those who earn more as a result of their degree pay more.

It is not perfect and there are many potential pitfalls. Should it ultimately be implemented, it will be a huge test of the Coalition Government to ensure that it is done fairly.

I and other Liberal Democrats are not the only people who feel that a graduate tax would be the fairest way of funding higher education.
The National Union of Students has long backed such a tax, with its current President Aaron Porter arguing that ‘a progressive graduate tax would be a signal of a just society, where people who benefit more pay more’. It also has the backing of at least two of the Labour leadership candidates.

It may be the case that Lord Browne’s review comes up with another possible solution to this very serious situation. If so, my colleagues and I will judge the proposals on their own merits.

I for one hope that he gives a graduate tax serious consideration.

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  • Such a tax is a good idea, but it will only be fair if graduates such as you and me who didn’t have to get into debt for our degrees in the past also pay this tax. I have not yet heard any hint that this will happen, but I sincerely hope so!

    How else can the older generations (well, anybody above 30 or so) face young graduates and students otherwise and thell them with a straight face that it’s fair to pay for the advantages they gain from a degree?

  • It’s a lousy idea in just about every way anyone can think of. Drop it. When you’re in a whole stop digging.

    The only sensible way to fund higher education is from general taxation. Why should those who do go after qualifications – which are desirable for the good of society as a whole – be penalised? And why can we pay millions on benefits to do nothing, but we can’t support those working to make themselves more use to the rest of us.

    If it’s necessary to put more money into higher education, then let everyone pay – including those who will benefit from having better public services and a wealthier economy because we have more graduates.

    Of course, it may be that the people who run our universities are engaging, ever so slightly, in empire building. A little less credence from politicians for the universities’ incessant pork-barreling wouldn’t be a bad idea.

  • James Robertson 19th Jul '10 - 6:34pm

    A graduate tax would be better than the status quo, but that alone shouldn’t be enough to either recommend it or gloss over the fact that it is by nature discriminatory.

    I’m not a huge fan of the NUS, but even if you accept the logic that “a progressive graduate tax would be a signal of a just society, where people who benefit more pay more”, how do you determine who actually benefits and therefore who should pay more? I have personally benefitted in the past from the medical, educational, artistic, and scientific abilities of graduates – so why is it only the graduate who should be perceived as the beneficiary of his/her education?

    I would be concerned that this sets a dangerous precedent; if particular groups are taxed over and above general taxation to repay benefits – either perceived or real – where do we draw the line? In fairness, graduates earning the salaries Dr Cable discussed are making more than sizable contributions. Perhaps instead of jumping the gun and making sudden announcements it would be useful to examine how other democracies are dealing with the complex issue of student funding.

    Closer to home, there is the example of the Cubie Report which only applied to Scotland but whose principles are surely relevant UK-wide. I shouldn’t have to remind Lib Dems of the report’s significance and of the political circumstances through which is was brought about. Admittedly the economic climate is somewhat different from 1999 but sound principles are sound principles.

    Also, why are Tim Farron and Vince Cable so keen to pre-empt the “independent” Browne Inquiry? I am incredibly concerned that either the political neutrality of the Browne Commission is being rendered questionable or that politicians in their arrogance are feeling the need to lecture the Commission about issues in which it is supposedly more than informed and competent to deal with.

  • Yes that’s it. Let’s tax youth. Let those of us who didn’t have to pay for our educations pontificate on the importance of making a contribution. Just so long as we’re not the ones making it eh?

    Honestly, what a wheeze – higher income tax rates for anyone born after the early 1990s. The baby boomers would be proud of that one.

  • The problem I think, Tim, is that the party debated and voted on this a while ago, and regardless of my views, I think members’ real unease is that they know Vince didn’t support the side that won (the free-education supporters), and think that perhaps he, and others are using this coalition as an excuse to jettison policies which they don’t like.

    There needs to be some reassurance here rather than repeated claims that ‘this policy was right all along’ when it is what the party repeatedly chose not to do.

    If we accept the possibility we might be wrong (Mill) and allow democratic process to act as the best arbiter of differing opinions (still Mill I think) then the essence of your article is that you believe this policy is right, and because it is one you agree with, you are less bothered by the democratic processes of FPC and the party at large.

    (Finally, quoting the rather impotent NUS was not the best conclusion to your argument – bloc voting and unelected appointments run rife, and many unions across the country feel sorely tempted to dis-affiliate. The reason behind much of this impotence is a Labour-party flavour which made standing up for students difficult over the last 13 years. We should avoid this same trap you tempt us with.)

