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Critics of the graduate tax are shouting at straw men

Jim Dickinson responds to the legions of public critics of Owen Smith's plans for a graduate tax, arguing that there are just as many problems with the current fees and 'vouchers' system.
This article is more than 7 years old

Jim is an Associate Editor at Wonkhe

It’s an unpleasant sight.

An unholy alliance of vice chancellors’ bag carriers and Corbynistas have been out in force for a couple of weeks now, responding to a speech from Labour leadership candidate Owen Smith by arguing that a graduate tax is really no better or no different from the current undergraduate fees system.

They’re right, in a way. I should start by saying something really clearly – from a graduate repayment perspective, the current system is very similar to a graduate tax. You can in fact design a whole graduate tax system that for graduates is almost totally identical to the current system.

But beyond that, critics of a graduate tax end up creating the enemy they want to attack. By simplifying or ignoring a graduate tax’s features they are providing a smokescreen to protect the inexorable march towards the financialisation of higher education.

What unites us

We can all agree on some things. No one wants students to pay at the point of delivery. The student finance regime probably ought to cover living costs. And we ought to have a scheme that encourages lifelong learning, part time study and progression into postgraduate study.

Meeting those challenges involves finding ways for rich graduates to contribute more than poorer ones, and not paying back until you can afford it. On these points, the free education mob, the grad tax mob and the current system mob all agree.

But it’s not just the graduate repayment regime that matters. Just as important is where the money goes; how efficient that process is; what it gets spent on and how useful (in the very broadest sense) that investment in higher education is to the individual or society.

And it’s on those matters that the critics of a graduate tax tend to go silent.

“Well”, they say “with tuition fees you know how much you’ll pay (back) in debt”. Recent anger from new graduates not realising they were building up interest on their first year fees in their second and third year rather destroys that argument.

But crucially the government’s outrageous exempting of student loans from consumer credit regulation means they can (and, it appears, will) change the terms at will without proper parliamentary scrutiny. The important thing about student loans isn’t that they are ‘in reality’ a graduate tax, it’s that their advocates sell the loans as predictable lending and then shut their eyes and put fingers in ears as the government fiddles with the terms anyway.

“OK”, they continue, “but at least the money follows the students”. This is an age-old argument of supporters of school voucher schemes – they’re preferable because instead of revenues going through government (who will spend them on ministerial frippery), they end up on the “front line”.

The fact that this guarantees that the richest institutions will get richer (because the poorest HEIs have higher support costs per student) is ignored. The fact that this”‘front line” in a given higher education institution involves a cross subsidy for other courses, access measures, executive pay and arguably inefficient governance and management structures isn’t the point.

Ask any university to show a student where their fees go and they crumple into a ball of complexity and excuses. And the long term impact of the voucher argument is an own goal – because convincing citizens that politicians and government aren’t to be trusted with decisions about where public money should be spent is deeply corrosive.

Vouch for me

Funding by voucher has other downsides. The people in universities that make calls about programme innovation investment tend to look back at what sells well, not forward at what society needs. It encourages HEIs to balance the books by flooding the market with cheap-to-teach degrees that the labour market doesn’t need, cheer-led on by the old left on the romantic idea of “education-for-education’s-sake”.

And vouchers put power in the hands of open day attendees much more than it does for current students or graduates, with shiny buildings, posh prospectuses and unhelpful levels of confidentiality and competition.

Vouchers’ defenders invent other problems. “But who would decide where the money is spent”, they wonder, as if there are literally no other ways of deciding how to spend money than through individual transactions. “But graduates who already have loans would pay it”, even though no proponent has ever suggested as such. “But they wouldn’t start paying this tax for years”, they crow, pointing out the upfront investment required whilst ignoring the unsustainable student debt mountain that’s piling up and will cause terms and conditions changes to student loans in a few years anyway.

The point missed by many of its critics is that there are all sorts of ways of implementing a graduate tax. There are types that protect the contributions raised from graduates into a co-operative trust that can’t be meddled with by ministers. There are types that can invest in diversity of provision, or widening access, or geographical cold spots. There are ways to drive efficiency and increase quality and reduce cross subsidy.

And perhaps most importantly, a graduate tax has a totally different psychology to that of debt. In my later life I’m making a contribution back towards current higher education – feeding forward, rather than struggling to get the noose of debt off my neck. Importantly, a graduate tax could spur interest and involvement from successful graduates in the continuing success of higher education, rather than the current resentment prompted by the psychology of debt.

Of course, Owen Smith will (probably) never be Labour’s leader. The pragmatism of triangulation is out of fashion and as a pitch for the “youth” vote, Smith’s package completely misreads how cool it is currently to be idealistic, not accurate. It’s a shame, because with only “Free Education” as the alternative, higher education will continue its march slowly and relentlessly to a financialised system – where the Russell Group gets fund managers to do bespoke student loans for bankable boys, and the government has endless rows about the usefulness of the subsidies they still have to put into media studies in former polytechnics.

3 responses to “Critics of the graduate tax are shouting at straw men

  1. There’s just one more point that you’ve not covered and it would be interesting to get your take on it: what happens when a graduate moves to a different country on graduation?

    HMRC is only responsible for raising taxes from those living in the UK for more than 90 days per year. Effectively a graduate who moves abroad would not be responsible for paying the graduate tax; whilst I can’t see graduates acting like Starbucks and moving around the world in droves to avoid tax it would certainly seem unfair on those that stay behind and pay for the education of those who leave the country.

    When the graduate tax was fought over a few years back we also had the sticky issue of EU citizens having to have the same opportunities as UK students for finance but with a bigger probability of them leaving and not paying UK tax.

    It was (I believe) the above two issues that knocked the graduate tax on its head and not any of the other issues in the article, with us leaving the EU one of those has now been removed but the possibility of tax avoidance by moving abroad still seems like the most intractable obstacle to any graduate tax.

    1. This is what my partner always asks, because she’s from Ireland where a significant proportion of graduates go to work abroad. I don’t know the figures, but I’d assume that enormous changes would have to happen in the UK before the money lost to the exchequer because graduates are working abroad. In the most mobile professions – such as the medical professions – the number of UK-trained professionals who end up working abroad is dwarfed by the number of overseas-trained professionals who come to work in the UK. I’d be pretty surprised if there are any areas where graduate mobility vs the cost of education and training works out as a net cost to the UK.

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