Opinion: Labour’s Tuition Fees policy is a tax cut for the rich, paid for by the poor

University of the West of England, laboratory, science. Some rights reserved by JiscEd Miliband is announcing that a Labour government would cut university tuition fees from £9,000 to £6,000. It’s more of a re-announcement as the policy’s been knocking around for a while – and you can understand why. On the surface it sounds good.

In reality, Labour want a tax hike for the poor and a tax cut for the rich.

The Coalition’s Tuition Fees policy cut the cost of university for poorer graduates (but increased it substantially for the wealthiest) and has seen not only record numbers going to university, but also the highest ever number of young people from poorer backgrounds signing up. And yes, not the Lib Dems finest hour with the pledge and all that – no doubt commentators below the line will find new and interesting things to say on that topic that no-one’s thought of in the last four-and-a-bit years.

But let’s take a look at what Labour’s proposals would actually mean. First, as university vice-chancellors have been quick to point out, it would create a funding black hole – they claim £10 billion over five years.

Second, the people who would benefit are rich graduates. The new fees system is a graduate tax in all but name. It is designed so lower-paid graduates never pay back anything like the full amount. The lowest paid won’t repay a penny and the bottom third pay back less than under the old Labour scheme. Cutting fees from £9,000 to £6,000 makes no difference to them at all – they were never going to repay even half the full amount, and they’ll carry on paying the same.

The people who benefit are the wealthiest graduates – and the richer you are, the more you save. If you graduate and become a high-paid banker who would have repaid the full loan plus interest, you get a nice big tax cut from Mr Miliband.

And who pays for this tax cut for the rich? Labour will have two choices. They can increase tax to cover it – making us all dip into our pockets. Or they can cut services – perhaps making further cuts to welfare to help those wealthy bankers. Labour has already promised to be “tougher than the Tories” on cutting the benefits bill.

Labour’s Tuition Fees proposal is a poorly thought-out, unfunded , headline-grabbing policy that will result in a tax-cut for wealthy graduates with either tax rises or cuts in services for the poor.

 

* Iain Roberts is the former leader of Stockport Liberal Democrats and Lib Dem Campaign Manager in Greater Manchester Mayoral election and for Cheadle constituency in the General Election

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102 Comments

  • I’m sorry but the above is absolute hogwash. Do you honestly think that graduates expect to spend all their lives in low paid jobs? Like everyone else they dream that they might one day get a decent job and like everyone else they worry about the size of their loans. To just write off the stress of having large debts by say it makes no difference to those on low wages is just plain wrong.

  • 1) Even Vince Cable is on record as saying the current system is not paying for itself, although he, sickeningly, sees it as someone else’s problem:

    “I don’t worry about it because in effect they are losses crystallising in 30 to 40 years’ time,”
    http://www.theguardian.com/education/2014/oct/07/university-tuition-fees-likely-rise-significantly-vince-cable

    2) Your party surrendered its ability to comment meaningfully on tuition fees back in 2010.

  • Eddie Sammon 2nd Feb '15 - 5:08pm

    Why can’t they pay for it by making universities make cuts?

    Fighting Labour on a platform of who can hit the rich the hardest is a losing platform. We should fight them on a platform of education quality, which will resonate.

    Best wishes

  • Iain Roberts 2nd Feb '15 - 5:18pm

    I take it you’re not familiar with the way the tuition fees system works, malc. Bizarre as it sounds, the people who designed it did realise that people’s salaries often increase during their lives and took that into account.

  • So the pre-election signed pledge on tuition fees was just a publicity stunt then? Of course, I forgot. A signature means absolutely nothing.

  • Iain Roberts

    I think that most graduates – especially the low paid – find a £27,000 debt over their heads for a large part of their life fairly stressful. To say it makes no difference at all because they may or may not have to pay it all back is insulting.

  • Iain Roberts 2nd Feb '15 - 5:41pm

    malc – I think most graduates are intelligent enough to understand that a “debt” that simply gets written off if not paid and doesn’t count against them on credit scores, mortgage applications etc. is a bit different to most other forms of debt.

  • It is not a graduate tax in all but name because the richest graduates can pay off their loans early and end up paying less than graduates further down the income scale. The people who really get hammered are bright kids from poor backgrounds who do well but not quite well enough to get in the highest income bracket. They ended up paying more for their education than it actually costs. Though, to be fair, perhaps the policy is designed to so inhibit upwards social mobility that it is felt this doesn’t matter.

  • Iain Roberts 2nd Feb '15 - 5:44pm

    g.

    1. So the answer to the current system potentially not generating the income expected is a tax cut for the rich so it brings in even less money? I don’t think so.

    2. that’s just silly, I’m afraid. If you have a sensible point to make, feel free to make it.

  • Iain Robert

    So being a low paid worker with a large debt over your head, which you will have to start paying if you get a fairly small pay rise above your minimum wage is not stressful and makes absolutely no difference to the person concerned. Also if you don’t earn enough to pay back your student loans it’s very unlikely you will be applying for a mortgage. You may be very familiar with the current tuition fees system, but obviously not so much in touch with your own common sense.

  • Peter Watson 2nd Feb '15 - 6:09pm

    We were told – by Liberal Democrats in this government – that under the new system they were introducing tuition fees would be £6000 and only at the maximum of £9000 under exceptional circumstances. Labour’s proposals are reasonably consistent with that, yet apparently now £6000 is a ridiculous figure that leaves a massive funding black hole.
    Lib Dem policy on funding tertiary education seems about as consistent and well-defined as … a very inconsistent and ill-defined thing indeed.

  • @ Malc
    “So being a low paid worker with a large debt over your head, which you will have to start paying if you get a fairly small pay rise above your minimum wage is not stressful and makes absolutely no difference to the person concerned.”

    No more, presumably, than having a unending commitment to have to pay higher taxes in the form of a graduate tax for the rest of your life, which appears to be the alternative.

    Seriously, tuition fees have to be paid for one way or another, there being no free money just lying around, a fact that some people seem unprepared to acknowledge and accept.

    @ G
    “Your party surrendered its ability to comment meaningfully on tuition fees back in 2010.”

    The party you support, Labour, surrendered its ability to comment meaningfully on tuition fees way before that when it imposed them despite promising it wouldn’t.

    It is now compounding its hypocrisy on this issue by proposing this half-baked non-solution.

  • Peter Watson 2nd Feb '15 - 6:14pm

    @Iain Roberts “doesn’t count against them on credit scores, mortgage applications etc. ”
    I think the notion that a student loan is ignored by mortgage lenders is long gone, e.g. http://www.thisismoney.co.uk/money/mortgageshome/article-2646007/Student-loan-debt-IS-considered-applying-mortgage.html

  • “Labour’s proposals are reasonably consistent with that, yet apparently now £6000 is a ridiculous figure that leaves a massive funding black hole”

    So consistent in fact that a whole load of universities have queued up to condemn them. So are you saying the universities are wrong?

  • @ Peter Watson

    If graduates had to pay higher tax rates post university instead of having a student loan, that too would be taken account of in affordability calculations, because that would affect their take home pay, wouldn’t it?

  • RC

    It is amazing that universities are now saying it will be the “end off the world” if the £6,000 limit is brought in. The very same universities who said the £9,000 maximum would only be used under exceptional circumstances. They were wrong last time, why not this time?

  • No P Watson, it is affordability, ie the size of the monthly repayment – that the mortgage providers take into account. The loan amount is nt part of the affordability calculation.

    Graduates repay nothing until they earn £21k pa. They then pay 9% of salary above £21k. For example if a graduate earns £30k pa, the repayment is 9% of £9k which is £810 pa.

    Of course, the rise in income tax threshold from £6400 to £10600, which is £840 pa, more than accounts for this.

