In Support of a Graduate Tax

Graduation has been and gone. I have hugely enjoyed it, and my time at the University of Sheffield so far. I’m even more excited at the prospect of starting my MA in Politics with Research Methods. And yet, the following sign, usually in red, has been stalking me with unflagging enthusiasm: £. I am 20 years old, facing a debt of over £20,000 (without accrued interest). A price worth paying, perhaps. But with the prospect of seeing the University of Sheffield increase its tuition fees from 2012 to £8,975 per academic year, I can only question as to what extent tuition fees are a suitable method to fund Higher Education (HE) in this country. A country which, by the way, has world class universities and is only second to the United States despite the significantly lower funding. The US is to be commended in only one aspect: it invests twice as much of its GDP in HE than Britain. Can we sustain world class education by simply raising fees and cutting funding by almost £1 billion 2011-12, or are there other alternatives?

The Browne Review and subsequent changes passed by the Coalition last year are an improvement to the system that served me these past three years. However, it is only marginal, and marginal in the sense that higher earners will pay back more over their time at university than lower earners, whose fees will be cancelled after 25 years (which, seems to me, is a hypocritical policy of government, seeming as they will have to foot the bill of unpaid fees). How can we ensure a sustainable future? The answer lies, in my eyes, in a Mixed Graduate Tax system. Mixed, because employers, students and the government would be forced to contribute. A graduate tax will offer an alternative funding system for HE that is fairer, sustainable, and long-term.

How would it work?

A Mixed Graduate Tax (MGT) would work along the following lines:

  • Contribution dependent on earnings: 0.3 per cent for the lowest quintile right up to 2.5 per cent for the highest quintile. This would mean that a top earner would pay back £125.00 a month, a low earner £37.00 a month (figures assumed from 2010 [link to NUS Blueprint needed]).
  • People will pay back for a fixed amount of time, assumed to be 20 years. This will be enough for your value of the degree to have made its effects and you will have paid back the appropriate amount of money that your degree was worth.
  • A student would have to pay a tuition fee of £750 per academic year as an incentive to carry on studying. Studying for three years and then giving up just before final’s won’t be scott free.
  • A small rise in Employer’s National Insurance Contribution would be made, the proceeds of which would also go towards HE funding (this would be a tiny amount, less than a percentage point). Employers, as well as society at large, benefit from well-qualified students, and especially those who went to top-class universities. Without them, businesses would collapse.
  • The government would set aside a certain figure for research, teaching and investment in HE. Our education cannot be entirely privatised. Once our economy returns towards more substantial growth, I would hope we can match the investment made by the USA.

Where would the money go?

All of this money would go into a fund. The NUS have called this a ‘People’s Trust’. I’d just call it the ‘HE Trust’, a subsidiary of the soon-to-be merged educational councils called Higher Education Council. The HE Trust would have a chair directly accountable to parliament, and appointed by the Universities Minister (or perhaps Secretary of State). The remainder of the HE Trust would be made up of representatives from universities and HE establishments, a reformed NUS, and employers. The HE Council would be quasi-independent from government.

Funding would not be centralised. Rather, the money would be redistributed back to the institutions depending on their students and their contributions made, with a given cap to prevent some universities accruing too much capital. The remaining money (from the cap) would be invested in bursaries, grants, and other educational projects. This means that good universities will be rewarded, failing one’s punished (to the extent that they can go bust).

Why an MGT?

A Mixed Graduate Tax is a fairer system of financing Higher Education than the current tuition fee model. University education is an investment, not a product for consumption. If it were, a free market would be perfect. As it is, HE is an investment made by the student as well as society. It is a contract between the citizen and society. Students are not customers, and HE is not a supermarket. To think otherwise will give students the wrong mentality.

Given this, students, the government (acting to represent society) and employers would need to contribute to our ‘knowledge economy’. All three actors are investing in our future, the ultimate aim of all this. The British economy is (or has begun a transition to) a knowledge economy, and this requires highly educated citizens. Only HE establishments can provide this effectively.

An MGT is a better deal for students and the country more generally. We crucially need more investment in university. Sources have already shown that the potential of leaving university with a debt of over £40,000 (loans and fees) will put many people off university. This would be fine, if we had a world-class further education system in terms of technical colleges, apprenticeships, colleges and so on much like Germany. We don’t, which should cause alarm.

A Mixed Graduate Tax accepts that the abolition of fees is unfeasible and that students have to make a substantial contribution. But it proposes a fairer deal for students too. We must acknowledge that students, society and businesses take part in this social contract. That is why a Mixed Graduate Tax will work for all involved.


Please note that an edited version of this article appeared in Canvas, a student politics journal for which I was the Founder and Editor between 2010 and 2012. The article was published on 04 November 2011, and is available here.


One thought on “In Support of a Graduate Tax

  1. Pingback: Frequent Myths, Infrequent Truths | Colours on the Mast

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