POLITICS

'It Only Helps Richer Graduates' Tory Plan To Slash Tuition Fee Interest Rates Slammed

The Government is asking for ideas from its backbenchers

10/09/2017 15:59 BST | Updated 11/09/2017 11:19 BST
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Theresa May is reportedly considering cutting the interest rate of student loans in a bid to win back young voters.

The Sunday Telegraph quoted a source who had discussed the plan with Downing Street, which would see the 6% interest levied on tuition fees slashed.

The plans were criticised by financial journalist Martin Lewis, who said such a move would only help the top earning graduates.

Jeremy Corbyn made the abolition of tuition fees one of the key policies in his general election campaign, and saw the majority of under 40s backing his party.

A source close to Downing Street told the Sunday Telegraph: “We can all see the political issue here.

“The fundamental idea that you don’t fund universities from public funding but a graduate scheme makes sense to everybody.

“But the Government is looking at options to ease the effects [of student debt] in various ways.”

The proposal is one of a number of policy ideas being fed into the Government on how to win over younger voters.

Research by YouGov after the election discovered that people under the age of 47 are much more likely to vote Labour than Conservative.

“In fact, for every 10 years older a voter is, their chance of voting Tory increases by around nine points and the chance of them voting Labour decreases by nine points. The tipping point, that is the age at which a voter is more likely to have voted Conservative than Labour, is now 47 – up from 34 at the start of the campaign,” said the polling company in June.

YouGov

Martin Lewis, founder of Money Saving Expert, took to Facebook to express his frustration with the proposal.

He wrote: “The interest rate has no impact on annual repayments. Instead all it changes is whether or not you’d clear the loan plus interest within the 30yrs. Currently it’s likely only the TOP EARNING 23% of graduates’d clear within that time - so they’d definitely save money from an interest rate cut, as would some who earn a little less than them as they’d now clear within the 30yrs.

“In other words cutting the interest rate ONLY HELPS THE HIGHEST EARNING GRADUATES. Lower/mid earn graduates are unlikely to gain as they won’t clear much more than their actual borrowing, never mind the interest, within the 30yrs.

“Contrast that to the govt’s real student loan horror this year - the freezing of the repayment threshold at £21,000 – when it was supposed to rise with average earnings. That will cost almost every graduate EXCEPT higher earners and hurts the lower and mid earners far more. The opposite to cutting the interest rate.” 

At a meeting of the Conservatives’ backbench 1922 committee last week, Chancellor Philip Hammond asked for ideas for his Budget from his fellow MPs in 150 words or fewer on how to win over young voters.

The Chancellor pointed out that for many MPs at the meeting, concerns over mortgages and pensions were a thing of the past.

He contrasted that with students and young people – a group which voted overwhelmingly for Labour.

Speaking after the meeting, one Tory MP said the Chancellor was pressed on the issues facing young people in Britain today.

“There’s a need to address that,” the Chancellor is said to have responded.

The MP added: “We were asked to submit in writing ideas for the Budget.”

HuffPost UK revealed last week that Education Secretary Justine Greening has also been canvassing ideas, and invited backbench MPs with an interest in her department in for policy discussions over the summer.

As well as trying to win over young voters, backbenchers are also growing increasingly frustrated with the public sector pay cap of 1%.

One Tory MP told HuffPost UK the pay cap had become a “thing” in its own right, like the so-called Bedroom Tax.

“We just need to take it off the table in the Budget,” the MP said.

Yet any attempts to increasing spending without finding savings from other departments are being resisted by top figures in the party.

Some senior Tories told the Sunday Telegraph the party must not “over-interpret the results of a disastrous campaign” by adopting “hardcore Corbynism”.

They argue that Conservative chances of winning the next election would not be revived by “jettisoning our entire economic strategy to keep the public finances in check”.