  • Peter Watson 2nd Feb '15 - 6:29pm

    It seems to me that we need a more fundamental debate about university education in the UK – and it is sad that the Lib Dems have nobbled themselves from the outset with their position(s) over funding it.
    We should be considering what sort of tertiary academic system we want, what sort of subjects we should be encouraging and supporting, and then how we should pay for it.
    We now seem to have a system built on the assumption that everybody can go to university and study anything they want, but those who choose something with good employment prospects should pay top dollar for it themselves (and those choosing to study science or engineering for 4 years or medicine for 5 should be especially penalised) while those choosing something that makes them unemployable should have it funded by the taxpayer. This risks creating some bizarre incentives.

  • Malc
    There is absolutely NO guarantee that the £2bn pa that the Universities will lose from tuition fee reduction will be made up by a Labour government. They have lied, and lied again over tuition fees.

  • Bill le Breton 2nd Feb '15 - 6:33pm

    Iain, how does it not count against a person’s ability to gain mortgage approval?

    A 2012 entry graduate earning 40k will be repaying circa £1,800 a year probably for the remainder of the 30years starting from that point in time (as interest will probably be accruing at £2,000 + a year). The new stress tests will of course require mortgage lenders to count the £150 a month repayments in their calculations.

  • Julian Dean 2nd Feb '15 - 6:36pm

    Yet another LP attack eh? Oh and brass neck springs to mind!

  • Peter Watson 2nd Feb '15 - 6:42pm

    @Simon Shaw “Really? I don’t remember that. Have you some link to explain your comment?”
    Vince Cable in Parliament in December 2010:

    For the funding of universities, Lord Browne recommended—in a report that the then Labour Government endorsed, I think, in their manifesto—that there should be no cap on university fees and a specific proposal for a clawback mechanism that gave universities an incentive to introduce fees of up to a level of £15,000 a year. That was the report given to the Government. We have rejected those recommendations and proposed instead that we proceed as the statutory instrument describes. That involves the introduction of a fee cap of £6,000, rising to £9,000 in exceptional circumstances.

    http://www.publications.parliament.uk/pa/cm201012/cmhansrd/cm101209/debtext/101209-0002.htm

  • Peter Watson 2nd Feb '15 - 6:42pm

    Oops HTML fail!! 🙂

  • Bill le Breton 2nd Feb '15 - 6:46pm

    RC, as I understand it, what the universities are saying is that to reduce fees to £6,000 approximately £2b a year would have to be “ring fenced” under this budget heading and that this is ‘implausible’. They are not saying that it is implausible to find the £2b, but that it is implausible that this figure could be ring fenced for universities.

    So they have not condemned them in any way.

    Yet, we hear other parties ‘ring fencing’ other areas of expenditure. Are schools, the NHS and those interested in international development saying that such ring fencing is implausible?

  • Peter Watson 2nd Feb '15 - 6:47pm

    @RC “So consistent in fact that a whole load of universities have queued up to condemn them. So are you saying the universities are wrong?”
    I was suggesting that £6000 is consistent with the original coalition assurances about an appropriate level for tuition fees.

  • Peter Watson 2nd Feb '15 - 6:53pm

    @RC “If graduates had to pay higher tax rates post university instead of having a student loan, that too would be taken account of in affordability calculations, because that would affect their take home pay, wouldn’t it?”
    But is anybody making the same sort of bogus claims that mortgage lenders would ignore such tax payments?

  • It is fairly amusing to see the usual suspects in contortions in an attempt to deny that it is the richer graduates who would benefit most. What is less clear is that this it is necessarily the case that poorer graduates would pay more. The catch is in whether the £21 000 threshold for payment would rise with wages.

    As many graduates are all too well aware, Labour’s system starts payments at only a few thousand above the minimum wage and below the living wage. The Labour Party does not seem to have a problem with this.

    The effect on universities is that, unless Labour is signalling a massive cut to university funding, Labour’s proposals would bring them back under more direct central government control. Independence for universities was supposed to be one of the benefits of the new system

    I do not doubt that Labour could do this much to the delight for all young stockbrokers, management and financial consultants. If universities are not subject to massive cuts, there would be an increase in the ledger sheet for government expenditure, but taking university tuition off government expenditure and re-designating it as a loan was more an appearance than reality.

  • Little Jackie Paper 2nd Feb '15 - 7:03pm

    Peter Watson – But that’s kind of the problem isn’t it? Why stop your, ‘fundamental debate,’ at university funding. What we are seeing is the pay and go society as the end point of your debate. Why not for example have people take loans out for, for example, rural post offices (possibly from the big society bank). Why not have a very basic health service, supplemented by health loans? For that matter why not have loans for all post-16 education. Housing loans to replace housing benefit? The arguments being applied to HE could be applied to just about any area of public spending where loans/debt could replace other funding.

    Mr Roberts believes of the fees/debt system, ‘It is designed so lower-paid graduates never pay back anything like the full amount.’ I see no reason why that should be the case going forward. It is timely that the HEFCE funding letter was released last week (http://www.hefce.ac.uk/media/hefce/content/news/news/2015/Higher%20Education%20Funding%20Letter%202015-16.pdf). The numbers, year on year are fearsome, with interest at RPI+3%. This will be unsustainable simply by virtue of its size. And don’t forget that there will be postgraduate loans/debt to add in future. The only way I can see this being sustained is a considerably higher level of debt repayment, almost certainly from tightening the terms – raising the 30 year limit, reducing the threshold, more interest etc. All we are doing here is, in effect, taking an undefined sum from the 2033 budget creating a black hole for the future.

    It is probably true to say that without loans there likely would be severe cuts to HE. Fair enough as an argument. But that is political as a choice. The stark truth is that there is money for a triple locked pension, ‘winter fuel’ cheques, foreign adventures in North Africa, school meals….Was a continuation of the previous system really so unthinkable? I don’t know. But if this system ends up yielding a minimal saving the question is rather more than theoretical.

    I also fail to see the matter of principle here. There is an entirely reasonable argument that those of means should repay state support – that’s not at all unreasonable. But why should such pay and go principles apply to the young only. For example a lot of people got a right to buy discount and subsequently saw significant increases in the price of their assets – why should they not pay back their state support?

    Anyway, I’ll take my thumping now.

  • stuart moran 2nd Feb '15 - 7:17pm

    Martin

    Interesting you are using the Labour Government’s previous policy on the threshold for payback as a basis for criticising them – as far as I know they have not said they are going back to that

    Talking of policies prior to 2010 remind me what the Lib Dem’s policy was and what it is now?

    I feel that there are people posting here who think that we voters have had our memories wiped of what the Lib Dem’s told us prior to 2010

  • Little Jackie Paper 2nd Feb '15 - 7:27pm

    Peter Waton/Simon Shaw –

    It is worth pointing out that, whatever the politicking, the BIS forecasting for loans/fees was actually quite accurate. See para 8-13 at the full report here http://www.hepi.ac.uk/2013/12/17/the-cost-of-the-governments-reforms-of-the-financing-of-higher-education-an-update/. The forecast was well above £6,000.

    The problem is far more in terms of the supposed graduate premium and projections of incomes proving very volatile. The best thing that could happed in terms of the present fee system is a sharp increase in graduate earnings, but that is simply not on the horizon.

  • stuart moran: I am simply pointing out that those poorer graduates starting out under Labour’s system are paying even though they may not even be earning the living wage whereas under the new system similar graduates are not paying.

    In fact the future of the £21 000 threshold is a concern that applies to all parties, not only the Labour Party. If the threshold is allowed to slip then the article’s claim that the rich benefit at the expense of the poor would be very justified.

    Little Jackie Paper refers to a “pay and go society” which to me is regressive , in this case treating education as a kind of toll road. I am not remotely suggesting that the current system is right, just pointing out that it is a little less regressive than the system it replaced (and also that it is an annoying government accountancy trick).

  • Tsar Nicolas 2nd Feb '15 - 8:28pm

    This article is nonsense – putting the burden of debt on to individuals is just a further stage in squeezing the younger generation, making it almost impossible for them to get on the housing ladder.

