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15 July 2016

How Jeremy Corbyn can realistically abolish student tuition fees

The Labour leader has been quiet on tuition fees, but he doesn't need to be. 

By Andrew Harrop

The English university finance system is a disaster. Young people now face typical debts of £44,000 on graduation, according to the Institute for Fiscal Studies. Three quarters of new graduates are not expected to pay off their loans by the time their 30 years of liability expires. And throughout that period, they will face eye-watering marginal tax rates of 41 to 56 pence in the pound, which will leave them little better off as their earnings rise. How they will be able to afford a home, a pension and a family too is anyone’s guess.

And because student debt is so unaffordable for graduates, the system is expensive for the Government too. In future years, the state may have to subsidise and then write off nearly half of the debt it issues. It is a terrible deal for both the exchequer and the individual, because the sums involved are just too great for people to pay. Whatever you think of the principle of higher education fees, the maths on loan-funded tuition does not stack up.

So where is the alternative from the Labour Party? One year ago today, Jeremy Corbyn pledged to scrap loans for tuition, as he launched his leadership campaign. Since then, however, the Labour leader and his frontbench have been almost silent on the question. One shadow minister called it “hypothetical”. The reason is money. The party thinks ending tuition fees would involve significant up-front costs – maybe £7bn per year – and dares not make a spending pledge without a way to pay for it.

New Fabian Society research shows that this need not be the case. Our proposals end UK-based graduates paying for their tuition, but they do not entail an increase in immediate revenue spending by the government. This is made possible by creating a system where higher education is funded by new personal education accounts, rather than directly by government. The accounts would work as a hybrid loan/grant scheme, with education debt issued as it is today, but then written off progressively over time.

The accounts would be a new part of the National Insurance system. Today, people in the UK earn a state pension by gradually building up a record of contribution over many years. Under our scheme, people would “earn” free university tuition in the same way, by having debt in their education account written off in exchange for their participation in the labour market and society. But the accounts would not just be for university. People could use them for training and further education too, which would implement another Corbyn pledge, the creation of a free entitlement to lifelong learning.

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National Insurance would therefore be not just be a scheme which rewards previous contributions, but one which invests in people during the first half of their lives, on the basis of their future contributions. If we are happy to provide generously for pensioners on the basis of what they have done in the past, should we not be prepared to invest as much in young adults, on the basis of what they will offer in the future?

This Fabian Society plan delivers on two Corbyn pledges, but in a way the country can afford. Over their working lives people benefiting from university and other adult learning would not pay a penny more than their usual national insurance payments – and the new accounts would sit alongside the state pension as a central pillar of our contribution-based welfare state. This is a policy that Labour politicians of all stripes can unite around. It is Corbynism made practical and affordable.

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