We don’t need no Graduation (Tax)

So, we are back to the debate about how to pay for higher education. And the choice being presented is between increasing the tuition fees (to up to £14K a year to do a science degree), and introducing a Graduate Tax. I was opposed to the fees when they were brought in by the 1997 government, and I still am. I wasn’t too happy about the erosion of maintenance grants and their replacement by loans – a process that started under the Major government. When a Graduate Tax was being proposed back in the early 90s I opposed that too.

The problem with a lot of these approaches is that they take the simplistic basis that the only beneficiary of a university education is the student. This is untrue. Society as a whole benefits from having doctors, research scientists, architects, engineers, lawyers*, accountants etc. Companies and other employers have a pool of talent to draw on, and so ‘wealth’ can be created. Indeed, some graduates even become employers on the back of their knowledge and so are providing opportunities for other people to work (and not simply other graduates).

Yes, people with a degree are likely to earn more money as a result than people who do not, and this is a clear direct benefit to graduates. However, as a result, they are already likely to be paying more in taxes on income and consumption than those who do not. So why should they have to pay again through another special tax or through high tuition fees?

Now, of course so far I have simply been arguing against things, and it’s quite reasonable to ask what I would actually support, and how we should expect to pay for an expanded higher education sector**. So here it goes:

Because the whole of society benefits in general, and because one of the main ways in which graduates benefit is financially, why not simply use general taxation? We do it for pre-university education, don’t we? We don’t insist that kids with A-Levels pay extra for staying on for a couple of years more on the basis that they can get a better job as a result. It’s accepted that education up to the age of 18 is publicly funded, not simply because every child and their parents benefit from it, but because the nation as a whole is better off with a more educated populace. For a good thirty years (from 1962 to 1992), we had a system that provided full tuition and additional means tested maintenance grants. The prime beneficiaries of this system were the ‘baby boomer’ generation. In Scotland and Wales there is more public involvement than in England, with no tuition fees for Scotland at all.

But what would be the cost to taxpayers? Well, in 2002/3, there were 1.6 million UK students in undergraduate education in the UK, and by 2006/7 that had risen to 1.8 million (source DCSF). So I’ll assume that there are about 2 million today. Currently the tuition fees are up to £3,125 a year. This means that at the most about £6.25 billion would need to be found to pay the same tuition fees. This is equivalent to adding about 1.5p to the rates of basic Income Tax, NI, or VAT, according to HMRC figures, or a few more pence in the pound on higher rates. My numbers are rough, and over-estimates***, but that should allow some room for the expansion of higher education and increasing costs of tuition.

To supplement the costs, Universities should be encouraged and helped to get more private funding for research, through partnerships as well as from traditional funds like the Wellcome Trust. Indeed, I am far less worried about corporate involvement in universities (as long as it is regulated) than I am about it in schools.

Now, I fully realise that I am proposing a tax-and-spend policy at a time when the new government is embarking on a tax-and-cut policy in an attempt to rapidly reduce the deficit. However, I take a different approach to education than the Tories (and now Lib Dems) do – it should be seen as an investment to improve the ‘asset’ that is an educated society, rather than just as a cost. It may not be a change that is seen as affordable now, but it’s one that I would like to see put in place for the future.

Besides, making the change now would actually add to borrowing, because for the first two years all of the tuition would have to be paid for but the tax would not apply until people graduate and are working, and it would take decades to ramp up to the full revenue stream.

And let’s face it, any politician who graduated before 1999 will not have had to pay tuition fees, and any who graduated before about 1990 went to university in the era of the maintenance grant. If they want to make the system more expensive for students they could at least explain why the old ways were ok for them. Eh, Vince Cable?

* I know that lawyers are not always necessarily seen as a public boon, and certainly a surfeit of them is a very bad thing indeed, but as my girlfriend has an LLB I have to say that not all lawyers are irretrievably rotten. Mind you, she doesn’t work as a lawyer…

** We have seen an increase over the last 20 or so years, and at the moment there’s likely to be a levelling off. There are debates to be had about whether we need nearly 50% of people to get a degree and what degrees they should be taking, but this post is already long enough already. For my part, I think we probably should aim to have as many people living to their potential as possible, and I’ll leave it there for now.

*** Not all UK students in UK universities pay tuition fees, not all courses are full-time or charged at the maximum of £3,125. The figures include mature students, and those at the Open University and the private University of Buckingham

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