    But what was the point of the reform? It can’t have brought in any more money for the Treasury -at least not yet. It seems to me that higher fees and higher debt without possibility of bankruptcy is just another way of funneling profits to the banks.

  • Alex Sabine 2nd Feb '15 - 8:42pm

    @ g
    “Even Vince Cable is on record as saying the current system is not paying for himself, although he, sickeningly, sees it as someone else’s problem.”

    I saw Vince’s comment and it did occur to me that – given the ongoing Lib Dem trauma and voter backlash over the broken pledge – it probably wasn’t the best subject for him to make light of!

    However, I will come to his defence on the substance of the issue…

    There is a ‘break-even’ point at which the new system costs the Treasury the same as the old one over the long run. A recent study by London Economics estimated that if more than 48.6% of the total loan value is written off, the new system will have a net additional cost.

    They estimated that under the current arrangements 39.6% will not be repaid. The government’s latest official projection is 45%, perilously close to the ‘tipping point’, having been revised up due to lower projected earnings growth.

    Clearly, then, there isn’t a lot of room for manoeuvre and as things stand there will only be a small long-term net saving to the Exchequer.

    However, the point Cable went on to make is that the actual repayment rate will hinge on the profile of graduate earnings over the next 30+ years, and small changes in the projections for earnings growth cause quite large shifts in the projected repayment rate. Since there is bound to be a wide margin of error in estimates of future earnings growth over such a long period, any claims to precision in the long-run accounting of this policy must be treated with scepticism.

    That said, good accounting practice requires projections to be made; and the current projections indicate that the government is straining at the limits of long-term cost neutrality. I would not be surprised if future governments respond by quietly freezing the earnings threshold for repayment in nominal terms for an extended period, which would have a similar effect to ‘bracket creep’ in the tax system. That way the proportion of write-offs would decline even if the projections for earnings growth don’t change. I should say that the stated intention is to uprate the threshold (I think in line with earnings growth) but it has been known for governments to honour commitments on indexation in the breach…

    It does beg the question of how much more progressive you can make this system without imposing an unfair burden on future taxpayers.

    It’s true that Labour’s proposal to reduce fees to £6,000, and thus reduce the total level of debt students will incur, will only benefit high-earning graduates – those who would otherwise have repaid most or all of their loans (plus interest) within 30 years. As Iain says, if lower fees aren’t to result in universities losing money, there will have to be an offsetting increase in the teaching grant which will need to be paid for by higher general taxation or by cutting other spending. Overall this hardly seems a sensible priority for a ‘progressive’ party. And if shadow ministers believe their own rhetoric that their new policy would be a great ‘progressive’ reform, then they are even more financially illiterate than I thought they were – in which case we should worry about more than just their higher education policy!

    If progressiveness were the sole criterion, it would have made far more sense to leave the £9,000 limit for fees in place but raise the earnings threshold for repayment while simultaneously hiking the rate. I’m not advocating this because it would increase the already high marginal effective tax rate faced by graduates – 41% for employees who pay basic-rate tax; but it would have shown that shadow ministers at least had a grasp of arithmetic.

    However, Lib Dems also need to recognise the limits of attempting to make the current fee arrangements more progressive by exempting an even larger proportion of graduates from the burden of repayment, or they will leave the system they are now defending holed below the water line. Efforts to improve the new system should really focus on things like encouraging mature and part-time students rather than (as Labour has done here) identifying largely imaginary problems and then failing to solve them.

  • Why is it that English students pay far higher tuition fees than the rest of the EU, it’s not as if they are only slightly higher? Also why does the alternative have to be a graduate tax? Wouldn’t it be so much better if we just all pay a little more on income tax than have young people lumbered with large debts?

  • This article is a perfect example of why all the mainstream parties are all the same and attack each other over the most minor differences.

    20 years ago higher education was free. 5 years ago it cost £3,000 per year, the parties are arguing over whether fees should have been doubled or whether they should have been trebled.

    It’s all the same really. It’s that right wing neo-liberal idea that everything must be turned into a free market. They’re essentially arguing how best to go about turning the higher education system into a US Style free market one rather than arguing about whether or not it should be turned into one.

    They all want to drive the country down the same road, they’re just bickering over who gets to drive. The debate has turned from which road should we drive down to where should we stop to get petrol. It won’t be long before there is no cap or the cap on fees is so high it doesn’t matter. Then they’ll be bicker about do we treble the interest rates on student loans? Do do we just double them and reduce the amount of earnings at which repayments have to start.

    Then with that job the debate will be what gets turned over to the free market next, the last remaining units of social housing or the NHS. I imagine when the lib/lab/con sell off the NHS the cost of major operations will be capped, for a while at least, too.

    Seriously, if you’re debating over £9,000 or £6,000 fees it’s essentially the same thing.

  • University applications are rising despite higher fees, the gap between the application rate among young people from the most and least advantaged backgrounds is declining, and government can fund the loans it is making by selling bonds at ultra-low rates. Equally the requirement for each course to wear its full cost on its face has created a new focus among university leaders on what they need to provide to attract and retain students. From this year the old caps on how many students universities can recruit have gone as well, meaning that the most attractive universities have opportunities for growth – and the rest had better up their game. Labour’s about-face on funding would return the system to central control.

    Social Market Foundation director, Emran Mian, writing in Prospect magazine: http://www.prospectmagazine.co.uk/blogs/emran-mian/what-will-labour-do-with-student-fees

  • Labour lied about tuition fees (top up fees) before the Lib Dems broke their pledge. As angry as I was, and am, about the pledge I will not trust a party that broke it’s word with a huge majority on this issue…

  • Peter Watson 2nd Feb '15 - 9:04pm

    @Simon Shaw “Are you seriously suggesting that anyone thought the upper limit was really going to be £6,000 pa in most cases”
    Quaint as it might seem to trust a senior Lib Dem, yes. Unless Cable and others were using the word “exceptional” in a special political way that means “unexceptional”. I don’t recall coalition politicians acknowledging the truth of scares tories about £9000 tuition fees being the norm. In the parliamentary debate linked above, Simon Hughes asked, “Under the fees scheme introduced by the Labour party, all universities ended up charging at the highest rate. One of the worries out there is that all universities might end up being allowed to charge £9,000. What assurance—what rules, what guarantees—can my right hon. Friend give that “exceptional” will mean “exceptional”, and that £6,000 will be the limit for most universities in the country?”. Cable’s response is discussed here: http://exquisitelife.researchresearch.com/exquisite_life/2010/12/an-exceptional-explanation-from-vince-cable-on-tuition-fees.html

  • Martin

    One of the reasons applications are rising is because there is very little alternative. What do you do when you reach 18? For many it’s a choice between, zero hour jobs, unemployment or university. The days when it was difficult to get into university are long gone, but once the job markets improve I think you will see a sharp drop off in numbers. If that does happen individual universities will fight to keep their share of students, just watch the fees drop then,

  • Little Jackie Paper 2nd Feb '15 - 9:42pm

    Alex Sabine – Highlights the problem though doesn’t it? This word progressive gets lobbed around by politicians of all parties but all too often it doesn’t work for the public at large. I seem to remember (happy to be corrected) that the abolition of the 10p tax band was part of a package that was overall progressive. Just pretty much no one noticed or indeed cared. £9,000 fees are not, ‘largely imaginary,’ if you are the one paying them, being priced out of housing etc. even if the spread sheet really is certain it’s progressive.

    I happen to agree with a lot of what you say. In many ways the break-even point is the key number here. If this doesn’t break even then all the political price was literally for zero.

    Like you I think that the variables are key here, but I can’t share your optimism that future changes will be in favour of the students.

