Graduate tax set to replace tuition fees for students

Vince Cable endorses a graduate tax and calls for two-year degrees to cut costs.

By New Statesman Published 15 July 2010

The Business Secretary, Vince Cable, will announce plans for a new graduate tax to replace tuition fees in a speech later today. In a bid to cut costs at universities, he will also suggest introducing two-year degrees in some courses and encouraging more students to live at home.

A graduate tax would mean students repaying the costs of their education through taxation once they begin working, with higher earners paying more. Speaking at London's South Bank University, Cable will call for a "radical re-think" of how universities in England are funded and say the government wants to work with the sector "to turn the current funding crisis into an opportunity".

Cable will say that the government should look at the "feasibility of changing the system of financing tuition so the repayment mechanism is tied to earnings - so that maybe lower earners pay not more - maybe less - and higher earners pay more".

The University and College Union, which represents lecturers, warned the government that a graduate tax had to be more than just a "rebranding exercise".

The UCU general secretary, Sally Hunt, said: "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."

But the shadow education secretary, Ed Balls, praised the coalition's decision to support a graduate tax.

He said: "As the first Labour leadership candidate to call for a graduate tax, I'm pleased that Vince Cable has followed many of my fellow contenders in backing this idea. When I was a Treasury adviser I argued for a graduate tax, because it was a fairer system which meant no upfront costs and no assumed debt for students and their families. It means graduates pay a contribution to the cost of their university education, but only once they are in work and clearly based on their ability to pay."

All of the Labour leadership candidates, with the exception of David Miliband, have come out in favour of a graduate tax.

In the past, the Liberal Democrats have campaigned for free university education and pledged to phase tuition fees out at the election. The coalition agreement allows them to abstain on votes on the issue.

Tags: Politics News

17 comments

Thu, 2010-07-15 20:14 — james (not verified)

im worried in just about to go to univercity and im wondering is it going to be worth it anymore? should i get a three year headstart on my career and and take night classes in my subjects? is it going to be woth doing a degree if im going to get a large amount of my pay taken off me in tax?

Thu, 2010-07-15 23:16 — Matt (not verified)

A retrospective graduate Tax is insane. I hold an undergraduate degree, masters degree and PhD. Although my masters degree and PhD were funded, I had to take out a loan to pay for my undergrad degree.

So, I could potentially be faced with paying back my student loan and my graduate tax? I pay around £200 per month in student loan repayments - if they write off my loan, and just take Graduate Tax payments then they will likely be even worse off over the next ten years (it is highly unlikely that the graduate tax will surpass the £200 I already pay). Also, If I have to pay a graduate tax, will they refund me all of the student loan I have paid back already?

I always thought the goverment already benefits from graduates, as we earn more (on average) we already pay more taxes!!!!

Matt

Fri, 2010-07-16 00:02 — Al (not verified)

I'm in a similar situation to Matt. I took out a student loan under the system where the loan is not written off untill you're 65. Will I be expected to pay back the loan as well as paying this extra tax?

Fri, 2010-07-16 00:47 — Karen (not verified)

@Chris

Sad to say, they say that it's 0%, however, as univiersity student who has just finnished this year, the rate may not match interest rates, but I assure you there has already been an increase in what I owe, by overall a thousand pounds nearly. It is true that this does not have to be paid until you you earn enough, however, earning 15 000 pounds in todays environment barely covers rent let alone being able to pay a morgage.
Paying more because you chose to earn more -e.g. becoming a doctor or a media executive should not mean paying more for university..on top of council tax, and normal tax on what you earn. Instead they should make courses more streamline so that there arn't "silly" courses but taking the money for national debt from those who will be supporting the country in the future is wrong.

Well that's what I think anyway. Im glad im only leaving with as little as I am, though this would deter me from continuing to do a masters or Phd.

Fri, 2010-07-16 05:17 — Seb (not verified)

The rate is not 0% and the debt is held by a commercial organisation not the government. Look at the student loans website.

Thu, 2010-07-15 11:43 — writeoff (not verified)

Who is there then to argue for a future for the young and the poor? £20k debts then they take the rest of your pay. Forget hoping for a house deposit. Just accept you'll be a poorly prepared wage slave. No surprise from the Tories, a miserable defeat for the values of Liberalism and another betrayal by a shameful Labour.

Fri, 2010-07-16 12:35 — Matt (not verified)

@ Karen

If you decide to do a Masters or PhD then you can get fully funded places (I did through NERC), so they actaually cost me nothing. To do my BSc, however, I had to loan about £10K!

Matt

Thu, 2010-07-15 12:16 — chris gray (not verified)

I think this seems a fairer system that the one we have at present. My daughter has just finished a 3 year degree, realises she has gained a tremendous skill-base but is very worried about the large debt she now has, especially since she cant get a job in her chosen field and even if hse does get a foot in the door will be on low pay for many years.

Thu, 2010-07-15 12:47 — Exile (not verified)

The 1st responder seems to be a bit confused - the proposal here is to get rid of student debt (for fees at any rate). I hope the new system will be retrospective too - why shouldn't I pay for my university education (35 years ago though it was) if I expect today's students to pay for theirs?

BTW there is no such thing as free university education. The debate is about who is going to pay for it and how this should be done.