Student finance has been back in the newspapers this week, with the government being criticised for increasing tuition fees and scrapping maintenance grants. As part of his re-election campaign, Jeremy Corbyn seized the moment to restate his commitment to free education, promising to scrap tuition fees and cancel student debt. Much to my horror, his opponent Owen Smith, responded by proposing a graduate tax, a bad idea that refuses to die.
When a graduate tax was being considered by those close to Gordon Brown in the early noughties, it had a clear a selling point to students. At the time access to tuition fee loans was means-tested, meaning that some students had to pay for tuition at the point of delivery. The graduate tax was a route to avoid this, with all students paying for their higher education after graduation. However, it proved not to be the only option, with the post-2012 system making tuition fee loans available to all students. As a result, in terms of taking payments, the current tuition fee regime is identical to a graduate tax; students don’t pay for university, graduates do.
The attraction to graduates was removed even earlier. In theory, a graduate tax is preferable to tuition fees, because graduates don’t have to worry about earning enough to meet their monthly student debt repayments as they will only ever be asked to pay back a proportion of their income. Of course, since the very start of English tuition fees, repayments have been income contingent, so removing the danger that non-working or poor graduates will be stuck with student debt bills they cannot afford to pay. Again the lack of any practical differences between the current student finance regime and a graduate tax is extraordinary; debt repayments are taken through PAYE as if they were actually a tax.
These tweaks to tuition fees have lessened the force of one of the strongest arguments against a graduate tax: that students could avoid paying simply by leaving the country. The current system’s reliance on HMRC to collect student debt makes it vulnerable to the same problem, as the ongoing problems surrounding collecting EU student debt demonstrates. That said, at least those graduates have an outstanding debt that Student Finance England can seek to collect. Unless all students could be made to sign a legally binding contract to tithe their future income, the government would have no recourse to force those working outside the UK to pay their graduate tax, nor any ability to backdate.
The signature benefits of a graduate tax may have been removed, but at least students would pay less, right? Wrong! The choice between a graduate tax or tuition fees, is not whether students should pay for their higher education but how this contribution should be collected. If Owen Smith simply wanted students to pay less then he could have used higher public investment to reduce tuition fees, make the repayment terms more generous or reintroduce maintenance grants.
Indeed, many students would pay much more under a graduate tax. It’s very hard to see anyone’s monthly contributions being significantly reduced given that low-income and non-working graduates are already protected by the £21,000 threshold. But removing a nominal debt amount from the calculation means that Student Finance England can keep collecting from richer graduates long after they’ve paid back the cost of their own higher education. That’s fairer but in an unusually brutal way for what is pitched as a moderate alternative to free education.
Plus ca change, plus c’est la meme chose
Leaving aside giving poorer graduates a sense of schadenfreude at their richer peers’ misfortune, the arguments for introducing a graduate tax therefore must rest away from the benefits for students or graduates – it must positively change the sector more fundamentally. It doesn’t.
For starters, a graduate tax could not reverse marketisation. The roots of marketisation are not tuition fees, as universities compete on the quality of the education and facilities provided, rather than price. Unless we want to move towards a system where students either go to their local higher education college or a highly selective national centre of excellence, students shopping around for the university that best suits them is simply inherent to the system. Less disruptive tweaks such as the reimposition of Student Number Controls would be better at reducing the cutthroat atmosphere that has descended over student recruitment.
It’s not just that a graduate tax is no upgrade on tuition fees, it also comes with all the downsides of relying on general taxation. Even though a graduate tax still involves students making a direct contribution to their education, this money would be centrally collected and distributed by the government. As someone who has personal experience of making sense of ministers’ erratic decision-making this is an idea that sends a cold shiver through my spine.
For all the flaws of tuition fees, at least the money follows the students. Under a graduate tax the money would quickly be tied to whatever bright idea has caught Whitehall’s attention that month. Worse, it’s hard to see why a future government wouldn’t succumb to the temptation to raid graduate contributions to support its wider educational policy priorities. Would the sector be able to stop a government from earmarking revenue from the ‘graduate tax fund’ for school-led aspiration-raising activities or in-college careers guidance?
But the worst thing about a graduate tax is that it is simply pointless. The true attraction of tuition fees for successive governments is that they hide the majority of the government’s spending on higher education. Every penny that universities receive in tuition fees comes from the taxpayer through state-backed loans, but only the estimated proportion of the student loanbook that will never be reclaimed from graduates has to be declared on the government’s accounts.
It was only keeping student finance off the books that saved universities from the swingeing cuts that have devastated further education. Under a graduate tax the government would be forced to declare this spending in full because accountancy rules do not allow it to factor-in future taxation revenue in the same way it can for loan repayments. If a government ever did scrap tuition fees, public finances would be no better off whether they introduced a graduate tax or embraced free education.
Ever since New Labour decided to charge students for their higher education, there have been those on the Labour soft-left that have sought to triangulate between the ‘extremes’ of free education and tuition fees. The reality is that a graduate tax is a false escape route for those too indecisive to decide, or too cynical to admit, whether they want to charge students or not. The choice really is between free education or tuition fees – this is one debate where there is no third way.