  • @Peter Watson: “Quaint as it might seem to trust a senior Lib Dem, yes. Unless Cable and others were using the word “exceptional” in a special political way that means “unexceptional”. I don’t recall coalition politicians acknowledging the truth of scares tories about £9000 tuition fees being the norm. In the parliamentary debate linked above, Simon Hughes asked, “Under the fees scheme introduced by the Labour party, all universities ended up charging at the highest rate. One of the worries out there is that all universities might end up being allowed to charge £9,000. What assurance—what rules, what guarantees—can my right hon. Friend give that “exceptional” will mean “exceptional”, and that £6,000 will be the limit for most universities in the country?”. Cable’s response is discussed here: ”

    I think you’ve just summed up the entire political class there. They persuade you to vote for them by promising or making you believe certain things then when what you expect doesn’t happen they’re like: “what, you didn’t REALLY BELIEVE that when we said this that it would actually happen, did you?”, like it’s your fault for being so stupid to believe what you were told rather than their fault for deceiving you by saying it.

  • Peter Watson 2nd Feb '15 - 10:26pm

    @Simon Shaw “So you really thought that £6000 was going to be the upper limit, not £9000 as I, and everybody else I know, thought?”

    The upper limit was set at £9000, but we were assured that fees would only reach this in “exceptional circumstances”. Coalition politicians came up with the figure of £6000. Cable referred to “the introduction of a fee cap of £6,000, rising to £9,000 in exceptional circumstances” and Willetts stated, “We believe a limit is desirable and are therefore proposing a basic threshold of £6,000 per annum. In exceptional circumstances there would be an absolute limit of £9,000.” The impression was given that £6000 would be the norm (but I agree, that value is not a “limit”).

    However, if you are suggesting that you and everybody you know expected that nearly all tuition fees would be at that upper limit of £9000 then I am genuinely shocked, as this makes the statements by Cable and others appear dishonest.

  • Simon Shaw
    Cable, Willetts, and Clegg were all quoted in the mainstream media (Telegraph and Independent) saying fees would only rise above 6k a year in ‘exceptional’ circumstances.

  • Why is it that countries like the Netherlands have annual fees of around £1,500 and higher education in Germany is free, fees there scrapped by public consensus. We need to fund a higher proportion of our public services such as education and transport through our taxation system. Good public services are the hallmark of any progressive society and we must be prepared to pay for the good of all.

  • Peter Watson 2nd Feb '15 - 10:41pm

    @malc “If that does happen [sharp drop off in numbers] individual universities will fight to keep their share of students, just watch the fees drop then”
    I doubt it. The link between the level of fees and what a student/graduate actually pays is far from straightforward, and if an institution reduces its fees it will definitely receive less money but the student may end up paying exactly the same cost! I think that is one of the reasons coalition politicians misunderstood what the level of fees would be (though I now wonder if they did understand but were simply dishonest).

  • Michael B-G 2nd Feb '15 - 10:49pm

    @ Simon Shaw
    “an excellent article with good campaigning points against Labour”
    I completely disagree that any of this article should be used as campaigning points against Labour because any discussion of tuition fees is likely just to remind the voter that we made a pledge and we broke it. Also some will remember unlike Simon that when the new system was introduced £6,000 was going to be the norm and £9,000 would be exceptional.

    The article agrees with the Browne report in a way. One of the reasons that the Browne report rejected a graduate tax was that graduates who earned the most would pay more than others and this would be more than their education cost. If we were keen to ensure that those graduates earning the most paid the most then we would have rejected the new system and insisted that a graduate tax be introduced.

    I don’t understand why a system could not have been setup much like the current one, but instead of their being loans to individuals there would be a separate fund and graduates could still only pay the graduate tax when their earnings reached £21,000 and these taxation payments would go into the separate fund. As there would be no time limit on paying the extra tax the break-even point would improve. Wouldn’t that be the most progressive system?

  • Peter Watson 2nd Feb '15 - 11:26pm

    @Mr Wallace (8:52pm) “They all want to drive the country down the same road, they’re just bickering over who gets to drive.”
    I completely agree with this sentiment. I can’t say I support the Labour proposal which is simply regurgitating what Lib Dems and Tories implied in 2010 would be the situation anyway. However, Labour have successfully reinvigorated a topic that reinforces the impression that Lib Dems cannot be trusted. And we have a masochistic article like this in which it’s unsettling to see Lib Dems move from “scrap unfair fees” to “£6000 is not enough”.
    Regardless of the pros and cons of the new system, this issue gives Lib Dems no end of problems. Most importantly, it reminds voters of a broken promise in a campaign for no more broken promises, and this impacts how the party is perceived in every policy area. When it comes to tuition fees themselves, the party is now defending a policy which is very very similar to that of Labour and Tories, but Lib Dems are in a less principled position because they warned voters against what those other parties would do before adopting (enthusiastically it would seem) the same policy themselves. This in turn means that if Lib Dems claim that a system of increased fees is brilliant, they must explain why they used to have a policy (and still have an aspiration) to scrap fees?

  • Peter Watson 2nd Feb '15 - 11:39pm

    @Simon Shaw The only thing that I found in the least bit unexpected was that the fees at some “not very good” universities were set at £9000, just like those at Russell Group universities. I had expected some greater variation.”
    I suspect that coalition politicians thought that the scheme would introduce some sort of price-sensitive competitive market into the university sector, but overlooked the very murky link between the “price” and the “cost” of a degree.
    I’m not even convinced that increasing fees introduced a “consumer” or “value for money” mindset to students, partly because tuition fees are only a part (albeit now the larger part) of the loan a student accumulates, but also because if I were a student today I would be more concerned about the return on investing 3-4 years of my life and my future career than the pricetag,

  • Peter Watson 2nd Feb '15 - 11:53pm

    @Simon Shaw “One thing you have demonstrated clearly is that those who, last summer, seriously suggested Vince Cable to replace Nick Clegg, clearly hadn’t thought it through.”
    I have to agree with you there. Both have allowed themselves to be tarnished by coalition (which is especially heartbreaking since we were the only party that would have aspired and planned for coalition politics). In 2010 I thought Cable and Clegg were a “dream team”: I admired Cable’s intelligence and Clegg’s passion. I respect the independent thought and expression that Cable has shown, and much prefer him to Laws and Alexander, but he became the champion of the broken pledge and has always appeared a bit isolated. And Clegg seems like a triumph of style over substance: I am just irritated by the mannerisms and presentational techniques that originally impressed me, and his brand of soggy opportunistic centralism seems to lack any real meaning.

  • “Why is it that countries like the Netherlands have annual fees of around £1,500 and higher education in Germany is free, fees there scrapped by public consensus.”

    Supply and demand! The UK is a desirable place to study, hence why we get significant numbers of oversea’s students – both EU and Non-EU attending our universities. In the case of the EU students, they are currently paying £9,000 pa. If the tuition fee’s were to drop to £6,000 would that attract more students from the EU? and how would UK taxpayers feel, knowing they were subsidising non-UK students to the tune of £3,000 pa?

    No the way to tackle tuition fee’s isn’t to do away with then, but to find ways of making it easier for UK residents and taxpayers to benefit from favourable repayment terms which include write off. To my mind the CTC was the way forward, only some politicians thought it was unaffordable, yet could still find substantially more money for their pet vanity projects…

  • Mr Wallace “20 years ago higher education was free.”

    I think millions of tax payers would beg to differ; especially those who never went to university.

  • Simon Shaw
    “People keep citing £9,000. You know, £9,000 should be the exception not the rule. If you want to go through the £6,000 barrier you are going to have to jump through a lot of hoops. ”
    Nick Clegg, 5th December 2010, the Independent.

  • Iain Roberts original article stated that the people who benefit from Milibanks proposal are the wealthiest graduates, he quoted the example of a graduate who became a high paid city banker. However, thats playing with the truth, the people who will benefit are anyone that ‘s on a remotely decent wage. The BBC showed that for the lowest paid 30% of graduates there would be no change, the next 10% would benefit slightly and 60% would get the full benefit of the £3,000 a year reduction.

