Labour’s tuition fees proposal is the worst of all worlds

Universities will be left with a huge funding gap - and students still won't be able to pay off their loans

 

Labour has developed an excellent critique of coalition policy, but has failed completely to offer an alternative. The party is right of course to say that the coalition’s tuition fees policy will lead to large scale debt for graduates and an ever increasing bill for servicing student loans for the taxpayer.

But its £6,000 a year fees proposal is the worst of all possible worlds. It will leave universities facing a huge funding gap and make little difference to student debt levels or the amount repaid. The current £9,000 fee system was so badly designed that the predicted repayment levels are around half the money that students borrow. Furthermore, the new regime is expected to end up costing the taxpayer more than the old system did.

Many students won’t pay their loan off before the 30 year repayment limit ends, regardless of whether the amount borrowed is £9,000 or £6,000. All that cutting the fee would do is deprive universities of around £10bn over the life of the next parliament.

It comes to something when Vince Cable is mocking your university funding plans, although he does know all about the cost of a populist soundbite on tuition fees. This week’s intervention by the universities’ umbrella group Universities UK means Labour may now avoid making any promises on university funding until after the election and opt for (another) review of higher education.

The Labour party doesn’t need another review, unless it is really prepared to be bold and consider a wider range of options than just tinkering with the current failed system or revisiting a graduate tax.

Instead of trying to find ways to cut money for universities or redesign the way students pay back record levels of debt, Labour should be thinking about how to ensure universities are properly funded and all those who benefit from higher education pay their fair share.

As the BBC’s Sean Coughlan pointed out, students are not just being punished by high fee levels. The cost of studying whilst at university and a reliance on the bank of mum and dad is already bad news for students and parents.

So instead of just looking to hand students, their parents and taxpayers the bill for higher education, surely it is time to ask another main beneficiary to pick up some of the tab? The University and College Union believes that free access to higher education should be paid for through a hypothecated Business Education Tax (BET) on the largest companies’ profits, collected as part of corporation tax.

Successive cuts in corporation tax, at a time when university fees have been rising, mean that the UK has among the lowest tax rates in the G20 for big business, but students pay the highest public university fees.

We can continue to featherbed big business with a corporate tax regime which is more generous than even the United States, or we can change direction and ask the most profitable companies to pay fair tax in order to fund access to university for the next generation.

The Labour party needs to make clear where it stands on higher education before the election and not hide behind another review. It is surely no coincidence that other parties, like the Greens who have spoken out in favour of business paying more to fund universities, appear to be increasingly popular with traditional Labour voters.

Sally Hunt is the general secretary of the University and College Union

4 Responses to “Labour’s tuition fees proposal is the worst of all worlds”

  1. Frums

    I’m always rather bemused by the idea of asking “the most profitable companies to pay fair tax” . In the UK, this seems to mean asking multinationals like, say, Apple and Amazon, to pay more UK tax because they operate in the UK. But at the same time President Obama is arguing that such companies should be paying more tax in the US on their international income because that’s where they’re based.
    Which is it to be?

  2. Leon Wolfeson

    A BET has a fair amount to recommend it. There’s still an argument, of course, for some form of financial stake from students, but we’re talking about £1k/year *maximum*

    (A graduate tax is a route not followed by any other developed country for *very* good reasons, and would double down on discouraging the poor from thinking about education and the brain drain we have seen – at a minimum rate of 12% from the income tax threshold to come anywhere close to current repayments…for entire working lives…).

  3. Dave Stewart

    We need to move away from the ridiculous idea that only the individual benefits from a university education. An educated workforce is a benefit to all of society and should be paid for through general taxation. The idea that graduates should have to pay an additional tax to everyone else is totally unfair. If they go on to a well paid job (individual benefit) from their degree they will be a higher rate tax payer anyway so will be contributing more than most. If they however choose to do something more socially useful but less well paid, such as nursing for instance they will be earning very little but contributing a great deal to society. The idea of expecting these people to pay an addtional tax is insane. We need to be encouraging intellegent, driven and well motivated people into socially useful professions. Any form of graduate tax (and the current loan system) actively drives people into more selfish lines of work where they can earn enough money to pay their debts or hypothetically pay a graduate tax.

  4. JohnRich

    We should simply go back to the old system of grants and having the tuition fees paid.

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