Following the largely unsurprising news that the Labour Party is likely to scrap its 2019 policy of abolishing tuition fees, now is the time for a maturing of the debate around higher education funding.
In today’s economic crisis, and with free education now off the table for Labour at least, it is vital that any new policy is fiscally viable, understandable and most importantly fair for both students and the sector.
A progressive system
The fundamental principle of any fair and progressive taxation system is that those who earn the most, pay the most in tax. Surely, therefore, it is logical that a priority for any equitable HE funding system is to ensure those who financially benefit the most from their education, should pay the highest returns. Put another way, students who earn the most once they graduate should be taxed the most on the financial benefits they individually receive.
Rather than simply paying back the cost of their own higher education, a fairer system would see the highest earners continue to contribute through a progressive graduate tax above and beyond the cost of educating them. This is in stark contrast to the regressive “plan 5” system which from September will see some of our poorest graduates pay back thousands more for up to 40 years of their life, while the very richest can effectively game the system by paying their fees upfront.
A move to a progressive graduate tax would have the further benefit of not putting a sticker price on higher education, or indeed of quantifying the level of debt. For many of those attracted to study at UA92, the 2024 UCAS fee of £27.50 is an all too real price barrier and one they face before they can even countenance the frightening prospect of a tuition fee debt more than 100 times greater.
Introducing a 5 per cent payback tax for a graduate’s working life above median earnings, with a higher rate of 6 per cent payable at double median earnings, would end the unfair nature of tuition fees and their repayments. The money raised through the tax would then be ringfenced for funding higher education, providing a sustainable solution that adequately funds the sector and avoids saddling our poorest graduates with the biggest debt.
Maintenance matters
And if we’re going to look at progressive graduate tax, we must also think more broadly about student finances as a whole, especially in terms of grants for lower income students; the insufficient maintenance loan which exists now only places them in further debt, exacerbating their disadvantage.
While the only grants that students receive are from institutions not the Government and those institutions with the deepest pockets typically have the smallest proportion of poor students to support.
At UA92, we have more young students from the most disadvantaged communities than we do from those with the highest levels of participation (using TUNDRA quintiles). While other institutions have ratios of over 8:1 in favour of those from the most affluent neighbourhoods. A return to a centralised government system of dedicated grant support is an absolute prerequisite to ensuring fair access.
A progressive graduate tax system could also potentially allow for tax relief in service professions for those graduates who choose to work in our schools and hospitals. Rather than simply clapping our nurses, midwives, social workers and teachers, we could financially acknowledge their contribution to society and bolster recruitment exponentially in these troubled sectors.
A write off?
But could Labour be bolder still and fix the damage done already to our recent graduates? In the US, Joe Biden’s debt write-off is an incredibly interesting move which does signal a huge intent to create parity. And let’s face it, a debt write-off would be a vote winner for any political party ahead of the next election, far more so than any move to abolish or reduce fees. It’s a change that would affect the graduates and young professionals right now, who would be more compelled to vote for such radical measures. Cancelling part of the debt for graduates on incomes in the standard tax bracket, capping contributions at 5 per cent, and/or eliminating all interest accrued for those with ten years of payments are all plausible options worthy of consideration.
As the long-term funding of universities lies in peril and both students and graduates face a cost-of-living crisis, both we as the higher education sector and the political parties looking to resolve the issue must be more innovative and forward thinking to reach the correct resolution. Tuition fees simply don’t work. They are the worst of all worlds in that they don’t operate purely as a fee or a tax. Now is the time to call for their increasingly regressive nature to end and move to a fairer more progressive system that is much needed and long overdue.
The state currently pays out approx £22bn a year in student loans – about 30-40% of which is written off as subsidy. With a grad tax, all that money would need to be paid to providers and students upfront as grant instead. The tax would probably take 20 years before enough graduates were repaying to make the system self-funding.
Who’s paying that £16bn a year in the meantime?
Its welcome to have creative thinking but there would be so many things to resolve in a graduate tax…how long is it for? A lifetime? Time limited (30 years post graduation?). Would someone’s estate after they die be eligible? Ultimately you can be prosecuted for not paying tax – not so with a student loan. What’s to stop a future government raising the threshold from 5 to 7 or 10%? Same problem with Student Loans presently. In every system since fees were introduced wealthy students have always been able to pay upfront so that isn’t anything new. The current system needs adjusting – inflationary rises and more effective maintenance support – but income contingent loans generally work well.
Is it really 30 years since the devolution of higher education funding and policy under the 1992 Act? You certainly wouldn’t think it from this article, where the words “in England” are completely missing.
I appreciate that voters in England have to use the UK general election and its outcome to determine HE policy for institutions and students domiciled there, but some acknowledgement that there are also UK-wide issues would not go amiss.
The political environment in Scotland for “free education”, rejected by the author as not being a “vote winner”, is so strong that even the self-styled “Scottish Conservative and Unionist Party” (aka “the Tories”) dropped their longstanding support for student-funded tuition fees from their manifesto for the 2021 Scottish Parliament elections! (It’s also worth pointing out that one third of full time undergraduate HE students in Scotland don’t even pay the £27.50 admission fee charged by UCAS – as the institutions and courses they go to are not even in UCAS!)
But the challenges of the fiscal environment for pursuing totally different policies under devolution are great, with the “Barnett Formula” now well past it’s sell-by date as the UK government’s fiscal twist and turns on student loans, ostensibly to satisfy its English electorate, cause major challenges for the devolved legislatures and governments pursuing policies their electorates democratically approvef.
Unless alternative HE funding policies are presented by those primarily concerned with winning their view in England in a way that respects the fact that we have devolution for the rest of the UK, it can only accelerate the demand for independence and the break-up of the UK state – including the much vaunted research council infrastructure. This applies to HE sector organisations as much as political parties.
Please accept my heartfelt apologies for the errant “grocer’s apostrophe” – my grammar teacher would have hated predictive text!