  • We do a lot more to rethink HE than simply tinkering with fees. American universty endowments are streets ahead of ours. They have continual assessment and take teaching seriously. They also poach the top academics from the UK and elsewhere.

  • Daire Nolan 19th Jul '10 - 9:38pm

    If the government were to impose this “Graduation tax” on those who benefit more financially in the long term, doesn’t such a proposal have the potential to discourage future graduates who may have initially intended to enter their career as a Doctor because of the high pay and little burden they would receive from doing it?

    I must say, however, that I do support this graduation tax. But where would they get the money from?

  • Tim,

    When I was a student I bought books and rented student accommodation. I also paid to attend a conference on a subject outside the course, but relevant to it.

    Should I have paid a market price for these, taken a loan out if I needed to which I could pay back at a reasonable rate when I could afford it, or have been compelled to borrow money from the government that added an arbitrary and unpredictable sum to my future income tax?

    1) If the answer is a) or b) what’s the relevant difference between these items and the portion of my learning covered by tuition fees?

    2) Will future students have the freedom to choose to pay up front, by deferred capped loan, or GT? Or are you as a liberal going to force them to pick one option?

    3) If coerced, could they opt to pay a higher rate of tax for a shorter period of repayment?

    4) What tax avoidance and evasion impacts had been modelled on the NUS GT proposal by Vince Cable’s team before recommending this policy to the Browne review?

    5) If there are impacts, to what level will the GT need to rise to fill the gap?

    6) How do you react to the NUS’s proposal to Browne that to raise the money the universities say they need the rate of GT would be 5% over 25 years not 2.5% over 20 years as originally proposed?

    7) Applied retrospectively and assuming she remains an MP for the next 15 years this means LSE graduate Jo Swinson MP would end up paying at least £66,000 for her university tuition at current prices, plus a bit for her employment between 2000-2005, more if she joins the Cabinet or gets other allowances. More if MP’s salaries rise above inflation. Happy with that? Think it might have an impact on where high-fliers choose to study?

    8) Will you, Vince and other MPs backing this policy be willing to pay a retrospective surplus charge to the revenue based on current prices and what you would have paid in GT on this NUS proposal, as a gesture to fairness? (Sadly despite the vast salary differential between you and Vince in your first 25 years of employment, you may owe morel he worked abroad a lot between 1965 and 1990 and may have avoided GT in that period as a result).

    9) Will young city high fliers Chris Huhne and David Laws be willing to join this crusade for leadership by example?

    10) One group benefitting from this policy are graduates who choose to work for MPs or student organisations, for example former Presidents of their student union. Is it right that productive ambitious young doctors and lawyers subsidise these political jobs?

    11) Where is the money going to come from to plug the gap between fees and GT revenues in the transition period, will other taxes have to rise in the short-term, will you be borrowing (if so how much), or cutting other services?

    12) If you believe university funding should be as progressive as possible, and given the majority of university funding currently comes from general taxation, whilst the spending mostly benefits future middle/high incomes earners, and this was one reason for introducing fees… to make that system less regressive… will you be recommending the graduate tax be applied to the full cost of state funding at what looks like a rate of 12.5%? That could be smokin’ progressive…

    Best wishes… Andy

  • I think you may have something Henry. Vince appeared very irritated at the Cambridge Uni Lib Dem he debated with on Newsnight, who took the “fund from general taxes” line. I don’t think I have ever seen Vince irritated like that on TV. I have heard so much c..p talked about how a graduate tax is “progressive” , how much of a salary premium is earned by graduates and similar contentions.

    A good general education DOES prepare you for life on what should be a broad front – it is more difficult to claim precise “premiums”. The fact that graduates of a certain age may earn £x000 more than non-graduates, does not necessarily mean that they owe that to being graduates, either partly or wholly. This whole approach panders to those who want to increasingly ringfence (“accountant think”) expenditure, and noyt pay tax towards things they may not directly benefit from. This can only be described as a narrow approach – if we were all allowed to get away with that, the country would be in an even worse predicament.

  • James Robertson 19th Jul '10 - 11:45pm

    “Unless the idea is to keep paying it forever, rather than for a finite period of time.” As far as I have been able to determine, that is exactly what is being proposed with some calling Cable’s plans “the student loan you never pay off”:

    We are not talking about “endowment funds” like those in Scotland, which see graduates making payments until the state investment in their studies is repaid. We’re actually discussing a tax that will apply for the working life of the graduate. As a Lib Dem, I recognise there’s a need to be flexible as a partner in government but as Henry points out this stance is in direct opposition to long-held party policy.

