What exactly is the point of a graduate tax?

Vince Cable has argued in favour of a graduate tax. So has Ed Miliband. Both see it as a fairer alternative to the current system.

Under the current system:

If you’re starting a full-time higher education course, the main types of financial help you may be able to get are:

  • a Maintenance Grant or Special Support Grant – worth up to £2,906
  • a Tuition Fee Loan to cover your fees in full (up to £3,290 for 2010/11 or £3,225 for 2009/10)
  • a Maintenance Loan – worth up to £4,950 if you live away from home, or more if you study in London (although the maximum you can get is reduced if you’re getting help through the Maintenance Grant)
  • a bursary from your university or college

All the loans you take out to cover your fees/living costs/whatever then get paid back out of your wages as you earn over £15,000 per year.

I fail to see how paying these fees back as you earn is any different to simply paying no fees at all, and then paying a “Graduate Tax” as you earn. Back to Dr Cable:

Mr Cable [sic – he is a doctor, isn’t he? With a PhD and everything?] said that by linking the graduate repayment mechanism to earnings, it may be possible to establish a system where low earners would pay the same or less than they do now, and high earners would pay more.

He earlier told the BBC that under the current system, “if you’re a school teacher or a youth worker you pay the same amount as if you were a surgeon or a highly-paid commercial lawyer”.

“I think most people would think that’s unfair,” he said.

In which case, why don’t we just increase the rate that people on higher incomes pay their student loan back? Voila! Problem solved. No need to tinker with the system, and certainly no need to raise fees.

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3 Responses to What exactly is the point of a graduate tax?

  1. The essential problem in Britain is that we are a highly-industialised nation, which means we need a lot of skilled workers to support tertiary industries. However, this also means that the costs of higher education are huge. To be honest, I think the best solution would be to agree that attendance targets of 50% are pointless if those attending are doing ‘mickey-mouse’ courses. We need to reduce the number of university places to restore reality to the value of a degree and simultaneously restore alternative career routes such as manufacturing and skilled labour so that kids leaving school have an alternative. For the graduates themselves, either charge flat rate fees or set their repayments at a set percentage of their average wage for the first ten years of employment. That way, you will still pay more if you go straight into a city banker job, and you won’t be discriminated against for continuing university.

  2. I’m not sure tertiary industries need too many graduates, to be honest. That’s mainly service sector; meaning we need lots of people working at checkouts, data entry, that sort of thing. In “Fantasy Island”, a wonderful book by Larry Elliott and Dan Atkinson, they point out that a massive proportion of graduates (could have been as much as 40%, I’ll dig out the precise stat if you’re interested) were overqualified for the job they were doing.

    We probably do have too many people going to university. We ought to encourage people to do apprenticeship schemes and the like, by removing the stigma that seems to be attached for them. Why this hasn’t been grasped by governments and businesses I’m not quite sure.

  3. Pingback: Some tuition fees number crunching « Paperback Rioter

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