  • Does anyone commenting on here have a child with this debt? Mine have debt under the old scheme and I can assure you that their debts of £12000 and rising with interest is mind numbing. I dread to think what the debts of £27000 + maintenance loans taking it over the £40000 mark will make them feel when that reality sinks in after their three years and add the interest to that! I remember well the day we opened the letter with the first total amount, my blood actually did run cold. With the selling of the student loan book, I predict that the rules will change and the private companies will be allowed to call in the loans and I also wonder if the parents will be held to be accountable for them as well.

  • Alex Sabine 3rd Feb '15 - 3:10am

    @ Little Jackie Paper
    “This word progressive gets lobbed around by politicians of all parties but all too often it doesn’t work for the public at large.”

    Yes, it’s what my university politics lecturer would have called a ‘hooray’ word. Just call something ‘progressive’ and it is self-evidently marvellous; all further debate about its merits and demerits is redundant. In my view we should use it more selectively, more precisely, and with less of an assumption that it is the political equivalent of stardust. Too often its lazy usage is an example of how, as Orwell observed, political language is designed “to give an appearance of solidity to pure wind”.

    I used it several times myself when discussing Labour’s new tuition fees policy – because Labour politicians regard it as axiomatic that they and their policies are progressive and, by that yardstick, on any plausible definition of the word, reducing the fee cap is a clear failure. It might be defended on other grounds – although I would struggle to make a case for it – but the one thing it isn’t is progressive.

    That said, whether something is progressive or not – and whether that matters – is often in the eye of the beholder. And it depends crucially on the starting point. For example, it’s easy to grasp that reducing the fee cap is regressive in that the beneficiaries would be high-earning graduates specifically. But if the cap had been set at £10,000 and the proposal was to lower it to £9,000, the beneficiaries would be even higher earners, and so by the same logic that too would be a regressive step (indeed more so). Ditto if there had been no cap – as proposed by Lord Browne’s review – and a cap was later imposed. If the cap were to be raised to £12,000 alongside an increase in the earnings threshold for repayment, that would be impeccably progressive, yet I don’t imagine many Lib Dems would find it an appealing prospect.

    When the Lib Dems advocated scrapping fees they did so partly on the grounds that free higher education was a matter of principle, but they also seemed to believe it was a progressive thing to do. Yet a number of commentators who were not unsympathetic to the Lib Dems questioned how it could be progressive to transfer the cost of fees from graduates earning decent salaries (and on average significantly higher salaries than non-graduates) to taxpayers many of whom were on modest salaries. We now hear similar arguments from Lib Dems, but they were late converts to this way of thinking. The true justification for the old policy was not progressiveness, but universalism – which is a very different thing, and indeed often in tension with progressive aims.

    We see this tension more obviously in the welfare system. The old, pre-coalition child benefit system was universal. Child benefit now gets tapered away at earnings above £50,000 and removed altogether at £60,000. By conventional definitions this was a highly progressive reform – too progressive for many Tories who would have preferred the state to continue subsidising their more affluent voters. Yet I rarely hear Lib Dems proclaiming this marvellous progressive reform, nor do they seek to claim ownership of it as they do for more obviously popular (though arguably less progressive) policies like raising the tax threshold.

    The obvious explanation is that taking benefits away from someone (even the relatively well-off) is not likely to be welcomed whereas letting them keep more of their earnings is. Most voters probably care less about whether a policy is progressive or not and more about whether they and their families stand to gain or lose from it. More altruistic considerations may play a part too, but it seems implausible that Gini coefficients and distributional analysis and the heated political rhetoric that surrounds them ever escape the Westminster bubble and penetrate wider public consciousness.

  • Alex Sabine 3rd Feb '15 - 3:15am

    So there’s a fair chance Labour’s £6,000 tuition fees cap will ‘play well’ with the electorate – though it might backfire if it turns out they are merely kite-flying, or if the means of funding it proves unpopular or lacks credibility. But if it does play well, it will have nothing to do with whether or not it is progressive. Indeed, it will be in spite of its regressiveness. Plenty of regressive policies are popular, and progressive policies unpopular, including among left-leaning voters.

    The reason it might be popular is that it reduces the total amount borrowed by students, even though it does nothing to reduce the amount that most graduates will repay. On one level this is irrational: why worry about a particular chunk of debt that you are statistically unlikely to have to repay? But this misses the point that many students might aspire to be among the high earners who would have to repay it, and would (unsurprisingly) welcome the opportunity to dilute that cost by passing it onto the general taxpayer.

    There is also the more general fear of taking on large sums of debt, even though student loans have much less exacting terms than normal commercial loans. (It’s not quite true to say the new system is a graduate tax in all but name, but nor is it really a loan in the conventional sense; we could call it an ‘income-contingent graduate contribution’ if it wasn’t such a mouthful…)

    If fear of student debt were as pervasive as some people claim, we would surely have expected university applications to have fallen sharply following the trebling of fees rather than hitting a record high. But in so far as it is a problem, Labour’s policy response is the proverbial sledgehammer to crack a nut.

    As Martin Lewis writes on MoneySavingExpert.com: “The one positive of this plan is that cutting tuition fees is likely to reduce fear among those who don’t understand the system. Yet instead of spending billions to do this, why not spend £100 million on financial education for potential students and their parents to fight unfounded fears?”

    Lewis was too kind to point out that those who might benefit most from such financial education are the members of Labour’s team who came up with a policy that he aptly calls “financially illiterate”.

  • @ Anne

    Totally agree Anne. The level of the debt is staggering and now that the loans have been sold off – at a loss – to a debt management consortium by the Government, who knows what will happen? The Government actually shot itself in the foot because it has had to borrow such enormous sums of money to lend to the students in the first place – some of which will never be repaid. The implementation of the raised tuition fees policy has, in my view, been badly managed in my view.

    It’s also about what it is reasonable to charge students. As I have said on LDV before, students with around 10 hours tuition a week – and many have much less – are paying around £40 a lecture. One of my children currently at uni has only 7 hours tuition this term with a teaching term of only 5 weeks because of exams – and she is paying £3,000 plus interest for that!! Next term is not much better. The Guardian estimated in 2001, that some students would be paying £100 a lecture!

    It looks to me as if the Government looked at students with dollar signs in their eyes.. And presumably if we hadn’t had to bail out the bankers to the tune of billions there might have been a bit more money for higher education and students who have done nothing to deserve such crippling fees..

  • Tsar Nicolas 3rd Feb '15 - 9:00am

    One thing that posters and people in general seem to be blissfully unaware of is how much of a racket universities have become . They are generators of large amounts of cash for the professionally unproductive, the people like the chief executives who regularly award themselves and their minions massive pay awards far in excess of anything justified by productivity or input into the economic life of the university.

    The whole thing has become so ridiculous that in many universities lecturers are seen as ancillary to the existence and welfare of senior management.

  • PS I have to correct above post. My daughter has 7 weeks of tuition this term not 5.

  • Matthew Huntbach 3rd Feb '15 - 12:06pm

    OK, but how much did house prices go up under the last Labour government? I think it was by somewhat more than £27,000 for the average first-time buyer. Isn’t the stress caused by the extra money that has to be borrowed just to get somewhere to live equally an issue?

    What if we had just paid for universities by increasing government debt – it would STILL be the next generation lumbered with debt.

    If you want state subsidised universities, you have to be willing to pay the taxes that costs. When the people of this country voted for a Tory-dominated government in May 2010 – and a year later confirmed that’s what they wanted when they voted by two-to-one for our distortional representation voting system on the grounds it was good that it propped up the biggest party by giving them so many extra seats they usually can govern alone – they voted to say, no actually they weren’t willing to pay the taxes it costs.

  • Anne

    “With the selling of the student loan book, I predict that the rules will change and the private companies will be allowed to call in the loans”

    I think you are confused about the possibility of the government doing a securitisation on the current student loan book. It would not alter the contractual terms of the current loans (9% over 21k, RPI+3%, write off etc.).

