Students celebrate graduating. Photo: Dan Kitwood
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If Labour cuts tuition fees, it won't help more disadvantaged students go to university

In higher education policy, Labour can be more radical – and on the cheap.

Not since the days of effigies of Nick Clegg being burned have tuition fees exerted such a hold over the political agenda. Labour’s offer on fees is shaping up as its final policy card to play before the general election. As John McDermott observes: “Tuition fees is part of Labour’s broader problem: how to make good on Mr Miliband’s talk of radicalism in a world with no money.”

It appears that Labour’s answer – one first advocated at party conference in September 2011 – will be to lower maximum fees from £9,000 to £6,000. The policy is under vicious attack from universities, with an array of vice-chancellors taking to The Times yesterday to express fears that it could do “colossal damage” to university funding. And, as I explained last week, a cut in tuition fees would increase income inequality. It would reduce the tax burden of the richest graduates while doing nothing to help less well-off graduates or, even more importantly, lower socioeconomic groups when they are studying at university.

Damningly, Labour’s apparent new policy on tuition fees doesn’t even engage with the question of how to get more disadvantaged pupils into top universities. Partly this reflects the surprising success of the trebling of tuition fees. Apocalyptic fears that a generation of students would be put off university have not materialised: there are more disadvantaged pupils at university than ever before. Application rates for the new university year have just risen to new heights, with a bump in application rates from 18-year-olds living in the most disadvantaged areas in England from 18 to a record 21 per cent.

But disadvantaged pupils have been much slower making their way to elite institutions. In 2014, 22 per cent of applicants from advantaged areas went to higher tariff universities, compared to just 3 per cent from disadvantaged areas. Today a young person from the richest fifth of neighbourhoods is ten times more likely to go to a Russell Group university than a child from the poorest fifth. Five independent schools send as many students to Oxbridge every year as 1,800 state schools combined.

There is a lot that could be done to help – and it would cost far less than the £2.5bn a year it would take to lower tuition fees to £6,000.

All disadvantaged pupils can afford to take out a tuition fee loan because they will only begin to pay it back when the start earning £21,000 a year. But disadvantaged pupils do endure financial hardship at university that impedes their ability to study, and can even lead to dropping out. The problem is rooted not in tuition fees but inadequate maintenance loans. When I visited Sheffield recently, Emily Connor, the president of Sheffield Hallam Students' Union, explained that she received only £7.50 a week in living costs after accommodation expenses in her first year. Thousands of students around the country have had similar experiences. Ensuring adequate provision of maintenance loans would transform the university experience for disadvantaged students.

There are also simple steps that could be taken to make the admissions system fairer for students. Every year, more than 50,000 places are awarded through clearing. This annual harum-scarum for places is a charade: university places are decided by which students spot adverts for universities for their remaining places and who has the speediest broadband connection. Panic-stricken pupils are lumbered with courses they lack genuine interest in – bad news for the universities and, when they drop out or change degree, the taxpayer too.

All of this is because of the UK’s insane requirement that pupils (unless they want to do a gap year) apply to university before they have sat their A-levels. This system is failing bright children at underperforming schools. Contrary to the myth, state school teachers are not too generous in their predicted grades for pupils, but too harsh. That is why 3,000 disadvantaged pupils each year get the grades to go to an elite university but go to a less competitive one.

The solution is not complicated. It is, as a government task force recommended in 2004, for students to apply to university after getting their results, something that exams a few weeks earlier and a quicker marking process would allow. This system “would be much fairer and would give less advantaged students the confidence to apply to the most selective universities”, says Sir Peter Lampl, chair of the Sutton Trust.

The financial cost of this modest change would be negligible. But the upshot would be great. Fewer students would waste time and money on courses they do not want to do. And fewer disadvantaged students would end up in universities that do not do justice to their ability, providing a much-needed boon to social mobility.

If Labour yearns for a chance to be radical on the cheap, higher education policy provides just this opportunity. Three months before polling day, it is not one that the party has taken.  

Tim Wigmore is a contributing writer to the New Statesman and the author of Second XI: Cricket In Its Outposts.

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Taxation without benefits: how our tax system increases inequality

We often hear the progressive income tax used as a proxy for all tax when it actually accounts for just over a quarter of the tax take.

Tax may not be the burning issue on everyone’s minds over the next month, but the Panama Papers leak has proven that the thorny issues of who pays what, and what level of tax is fair, are ones that are never too far away from the public consciousness.

One of the most important annual publications on tax is the Office for National Statistics’ Effects of Taxes and Benefits on Household Income. Published today, it shows, among other things, the proportion of income paid in tax by people at different points on the income spectrum. This may sound like the natural domain of the data nerd, but it actually tells us some rather interesting facts about our system of taxes and benefits.

First, the good news. Our much maligned welfare system is in fact a beacon of progressiveness, drastically reducing the level of income inequality we see in this country. In fact, overall, taxes and benefits are quite substantially redistributive. Without them, the income of the richest 20 per cent of households would be 14 times higher than the poorest 20 per cent. With them, that gap falls to only four times.

The benefit system as a whole decreases the Gini coefficient, the most frequently used measure of inequality, by 14 percentage points. For anyone who sees taxes and benefits as a key component in reducing economic inequality, or boosting the incomes of the poorest, or, frankly, tackling social injustice, this is rather welcome news.

But now for the bad news.

While our welfare system is undoubtedly progressive, the same cannot be said of our tax system when looked at in isolation. The poorest face a disproportionately heavy tax burden compared to the richest, paying 47 per cent of their income in tax, compared to just 34 per cent for the richest. Last year (2013/14) this difference was 45 per cent – 35 per cent, and the year before (2012/13) the gap was 43 per cent – 35 per cent. So while the proportion of income paid in tax has fallen slightly for the richest, it has increased for the poorest.

While some taxes like income tax are substantially progressive, those such as VAT and Council Tax are not. Even after adjusting for rebates and Council Tax Benefit, the poorest 10 per cent pay 7.1 per cent of their income in council tax while the richest 10 per cent pay only 1.5 per cent.

Should this matter, if our system of benefits continues to narrow the gap between rich and poor? Well, yes, not least because that system is under severe pressure from further cuts. But there are other good reasons to focus on the tax system in isolation from the benefit system.

Polling by Ipsos MORI has shown that the public believes that the tax system by itself reduces inequality, and it is often spoken of by politicians as if that is the case. We often hear the progressive income tax used as a proxy for all tax, for example, when it actually accounts for just over a quarter of the tax take.

Understanding why the tax system does not by itself reduce inequality is therefore important for both thinking about how tax revenues could be better raised, and for understanding the importance of the benefit system in narrowing the gap between the richest and the poorest.

John Hood is Acting Director of the Equality Trust