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Vince Cable has asked Lord Browne to consider a graduate tax to replace tuition fees.

A Graduate tax is a proposed method of financing higher education by taxing persons who have received academic degrees over a period of years after the granting of a degree.[1] A form of graduate tax has been proposed by the National Union of Students in the United Kingdom[2] and has been supported by four of the five candidates currently running to be leader of the British Labour Party.[3] A graduate tax was mooted before the introduction of top-up fees in the United Kingdom but was ultimately rejected.[4] A system of graduate tax is seriously being considered as part of the Browne Review[5] although Vince Cable has stated that “No decisions have been made".[6]

National Union of Students proposal

The NUS has proposed a tax which would be levied on graduates for 20 years following their graduation, progressively ranging from 0.3% to 2.5% of their income.[7]

Benefits

Benefits of a graduate tax include that it would allow education to be free at the point of delivery and prevent a market in higher education developing whereby students chose where and what to study based upon the ability to pay rather than academic ability. A graduate tax would raise more money for universities over the long term than tuition fees.[2] David Greenaway, a critic of a graduate tax admits that an "obvious attraction" of such a tax is that it is levied only on graduates, the immediate beneficiaries of higher education.[8]

Under the NUS' proposals a 'People's Trust' would be set up that would be independent of the Treasury.[1] The current system of loans has been seen as unviable because they require an expensive public subsidy to universities.[4] David Willets has described how a rise it tuition fees would increase public spending: "It is in such delicate equilibrium that shifting any single element requires us to shift everything else. If fees were to go up, the government would have to lend people the money to pay for them - and that would push up public spending....It's not just that students don't want to pay higher fees: the Treasury can't afford them. So the arrangements we have now are clearly unable to respond to the current economic climate."[9]

A graduate tax may not be perceived to be a debt in the same way as a student loan is.[4]

Criticisms

Criticisms include the transitional problems which exist where students are going through university but not paying the tax. Free-market thinkers have criticised the graduate tax for not creating a market based element in higher education. Alistair Jarvis of the 1994 Group of research universities has stated: "Any mechanism that prevents variable fees and the functioning of a regulated market would be damaging to the sector...We strongly support a regulated market because this is the best way to drive up excellence in research and teaching, and to deliver student satisfaction. A system of variable fees has been, and remains, the correct strategy. This system should be developed, rather than fundamentally changed."[2]

It has also been argued by The Independent that it is too early to change the system again in the United Kingdom.[10] Greenaway argues that a graduate tax would not deliver additional resources rapidly and that there is a potential problem of 'leakage' with EU nationals leaving the UK and therefore not paying the tax. A graduate tax is unpopular with Russell Group Vice-Chancellors as it would likely result in a more equitable distribution of research funding towards less prestigious universities.

Nicholas Barr, Professor of public economics at the London School of Economics has praised the current system of student loans as a method of financing higher education arguing that variable fees foster competition that is of benefit to both students and employers.[11]

Another problem concerns how foreign students at UK universities and emigrants from Britain would be treated by the tax.[12]

Madsen Pirie of the free-market Adam Smith Institute writing in The Telegraph argues that it is wrong for talented graduates to face higher taxes under a form of progressive taxation and that such a proposal might make emigration more appealing to graduates.[13] A loan can also be paid off early whereas a tax would continue to be charged for a longer period of time.[13]

Wendy Piatt of the Russell Group has stated: "All the disadvantages of a graduate tax explain why no other country has yet implemented this system of graduate repayments".[14]

The Universities and Colleges Union, a supporter of free higher education has criticised a graduate tax. Sally Hunt has criticised the tax as a rise in fees by stealth: "All the polls show that the general public will not stomach a rise in university fees. If the Government thinks it can get the public to swallow higher fees as some sort of graduate tax, it is living in a dream world. We need a proper debate on how to fund our universities, not an exercise in rebranding. We will judge the plans on what they actually do and whether or not students will be forced to pay more, not how the Government markets them."[15]

See also

References

  1. ^ a b Jessica Shepherd. "Student leaders call for graduate tax to replace tuition fees | Education | guardian.co.uk". Guardian. Retrieved 2010-07-13.
  2. ^ a b c "Would a graduate tax would be fairer than fees? - Higher, Education". The Independent. 2009-06-11. Retrieved 2010-07-13.
  3. ^ Shackle, Samira (2010-06-30). "David Miliband becomes Labour's lone star against a graduate tax". New Statesman. Retrieved 2010-07-13.
  4. ^ a b c Polly Curtis, education editor. "Scrap fees and bring in graduate tax, says university chief | Education | guardian.co.uk". Guardian. Retrieved 2010-07-14. {{cite web}}: |author= has generic name (help)
  5. ^ "Tuition fees could be swapped for graduate tax | Mail Online". Dailymail.co.uk. Retrieved 2010-07-14.
  6. ^ Morgan, John. "Cable sets out radical plans for academy's future". Times Higher Education. Retrieved 2010-07-15.
  7. ^ "UK | Education | Call for student tax - not fees". BBC News. 2009-06-10. Retrieved 2010-07-14.
  8. ^ Greenaway, David, Haynes, Michelle, Funding Higher Education in the UK: The Role of Fees and Loans, The Economic Journal, 113 (February), F150 - F166
  9. ^ "/ UK - Students face higher interest on debt". Ft.com. 2010-06-11. Retrieved 2010-07-15.
  10. ^ "Leading Article: A graduate tax would not serve universities well - Higher, Education". The Independent. 2010-07-01. Retrieved 2010-07-13.
  11. ^ Nicholas Barr. "Nicholas Barr on why loans are better than a graduate tax | Education". The Guardian. Retrieved 2010-07-13.
  12. ^ Alissa Goodman, Andrew Leicester and Howard Reed, A Graduate Tax for the UK?, Institute for Fiscal Studies Report <http://www.ifs.org.uk/budgets/gb2002/chap8.pdf>
  13. ^ a b Pirie, Madsen. "What David Cameron can learn from Buckingham". Telegraph. Retrieved 2010-07-15.
  14. ^ "Tuition fees could be swapped for graduate tax | Mail Online". Dailymail.co.uk. Retrieved 2010-07-15.
  15. ^ "Vince Cable announces 'graduate tax' plan - Education News, Education". The Independent. Retrieved 2010-07-15.

Further reading

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