    “and I also wonder if the parents will be held to be accountable for them as well”

    Again, the loans are on the basis they were taken out, so parents wouldn’t be in any ways involved.

    Judy Abel

    “now that the loans have been sold off”

    I assume you are talking about the old non-performing loans from one of the old systems (I can’t remember which one). That is in no way related to the current loans in operation.

    There are plenty of things that people have legitimate worries about, you don’t need to worry about things that will not happen.

  • stuart moran 3rd Feb '15 - 12:26pm

    Matthew

    But surely it is being paid for by borrowing?

    The students borrow this money and so does the government in order to give it to them. The payback will be less than lent in all likelihood so the debt will transfer to someone

    If the projections are right those who are paying back their loans will also have to pay for those that are not paid by others through Government debt?

    I said on the other thread that there should be a better mix of tuition fees, graduate tax and government funding. The current system seems to be defended by suggesting no one actually has to pay for it!!!

    I still believe education up to tertiary level should be substantially paid for by the Government, a policy I believe you used to support as a party but today I have been accused of being anti Lib Dem on another thread. Go figure!

  • Matthew

    “how much did house prices go up under the last Labour government? I think it was by somewhat more than £27,000 for the average first-time buyer. Isn’t the stress caused by the extra money that has to be borrowed just to get somewhere to live equally an issue?”

    Important point (though I think we disagree on the solution) the affordability of housing is much more to do with the cost of housing rather than student debt. I understand how some people worry about student debt but those I know who are trying to get (/have just got) on the housing ladder they are for more worried about the hundreds of thousands they will have repay which are far inflated beyond anything normal.

  • Matthew Huntbach 3rd Feb '15 - 1:49pm

    stuart moran

    I still believe education up to tertiary level should be substantially paid for by the Government, a policy I believe you used to support as a party but today I have been accused of being anti Lib Dem on another thread. Go figure!

    Yes, but how many times does the point have to be made? We don’t have a LibDem government, we have a Tory-LibDem coalition in which the Tories are by far the dominant party (due to the way the people voted and to the distortional representation electoral system which the people supported by two to one, after a campaign which said its distortion was the best thing about it).

    So what comes out of this government isn’t necessarily the LibDem ideal. Isn’t that rather obvious? If the people had wanted the LibDem ideal, they should have voted LibDem, but by and large they didn’t. 50% more voted Tory than LibDem, and many of the rest voted Labour who support the electoral system which turned that 50% more votes into 500% more seats.

    So, if you can’t get your ideal, you have to find a compromise. As you are now beginning to admit, the compromise is actually quite a lot closer in effect to the LibDem ideal than it appears on the surface.

  • Matthew Huntbach 3rd Feb '15 - 2:02pm

    stuart moran

    If the projections are right those who are paying back their loans will also have to pay for those that are not paid by others through Government debt?

    Yes, if the projections are right, a substantial proportion of the loans will be paid back through general taxation due to the generous write-off conditions. Isn’t that what people wanted in the first place – universities subsidised by general taxation?

    I said on the other thread that there should be a better mix of tuition fees, graduate tax and government funding. The current system seems to be defended by suggesting no one actually has to pay for it!!!

    Who is saying that? I’m not, and I can’t see anyone else saying it. It’s the opponents of the LibDems who seem to assume that university education doesn’t need paying for, as they scream abuse at the LibDems while saying nothing about how THEY would pay for it. Sure, if it didn’t have to be paid for, the “pledge” could easily be kept. But as it does have to be paid for, it’s not so easy – keeping to the pledge either means substantial extra general taxation (which the Tories would never agree to) or substantially more cuts above the cuts we are already seeing from this government (which would result in more screaming at the LibDems for agreeing to it, and probably Tories blaming the cuts on “oh, sorreee, we had to do it so those LibDems could keep their pledge, don’t blame us”).

    In effect what we’ve ended up with now IS a mix of tuition fees, graduate tax and government funding. Maybe not the best one, but if you want more government funding, you have to say where the taxation for it is coming from – something noticeably absent from all those anti-tuition fees protestors. Personally, I’d like to see it all paid for by much bigger inheritance tax, but how many of those anti-tuition fees protestors would melt away at that idea, seeing as mostly they seem to be posh types looking forward to a big inheritance dollop of cash.

  • Julian Tisi 3rd Feb '15 - 2:03pm

    An excellent article, Iain and it’s only right that we call out Labour and their sheer hypocrisy over tuition fees. The core point is that while it was clearly wrong to break our pledge the policy we helped introduce is much fairer than people think. It’s delivered more money to universities and done so without increasing the burden on general taxation. Most of all it’s progressive – the poor pay less and the rich pay more. Trouble for us as a party is that the sheer hatred and bile thrown in our direction (understandably, you might say) has obscured all of this. Labour would be seen as hypocrites if after all their bile they refuse to change the system they’ve pilloried as being unfair, so they’ve come up with this solution which actually makes it less fair, in the hope that people won’t understand.

  • Matthew Huntbach 3rd Feb '15 - 2:06pm

    Psi

    Important point (though I think we disagree on the solution) the affordability of housing is much more to do with the cost of housing rather than student debt

    Er, yes, but you seem to have missed my point. Isn’t it a bit odd to get worked up about the extra debt put in young people due to tuition fees, and not to worry about the much bigger debt placed on them due to hugely higher house prices? Labour let house prices rip and seemed to be “intensely relaxed” about it.

  • stuart moran 3rd Feb '15 - 2:24pm

    Matthew

    Hello again

    I never said you said it

    Most justification seems to be focused on who is not paying the fees rather than who is, as though graduates should aspire to less than the average wage!

    I have seen many times written ‘most won’t have to pay it back anyway so it is not really a debt’. Some people will be hit hard by this in future years

    The problem is really that this whole policy is smoke and mirrors. I could accept that if the coalition didn’t go on so much about ‘burdening future taxpayers’ when they probably will be

  • @Stuart Moran
    I agree about the ‘smoke and mirrors’ – it is hard to disentangle all the factors – and with David Wright that this is not just about the tuition fees as there is the maintenance to repay as well. Student accommodation is also very expensive and ‘better’ accommodation is available for students with more money instead of all students being in similar housing.

    But I just want to reiterate the point that whereas a student starting university in 2005 paid £1,000 in annual fees, ten years on students are paying £9,000 – nine times more – plus up to 6.3% in interest – four times more interest than the rate when the loans scheme started. This is not reasonable or proportionate. I agree with students paying fees certainly, but not in students being exploited.

  • stuart moran 3rd Feb '15 - 3:49pm

    Matthew

    Just saw your post from earlier

    I wasn’t challenging the compromises made in coalition

    It seems a lot of posters on here are so supportive of the coalition that they see any criticism of coalition policies as being anti-LD
    It is that which is worrying and something I think you would agree with me on is not at all the same thing

  • Peter Watson 3rd Feb '15 - 5:22pm

    @Julian Tisi
    “It’s delivered more money to universities and done so without increasing the burden on general taxation.”
    Has it delivered more money or simply replaced previous government funding?
    So far government has paid the fees – graduates have not started repaying yet – so surely that has come from general taxation? And some predictions for the future suggest it could end up being as expensive as the previous system.
    Most of all it’s progressive – the poor pay less and the rich pay more.
    Is that based on the assumption that everybody takes out the loan and repays the scheduled instalments? Students from the wealthiest families with the highest salary expectations (mini Cleggs and Camerons) can save a lot of money by avoiding the debt completely. Graduates with the highest salaries can repay early without penalty and pay less than their peers on lower salaries.

  • Julian Tisi 3rd Feb '15 - 5:44pm

    @Peter Watson
    Previous government funding was simply unsustainable given the huge increase in the number going to university which had not been accompanied by a similar increase in funding. So no, it hasn’t replaces previous government funding because it wasn’t there.

