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Laurie Penny: We need a retroactive graduate tax

Vince Cable’s plans are bold and progressive, but could go further to reduce inequality.

This morning, Vince Cable signposted his plans for a change in university funding, whereby graduates might find themselves repaying the cost of their degrees in the form of a tax based on earnings, as opposed to the current student loans system, which discriminates in favour of those who go on to more profitable careers. Cable said he would ask the former BP boss Lord Browne, who is leading an independent review into university fees and funding, to examine "the feasibility of variable graduate contributions".

This is a bold and progressive idea. But why not be a little more bold and a little more progressive, and apply the graduate tax to all graduates, not just current and prospective students? If tax can be applied retroactively, why not levy a fee from all working-age graduates, including those aged 30 and above who have used the benefits of free higher education to carve out high-paying careers for themselves?

Cable has a track record for sound ideas about higher education, including his observation that too many graduates are now going into jobs that were previously the province of non-graduates. This has implications for his cited figure of £100,000 as the average difference between the earnings of graduates and comparable non-graduates net of tax. The graduate earnings premium peaked in the 1980s; today, a university degree is a mandatory requirement for most lower- and middle-management jobs, rather than an optional educational extra to boost one's earnings.

Cable previously told the BBC that "if you're a schoolteacher 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." Surely it's rather less fair to expect those over 30 to pay nothing at all? Surely it's not beyond the pale to ask those who enjoyed British higher education at its most lucrative and inclusive to give something back?

If Britain is to remain a world leader in research, innovation and education, our higher education system needs more money, and fast. But why should the burden of financing the necessary cash injection be placed solely upon today's young graduates, who have rather less chance of going on to high-paying careers than those who left university in the 1970s and 1980s?

The money that could be raised by taxing graduates across the board might well be enough to reduce the cost of university for young people from disadvantaged backgrounds, as well as solving the problem of higher education funding more fairly. If a variable graduate tax were truly based on earnings, there would be no reason for graduates of any age to pay more than they could reasonably manage. Parents of current students might even find themselves paying less overall, if their graduate tax liability offset the costs of contributing to higher tuition and maintenance fees for their children.

The new president of the National Union of Students, Aaron Porter, has said that while the NUS welcomes the graduate tax proposal, any changes to funding should be genuinely fair and progressive to win students' support. The core injustice of tuition fees has always been that they imposed a burden of debt on the young which rewrote the script for young adulthood in this country. And although there are indeed more young graduates now than there were 20 years ago, most are labouring under a double load of unavoidable personal debt and high unemployment.

Meanwhile, Vince Cable, George Osborne and David Willetts, along with nearly every other policymaker currently responsible for higher education funding, were financed through their degrees by a generous grants system, left university in credit, and entered a booming job market. A universal graduate tax would be a fair way of sharing out some of the proceeds of that extraordinary generational luck.

If the deficit must be paid for, it is not unreasonable to expect it to be paid for on the basis of equal sacrifice. If the principle of retroactive taxing is being considered at the highest levels of government, it is not far-fetched to suggest that the rich be taxed as well as the poor, the old as well as the young, on the basis of the services that they have enjoyed from the state.

I'd stop short at suggesting that Cable backdate the graduate tax to 1970, of course -- that would leave older people with degrees owing, ooh, tens of thousands, almost as much as an average humanities graduate in 2010. And nobody would stand for that.

Laurie Penny is a contributing editor to the New Statesman. She is the author of five books, most recently Unspeakable Things.

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Scotland's vast deficit remains an obstacle to independence

Though the country's financial position has improved, independence would still risk severe austerity. 

For the SNP, the annual Scottish public spending figures bring good and bad news. The good news, such as it is, is that Scotland's deficit fell by £1.3bn in 2016/17. The bad news is that it remains £13.3bn or 8.3 per cent of GDP – three times the UK figure of 2.4 per cent (£46.2bn) and vastly higher than the white paper's worst case scenario of £5.5bn. 

These figures, it's important to note, include Scotland's geographic share of North Sea oil and gas revenue. The "oil bonus" that the SNP once boasted of has withered since the collapse in commodity prices. Though revenue rose from £56m the previous year to £208m, this remains a fraction of the £8bn recorded in 2011/12. Total public sector revenue was £312 per person below the UK average, while expenditure was £1,437 higher. Though the SNP is playing down the figures as "a snapshot", the white paper unambiguously stated: "GERS [Government Expenditure and Revenue Scotland] is the authoritative publication on Scotland’s public finances". 

As before, Nicola Sturgeon has warned of the threat posed by Brexit to the Scottish economy. But the country's black hole means the risks of independence remain immense. As a new state, Scotland would be forced to pay a premium on its debt, resulting in an even greater fiscal gap. Were it to use the pound without permission, with no independent central bank and no lender of last resort, borrowing costs would rise still further. To offset a Greek-style crisis, Scotland would be forced to impose dramatic austerity. 

Sturgeon is undoubtedly right to warn of the risks of Brexit (particularly of the "hard" variety). But for a large number of Scots, this is merely cause to avoid the added turmoil of independence. Though eventual EU membership would benefit Scotland, its UK trade is worth four times as much as that with Europe. 

Of course, for a true nationalist, economics is irrelevant. Independence is a good in itself and sovereignty always trumps prosperity (a point on which Scottish nationalists align with English Brexiteers). But if Scotland is to ever depart the UK, the SNP will need to win over pragmatists, too. In that quest, Scotland's deficit remains a vast obstacle. 

George Eaton is political editor of the New Statesman.