    It’s also a bit disingenuous to state that “doctors or international lawyers will earn far more than those who go into social work, academia or teaching, yet right now they all pay the same rate in the same way”. In fact, an international lawyer will pay an awful lot more in general taxation than a social worker; this egalitarian rhetoric looks false and a smokescreen for the real motivations surrounding the announcement of Cable’s plan which are political and economically pragmatic but certainly not primarily about furthering social equality.

    To Tim (who knows me and has discussed with me at length my own dificulties in relation to student funding) I would ask the following: a) why do you believe that a graduate tax “would be the FAIREST way of abolishing tuition fees”? b) when did you change your mind? c) why the need to pre-empt the Browne Commission? and d) wouldn’t you agree that the Cubie recommendations are more progressive than both the status quo and the graduate tax?

  • gramsci's eyes 20th Jul '10 - 8:16am

    Are you paying for the degree or your own success?

    Everyone seems to be an “international banker” and everyone else a Florence Nightingale in the public sector. Such that the world could be as simple.

    As a rule of thumb those with a First will earn more than those with a Third. So the kid from the council estate, despite the disadvantage, will pay more than the middle class kid who couldn’t be that bothered?

    “I was one of the lucky ones. When I went to university in the late 1980s and early 1990s” … – No problem pulling the ladder up behind you then?

  • No easy solution to this one. Part of the problem has been the terminology and confusion around the issue. The system at the moment is called top up fees for historic reasons but it is in fact a form of graduate tax but limited to an individual’s own debt. I wonder if the new system will in effect be a modification of the current system.

    We have (wrongly in my view) become over attached to this policy area and have fallen into the trap of sticking to an unrealistic policy suitable only for opposition. In some respect and despite opposition (me included) the current policy seems to work to some extent. Its problem is that it is bearable at current levels but if fees were increased the deterrent factor that has been much less than predicted would surely increase.

    I am happy to continue paying back my own fees and I think many of my peers feel the same. Would I be as willing to pay with a say 25 year graduate tax where I would end up paying far more? Only if it guaranteed much higher levels of university investment and there were almost no loopholes e.g. those who go to work abroad or from abroad. These are hard to overcome and partly why we are where we are.

  • To a point I have to agree with Phil’s sensible post above. It is very easy for a party of opposition to develop entrenched and unrealistic policy positions. Also, to some extent, the status quo is just about “bearable” although the real fear is that fees could be substantially increased in the near future. This eventuality being not only possible but likely, it is understandable that we as a party should be promoting alternative (and more palatable) ideas.

    However, the graduate tax is also, in my view, an unrealistic policy. In fact, it is not only unrealistic but completely unworkable. That it is not what we have historically campaigned for is one thing; that it can be in no way be considered “liberal” is quite another. It seems that, as Phil suggests, we have become so concerned with replacing tuition fees that we’re willing to replace them with just about anything so long as we can claim the victory. Abndonment of tuition fees as any cost appears to have become an end in itself. This may be why Tim refers to “the fairest way of abolishing tuition fees” rather than “a fair and socially just system for funding HE”. The emphasis has been completely wrong – we’ve been looking to eradicate fees at any cost rather than take a long, hard and responsible look at the HE system and how it works (or doesn’t).

    I personally feel the issue is wider than the narrow focus of funding, and would welcome the debate moving away from this and onto the broader topic of HE; i.e. what kind of HE we wish to see, what we want it to achieve and how best to realise it. I would like the government to revisit the “lifelong learning” agenda and look at new ways of enabling individuals to reskill, retrain and develop throughout their adult lives. I would also welcome the abandonment of the well-intentioned Labour targets which were too focused on universities and instead examine how better education can be delivered outside of HE establishments (i.e. more affordably). The way in which education is delivered has to be adapted in line with need and affordabilty, and, if we’re honest, be made fit-for-purpose. In this sense, Cable’s graduate tax proposal is little more than an unhelpful distraction.

  • Well, looks as if the Coalition? The Conservatives? are already in the process of changing their mind about this yet again.

    I work in higher education and I have to say, watching the manner in which the future of the whole sector is being decided (or not, as the case may be) is a bit nerve-racking and definitely doesn’t inspire a lot of confidence in the future…

  • toryboysnevergrowup 21st Jul '10 - 10:52pm

    It actually sounds to be sensible approach – but perhaps rather than flying kites Messrs Farron and Cable could have tried to convince their Conservative partners first. I’m afraid this is another example of what is becoming a worrying trend of rushed and premature policy announcements being made by members of the Government – and someone needs to grasp pretty quickly that the uncertainty caused has the potential for creating serious problems.

    On a more partisan level I trust the Labour Party will put forward an amendment to the proposed legislation on the lines that will test Mr Cable’s capacity for hypocrisy.

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