    As for the new system being more progressive than the old are you seriously disupting this?! I’m basing this conclusion on the simple fact that the starting rate is much higher than before and you pay 9% of your earnings above that, limited by the total cost of your course (or £9000 a year whichever is the least). The rich pay much more than they did under the old system and the poorer graduates pay less because of the higher threshold. It’s not rocket science – this is clearly a progressive system.

    Yes, you can repay early – but if you do, you don’t “avoid the debt completely”, you repay the debt completely! Yes, you would avoid the interest that would have been payable – but interest reflects the time value of money (£1 today is worth more than £1 some years into the future), so although the monetary value you pay may be less than someone who pays over time, you’re not comparing like with like.

  • stuart moran 3rd Feb '15 - 5:49pm

    I find the whole arguments about tuition fees so sterile and the Lib Dems under Clegg have lost a real opportunity for differentiation

    Higher Education costs the same no matter who pays – although we should ask how paying massive salaries to pretty woeful VC actually can be justified but that is another question

    I favour full payment from general taxation and availability at any time in life. This means the whole population pays. The other alternatives are linked to the recipients of education paying via a loan or a graduate tax

    One argument you here against general taxation funding is that it is a tax on those who don’t go to university. This is a typical Tory excuse for not using taxation. Surely the problem here is that we still do not have access to education on ability and need to change that as a priority

    I have no kids and don’t drive, also I have not been to a doctor in over 10 years – I still see the value of my contributions to these and am happy to pay for those that need them – the same for HE!

    The other option is to get those that receive the education to pay themselves – I fundamentally disagree with this on principle (one that I used to think the LD believed in as well)

    My own considered view now is that we should have a mixture of loans and publicly funded education – as exists on the continent – with fees are around £1-2000pa and the rest is made up from general taxation. This may mean some raising of some taxes – or perhaps even increased borrowing (is education an investment in our country’s future – I think so). In order to reduce costs then there should be some rationalisation of HE and better use of other forms of tertiary education

    The current HE system is funded from taxation/borrowing and the world hasn’t collapsed – it will be years before there starts to be any meaningful payback and even then it may not be the case. In the meantime we have burdened young people with a debt of £27000 that will sit there all their lives whilst those who voted for it have a debt for the same education of 0!!

  • @Matthew Huntbach
    “if you want more government funding, you have to say where the taxation for it is coming from”

    You’re inventing a problem that doesn’t really exist. Graduates collectively make a huge extra contribution to the tax system compared with non-graduates :-

    http://www.bbc.co.uk/news/education-27763112

    According to this, a female graduate with a 2:1 will generate £264,000 in extra government revenue during her lifetime. A male graduate with the same degree will generate an extra £221,000.

    I see no reason why HE should not be substantially financed through general taxation. We already have – and have always had – a “graduate tax” in the form of the extra contributions noted above. The idea that higher education might actually be a good investment for the country doesn’t seem to occur to many posters here.

  • stuart moran 3rd Feb '15 - 6:34pm

    If we fund it through general taxation then the rich will contribute more than less rich – assuming they pay their taxes. Some taxes may need to rise but we should be ready to do that

    The people who will lose out in theory are the rich who did not go to university but I am prepared to see that happen – let them be aggrieved!

  • @Stuart Moran

    Completely agree with your conclusions.

  • Peter Watson 3rd Feb '15 - 6:54pm

    @Julian Tisi
    “So no, it hasn’t replaces previous government funding because it wasn’t there.”
    I thought that at the same time as increasing the cap on fees the government cut teaching grants?

    As for the new system being more progressive than the old are you seriously disupting this?!
    You did not compare the two schemes, you simply stated that the new system is “progressive – the poor pay less and the rich pay more” so I pointed out how the richest can pay less than those with less wealth and lower incomes.

    Yes, you can repay early – but if you do, you don’t “avoid the debt completely”, you repay the debt completely! Yes, you would avoid the interest that would have been payable – but interest reflects the time value of money (£1 today is worth more than £1 some years into the future), so although the monetary value you pay may be less than someone who pays over time, you’re not comparing like with like.
    I did not claim that those repaying the debt early were avoiding it. The wealthiest families with the resources to pay up-front can save money – on a NPV basis – if they do not take out the loan and their children go on to have high incomes. Similarly, because the government chose not to implement penalties for early repayment, those with the highest salaries and the funds can repay early and pay less – again on a NPV basis – than many of those earning less. In the previous scheme the value of the loan did not increase in real terms but it does under the new scheme so the incentive to repay early is significant.

  • Peter Watson 3rd Feb '15 - 6:56pm

    @stuart moran
    Tut tut. Sometimes you sound like a 2010 Lib Dem. The villagers will be chasing you off with pitchforks. 😉

  • stuart moran 3rd Feb '15 - 7:01pm

    Peter Watson

    According to RC I am ‘anti-Lib Dem’

    I have now realised there a group of people who are Coalitionists – those that will defend Coalition policies as if they were Lib Dem ones, although as Matthew H will say it is 85:15 Tory

    These people, who include LD PPCs no longer have time for old-fashioned thinkers like us

  • @Julian Tisi
    “Yes, you would avoid the interest that would have been payable – but interest reflects the time value of money (£1 today is worth more than £1 some years into the future)”

    You’re describing zero real interest there (i.e. interest = inflation), which is what was charged under Labour’s system. The current system charges positive real compound interest up to 3% pa. This highly significant part of the system (Einstein called compound interest the most powerful force in the universe) is little discussed.

    Given the huge exercise in sophistry being carried out by Lib Dem apologists over tuition fees at the moment I’m sure someone will like to have a go at explaining why positive real interest is so much better for hapless graduates than zero real interest.

  • Matthew Huntbach 4th Feb '15 - 11:49am

    stuart

    “if you want more government funding, you have to say where the taxation for it is coming from”

    You’re inventing a problem that doesn’t really exist. Graduates collectively make a huge extra contribution to the tax system compared with non-graduates :-

    http://www.bbc.co.uk/news/education-27763112

    According to this, a female graduate with a 2:1 will generate £264,000 in extra government revenue during her lifetime. A male graduate with the same degree will generate an extra £221,000.

    Sorry, but this is nonsense. At the moment, the money raised by taxes does not pay for subsidy of university education. That is why if you wanted to pay for university education through taxes now, you would have either to increase taxation, or to cut spending elsewhere, or to increase government borrowing. So in what way does this issue of which of these ways is to be used to pay for it “not exist”?

    Sure, you can say we borrow now in the hope it will raise money later. In effect that is what is being done, since the student loan system is really disguised government borrowing.

    I see no reason why HE should not be substantially financed through general taxation.

    Yes, and I agree with you. However, we face the problem that the general population do not, or at least we are told they do not. Whenever I raise this issue I am told I am being unrealistic, because if any party went into an election saying it wanted to substantially increase taxation, it would be political suicide. We have already seen how the tinsy-winsy suggestion of taxation on very high value property has been shouted down, yet it seems to me that given the substantial amount of money that sloshes around in property and is passed from one person to another, at the expense of squeezing earned income, we need much more in the way of property taxes.

    That is the point I am trying to make – people may be reluctant to accept extra taxation, so the case needs to be made for it by pointing out what happens when there is not enough money raised in taxes to pay for the government services people say they want. If people won’t accept the higher taxation, something has to give. This time what gave was direct subsidy of university tuition. What will it be next time? Why do you agree with the right-wingers who say we can’t talk about such things and who argue against me trying to raise them?

  • >I see no reason why HE should not be substantially financed through general taxation.

    I was under the impression that non-UK students, who pay fees, make a significant funding contribution to our H.E. system. Hence any reform, such as increasing the level of funding from direct taxation whilst reducing the level of fee’s, has to address the additional funding shortfall that will be created, due to the fee’s EU (non-UK) students pay automatically being reduced.

