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Why the Time is Right for a Graduate Tax

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The Coalition government has done something special with Higher Education. With most reforms, there are clear winners and losers. But with £9,000 fees and the disastrous deregulation of student numbers forced on Higher Education Institutions, there are only losers. It's time to look for a new system to fund our universities. A graduate tax is the only viable option.

Under the current fees regime, students lose - being condemned to debt until their 50s and paying more for less in return. Universities lose - with the middle and lower end of the sector suffering decreasing student numbers and looking at large cuts to services as a result. The Treasury loses - with an unexpected £13bn added to public sector net debt because of David Willetts' miscalculation that universities charging above £6,000 would be the "exception", and the government's need to fund soaring cost of degrees.

A graduate tax would solve the above problems and more. By asking graduates to contribute a tiny sum of their income, directly proportional to their earnings, to a reserved fund for a fixed time period, the government could create a secure, sustainable and affordable way of funding some of the world's best universities. Instead of a flawed market dictating which degrees cost what, all Higher Education would be free at the point of delivery, with students who drop out or end up on an unsuitable course able to find something that works for them better instead of being saddled with even bigger debts. Instead of those on extremely high incomes being able to buy their way out of the system and avoid interest rates on repayments - those who benefit the most from higher education would pay the most.

A graduate tax would do away with variably priced degrees, ending the insanity of asking 17-year-olds to make life changing decisions based on the differing sticker prices of courses, which bear little resemblance to the amounts repaid in the end. How can anyone be expected to calculate whether a Media Studies BA from the University of West London at £7,640 is better value than one from the University of Brighton at £9,000?

Furthermore, by ring-fencing spending on Higher Education in a reserved trust, universities would be insulated from the vandalism that the Coalition Government is currently inflicting on the public sector. The money paid in by graduates would be free from political control, ending the destabilising effects of turning higher education into a political football that is being used to score repeated own goals.

The arguments against a graduate tax are weak at best. Those who argue that it would require a significant short term outlay of public funds before it received any returns fail to note that the same is true with the current system. The Treasury will not see any of the fee income for the 2012/3 cohort of students until 2016/7 at the earliest. Those who say that graduates will move abroad to avoid a tiny percentage of their income being deducted in taxation fail to note the same danger within the current system as it is. Those who argue the system would be too complex clearly don't understand the sheer extent of the confusion caused by repayment mechanisms that are not related to the advertised costs of degrees.

If we are going to get a fairer system of funding, big decisions need to be made now. On Tuesday, NUS National Conference will vote on whether to continue supporting a graduate tax, or plump for an unfunded system of "free education", sidelining the organisation from serious debate. The leadership of both Labour and the Liberal Democrats soon need to work out what system they will be proposing at the next general election. Even the Conservative Party will find it difficult to justify a status quo where students lose and the deficit gets bigger.

The government simply cannot afford to continue adding billions of pounds each year to the national debt to fund an unpopular and unfair system of tuition fees. We can either choose an American system of funding, where college debt is about to reach one trillion dollars and families are struggling to cope with costs that are rising at twice the rate of inflation. Or we can choose a system where contributions are determined by earnings, and young people aren't asked to make huge financial gambles when choosing degrees with their own and taxpayers money. David Willetts, Secretary of State for Higher Education, is nicknamed "two brains". Even for him, a graduate tax should be a no-brainer.

Around the Web

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