Liberal Youth respond to graduate tax proposals

Well I, for one, was hoping for a quiet summer.

Having been elected as the new Chair of the Youth party exactly two weeks ago I’m just about getting my bearings about where all the buttons to push are, so imagine my surprise when I found the big red button marked ‘Higher Education Funding.’

The issue of Higher Education funding is, perhaps, Liberal Youth’s biggest single issue, and our policy, and that of the Federal Party, is probably our most recognisable to young people across the country; When you ask a student about Fees they will be able to tell you exactly where we stand.

By the time you read these words, the Coalition Governments Business Secretary, Saint Vince to you and I, will have set out in detail his vision for the Future of Higher Education funding this will include the scrapping of fees and their replacement with a Graduate Tax contribution.

In many ways this is a clever and commendable move, in one fell swoop it gets rid of up front fees, alleviates student debt, shows the progressive backbone that Labour failed to show in office and removes the thorn of a potentially prickly debate about the level of the Cap on tuition fees.

That said, Mr Bean rushes in where Stalin fears to tread – if there is to be an individual student contribution toward higher education, better one which is levied on future ability to pay, than one which lands students in thousands of pounds worth of debt.

But even better than that, why not have a HE Funding policy which completely undo’s Labour’s damage to the sector, recognises the importance of investing in Education and brings back free education?

Liberal Youth welcomes a move to a graduation tax as an important first step toward bringing back free education when the economic situation has settled, but it must be an interim policy.

Whatever compromise the Coalition Government comes to, our party policy should remain. It is right that we stand firm on the principles which have guided us to this point and Liberal Youth will be fighting to keep our long term policy at Federal Conference in September.

Nor should we forget about those who do not go to University. The 50% target has left a glut of graduates who have effectively pushed those without a degree out of the job market – we should be pushing for more funding for vocational training and apprenticeship schemes to help people without degrees find work. This is more important than ever given the high levels of youth unemployment that was left to us by the previous Labour Government.

There are big challenges and they need bold answers. Young people and students have had 13 years of failed policies and broken promises. I want to be a supporter of a party, of a government, which takes a stand on an issue which eroded so much trust among young people over the last decade.

Martin Shapland is the Chair of Liberal Youth.

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  • “The issue of Higher Education funding is, perhaps, Liberal Youth’s biggest single issue, and our policy, and that of the Federal Party, is probably our most recognisable to young people across the country; When you ask a student about Fees they will be able to tell you exactly where we stand.”

    Perhaps we should stand for better grammer?

  • Good Martin, but the ‘step in the right direction’ argument concerns me a little bit.

  • Touche! I shouldn’t have gone to University. My spelling would have been impeccable.

  • The current system is a graduate tax, the problem is it’s a flat rate. The current system is not an ‘up-front’ payment’ because of student loans. Vince’s suggestions sound good, however, we await detail – I’m not sure what detail above Martin is alluding to!

    I think the 50% target was about having something to aim for rather than been laisez-faire about getting more people into higher education – we’re going to need skilled people for our future growth!

    Good point Whelan about the grammer!

  • Phil Tipton 15th Jul '10 - 4:07pm

    Up-front fees were abolished with the introduction of the top-up fee system along with a restoration of means-tested grants for poorer students. The graduate tax represents a move from a fixed-debt, written-off after 25 years, to a potentially unlimited contribution where those who go into lower-paid employment will end up paying more as a proportion of income than those who earn the most. It’s a bit like increasing VAT in that respect.

  • “those who go into lower-paid employment will end up paying more as a proportion of income than those who earn the most.”

    Read the speech, especially the bit about the higher paid paying a higher proportion.

  • David Parkes 15th Jul '10 - 4:49pm

    I think what Martin is getting at (and he can correct me if I’ve got this wrong) is that the realities of coalition government (and the current financial crisis) mean that on certain issues we will often find a huge gap between our aspirations and what we can genuinely hope to achieve.

    3rd-way solutions, need to be explored and supported “as better but imperfect” solutions. We have to be prepared to say “We’d like to go further, but this is the best we can do right now,” Lets take some of the absolutism out of politics.

    Equally though as other posters have remarked, we have to ensure we genuinely are moving to a better but imperfect solution, rather than something which creates more problems than it solves.

  • where those who go into lower-paid employment will end up paying more as a proportion of income than those who earn the most

    What’s this based on? As a basic assumption I would assume that people pay a flat rate as a proportion of income. But one could also have a high threshold meaning those in low-paid employment pay nothing at all. And the tax could well be banded by income as well. The argument about low earners paying more VAT is because their expenditure is disproportionately high (though I’m not sure or not if this disappears if you take out rich pensioners and trust fund kiddies from the “low income” bracket).