    In this respect I think we have been too weak on Scotland et al. in not getting them to be good members of the EU, so yes you can have different tuition fee’s (including zero) to England, but they apply to all students from the EU including England…

  • Matthew Huntbach 4th Feb '15 - 12:11pm

    stuart moran

    It seems a lot of posters on here are so supportive of the coalition that they see any criticism of coalition policies as being anti-LD. It is that which is worrying and something I think you would agree with me on is not at all the same thing

    Well, there is a language issue here. What do you mean by “supportive”? One definition of “supportive” would be “accepting that the coalition had to be formed due to the reality of the situation following the 2010 general election, and accepting that its policies would not be those which are the Liberal Democrat ideal, and believing that the compromises reached are about what could be expected under the circumstances”. Another definition would be “Believing the policies coming from the coalition are the best policies that could be enacted regardless of the Parliamentary balance”. That is, do you mean “supportive” as in accepting it is a compromise situation, or “supportive” meaning it’s what you would want to do even if you did have complete control of the government?

    Labour criticism of the coalition deliberately mixes up these two very different definitions. However, a lot of the problem is also due to the way the Leader of the Liberal Democrats and those surrounding him also give the impression they are “supportive” in the second sense and not just in the first. This is the reason that though I have retained membership of the party, I have dropped out of activity promoting it. I cannot do that while the party’s leader is in this way undermining the defence I am willing to give it.

    It seems to me to be perfectly possible to accept the coalition as a necessary compromise given the parliamentary balance in 2010. and yet also to say its policies are not ideal, and that if the Liberal Democrats had more MPs and the Conservatives less, the compromises would have been more to the Liberal Democrat ideal, and so better. It seems to me that someone who has the job of Leader of the Liberal Democrats has a DUTY to promote that position.

    It seems to me that anyone who is pro-LD should be critical of the coalition’s policies, since they are of necessity due to the Parliamentary balance more to the Conservative way of thinking than to the Liberal Democrat way. Why is it that so few people seem capable of seeing this point?

  • stuart moran

    “I have now realised there a group of people who are Coalitionists – those that will defend Coalition policies as if they were Lib Dem ones, although as Matthew H will say it is 85:15 Tory”

    There are also those who respond to criticism of the coalition that is just poor criticism. There are a number of people who make criticisms that focus on symptoms not the causes, there are those who suggest central government provision as the solution to everything.

    It is perfectly possible to think that the coalition has many things wrong and so do many of those who criticise them.

    Online discussions are often poor at capturing a more nuanced details of positions. Sadly many discussions on LDV feel as if it is a discussion of the two largest parties in the 1980s. There are many liberal responses that people seem to attack as “tory” or “labour” but if they were dug slightly further into there is probably a liberal solution in there somewhere. Things don’t tend to get that far, too little time and less than ideal medium.

  • stuart moran 4th Feb '15 - 2:41pm

    Psi

    No, I am convinced there are lots of people who are Coalitionists ( including the leader) who are actually happy to work with a right wing party

    I would probably be the same with Labour to be honest as I would rather be with a left (if they are in reality) wing party

    What it hides is the fact that the LD are essentially two parties that only stay together because of FPTP. Clegg would easily work with a Cameron, and a Milburn in a right wing liberal party whereas I could see Farron, Miliband and Cable on the other side. Danny Alexander would be the last kid to be picked on the touch line.

    All Artie’s are coalitions aren’t they but I am more interested in the effect on LD because I always voted for you

  • Peter Watson 4th Feb '15 - 3:50pm

    @Matthew Huntbach “anyone who is pro-LD should be critical of the coalition’s policies, since they are of necessity due to the Parliamentary balance more to the Conservative way of thinking than to the Liberal Democrat way”
    Bullseye!
    That cuts straight to the heart of the matter, and I think that Lib Dems – especially the MPs – should get that printed on to T-shirts.

  • Does the Lib Dem Party no longer believe that university education should be funded out of general taxation?

  • stuart moran 4th Feb '15 - 5:23pm

    Phyllis

    You may ask ,I have tried to find this out but there is no answer – even Simon Shaw who seems to be an expert in Labour policy but seems less clear on that of his own party’s

  • Peter Watson 4th Feb '15 - 11:33pm

    @Phyllis “Does the Lib Dem Party no longer believe that university education should be funded out of general taxation?”
    I believe that official Lib Dem position is to accept the current level of fees but to still aspire to abolish them. So in Iain Roberts terms, Lib Dems aspire to a far bigger “tax cut for the rich, paid for by the poor”, and Labour’s plans to cap fees at £6000 is simultaneously too low, too high, and the same as senior Lib Dems told us it would be 4 years ago. Simples.

  • A simple solution.
    1. Educate people at schools to the old S Level- most jobs do not need an academic education above this level. I would suggest that the old S Levels/ Scholarship exams in say , Latin French and History provide a better education than many arts degrees from less universities. After Churchill, Lloyd George and most of the senior military staff of WW2 did not have degrees!
    2. Enter the workplace and undertake undergraduate study through night school, Saturday and short spells for most degrees.
    3. Have a few very good /specialist universities such as Oxbridge/IC / LSE /medical schools where people leave home .
    3. Many arts degrees of the lesser universities have a fraction of the course work and time with tutors which occurs at Oxbridge and are probably not worth the debt.
    4. If people do well with their undergraduate degrees , then they can undertake a masters at atop university and move away from home.
    5. Historically some engineers would complete a degree at a poly and then undertake a 2 year degree at Cambridge/IC or another top university.
    6. The top 50% of the Royal Engineer officers at Woolwich Academy would then undertake a 2 yr degree at Cambridge , the RN had a similar policy.
    7. Many of out top engineers left school at 16 or 18 , undertook apprenticeships and study at night schol for London U external degrees ( B Wallis ) or for the various Chartered Engineering Part 1 ( HND level ) and then Part 2 ( degree level ). It was said the Mechanical engineers Part 2 exam was tougher than a degree as it was set by the top practising engineers in the UK , if not the world.
    8. Similar evening study for a degree level exam could be undertaken for chemistry, physiotherapy, law,( solicitor or barrister), accountancy, surveying, insurance, art and banking. Ghandi and many others studied at bar school to become a barrister, they did not go to university. Historically many people studied for a degree and then went to law or bar school.
    9. In many countries one studies at the local university unless they do not have the capability or there is a reason to travel away to a very good one.
    10. Much of the reason for the university calender is that there were only 2 universities in England and 4-5 in Scotland and the vast majority of people had to travel away to study. Obviously travel before railways was very slow.When London , Manchester , Liverpool and other universities were founded in the 19 C they had evening schools and many students live at home.

  • Alex Sabine 5th Feb '15 - 6:03pm

    @ Peter Watson
    “… Lib Dems aspire to a far bigger ‘tax cut for the rich, paid for by the poor’, and Labour’s plan to cap fees at £6,000 is simultaneously too low, too high, and the same as senior Lib Dems told us it would be 4 years ago. Simples.”
    😉

  • Has our conference actually abolished our policy to abolish tuition fees? We found £billions over night for the banks. Where there is a will there is a way. The whole principle of the 1945 settlement was that we were in it together as a nation, that all received benefit from the social systems and all paid in, according to their ability to pay. Beveridge himself is reported as saying that a system for the poor would quickly become a poor system.

    Other European Countries have managed to retain free higher education systems. We should start by looking at the vast amount of waste within the Universities.

    Frankly I don’t know what the Universities squander the money on. They give the students virtually no tuition, have large lecture groups, little individual attention on many courses and pay many of their teaching staff less than school teachers. If schools can provide higher salaries and 25 hours a week tuition, in groups no bigger than the mid 30s, off £4500 a year it is difficult to see why courses out side of the resource intensive stem subjects need to charge so much.

  • @Julian Tisi – as a candidate in the last general election you committed to the eventual abolition of tuition fees. Have you changed your mind?

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