    Whether the tax is “for life” or not is an important question, though.

  • Phil Tipton 15th Jul '10 - 5:06pm

    I did read the speech, including the bit about the aspiration that higher earners should pay a higher proportion of income, but it is not clear that the graduate tax would only kick in above a certain income threshold for lower earners. I thought the proponents of a graduate tax wanted an x percentage onto the basic rate which would presumably kick in as soon as the personal allowance is exhausted and not at some higher, yet-to-be-determined level. If it is to be differential and to start from income above certain thresholds then I have much less of a problem with the concept.

    The real barriers to access, though, are found in the difficulties students face in maintaining themselves through their studies and not in the prospect of post-graduation repayment. The abolition of up-front fees went a long way to help this, though it has to be said only a minority of students had to pay the much lower up-front fees pre-2005 in any case, a fact often overlooked by the NUS, politicians and commentators. I just hope that the implementation of any new system will ensure that enough funding remains to keep, andindeed boost, the level of means-tested grants, along with a commitment not to introduce commercial rates of interest on student loan repayments.

  • “A far more representative measure is VAT spending as a proportion of total expenditure; you use that and higher earners pay and are impacted significantly more.”

    It is true that on this measure higher earners will pay more VAT in absolute terms. But that is because they have the disposable income to enable them to do so. It’s disingenuous to state that it is a more representative assessment, partly because it enables you to ignore the opportunity costs. The idea that the VAT on the purchase of a superfluous luxury good by a wealthy person will “impact significantly more” that the purchase of a needed basis item by a low-income person is, frankly, an arrogant and selfish assumption.

    If you’re in any doubt I suggest you ask Bob Russell.

  • Phil Tipton 15th Jul '10 - 5:10pm

    Andrew, isn’t that what happens now where the proportion of income taken from salaries as loan repayments increases as your salary increases? Also, forgot to say above that the 25 year write-off arrangement was retrospectively applied to those who studied with up-front fees post-Dearing.

  • Barry George 15th Jul '10 - 5:12pm

    I agree with some form of payment in return for higher education but I am concerned that many will choose to take their skills abroad in order to negate paying this tax. It is important to encourage graduates to stay here…

  • Barry George 15th Jul '10 - 5:26pm

    Is there any reason that we can’t have a emigrants tax?

    That would certainly level the playng field.

  • I’m sure that I heard it reported on Radio 4 six o’clock news that under these proposals the universities would finance themselves with bank loans on the expectation of future graduate tax receipts. That would put the universities in hock to the banks, and massively increase their levels of debt which would make the up front payments of foreign students much more attractive. Surely it is the employers who are receiving the benefits of all our fine graduates. I suggest that university tuition should be free and financed by the hugely wealthy companies paying a graduate tax. Why should they get the benefits of our superb university education system for nothing?

  • @Mack – you really do have a common theme to many of your posts … more taxes, more public spending.
    sure you are in the right place, wouldnt you be happier at labour home?

  • @ SMcG

    I note that you haven’t discounted my suggestion. I thought that the Libs (as opposed to the orange Tories) actually favoured free university education.

  • Matthew Huntbach 16th Jul '10 - 10:52am

    Graduate tax, how is this going to work? If there’s a big tax difference depending on whether you’re a graduate, we had better have some clear ways of telling if you are.

    Here’s a case – a real one I dealt with (in my capacity as Chair of my university subject exam board) today. Someone was on 17 units, they need 18 for a degree. They finally got the 18th unit (after two years trying) this year. But now might this person be begging me “Please, don’t give me a degree, I don’t want to have to pay all that tax”?

    OK, so what if the tax is for time spent at university rather than actually having the degree? So how do we tell if someone was at the university? Bear in mind all those who sign up and then never show up, people doing resits out of attendance, people doing it part-time, by distance learning, etc etc.

  • On the emigration case – I think it’s still the case that you don’t make loan repayments while you are working overseas. Indeed I think student loans are written off if you live overseas for four years, which seems a much greater incentive to flee the country than a small additional graduate tax over a long period.

    Also, surely the tax will only apply to *new* graduates? It won’t be applied to those who paid fees already will it?

    I’d also be in favour of a graduate tax being paid partly by the individual and partly by their employer. As MacK said, companies are doing extremely nicely out of the high number of graduates without having to pay anything extra for their training.

  • Phil Martin 16th Jul '10 - 3:18pm

    What up front fees – you don’t pay them now! Or did I somehow not get charged? A graduate tax does not actually reduce debt it renames it and depending on the method and subject you may well pay/owe more. The graduate tax may be the student loan you have for your entire working life. It pays for not only your degree but several others.

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