Monday 8 November 2010

More on Tuition Fees

One of the arguments against a graduate tax as a means of funding higher education (see earlier blog No Graduation without Taxation) is that such a tax would only produce a stream of income in the future, whereas the universities need money now.The National Union of Students, which favours a graduate tax, suggest that this circle could be squared by selling bonds, which would provide funds now against the promise of the future income stream.

As far as I can see there is no similar scheme in place to provide "upfront" cash for the universities now from the £6 000 to £9 000 fees which future students are to pay back when their incomes reach a sufficient level, but not now. So from where is the cash needed by the universities now to come? Presumably from the government.

If that is the case, than the hike in fees, and the extension of loans to part-time students, is going to increase the government's current expenditure, not reduce it. Yet the coalition's excuse for the draconian fees hike is that it is necessary because in the current "difficult economic circumstances" (which, if they exist, are entirely related to current government expenditure) "the current system for funding higher education is unaffordable." (Vince Cable, Liberal Democrat News, 5th November 2010).

If there is something in the above that I've missed, then I'd be grateful for enlightenment.

The coalition gives the impression that there is no alternative. Here is an assortment:

pay for it out of general taxation, as was the case when my generation (and that of most MPs) received their higher education. Yes, I know there are nowadays a lot more students, but then, the country is also a lot richer.

raise corporation tax to the average OECD level, as proposed by the UCU, who argue that the increase would be sufficient to finance HE. According to Caroline Lucas (letter to the Guardian, 5th November 2010), if corporation tax were raised to the G7 average, "the extra revenue would generate...more than enough to abolish all tuition fees, increase investment in higher education , and still leave the UK's main corporation tax rate below France, the US and Japan."

levy a small percentage extra "education" tax on all firms for every graduate they employ, with reductions for any training schemes they actually carry out themselves.


  1. Or you could apply a gradate tax to all graduates, not just new ones.

    Or some combination of any or all of the above.

  2. I should be quite happy to see a token extra tax on taxable income, say of 1%, on all graduates as a thank-you for the benefits we have received over and above the norm at the state's expense.

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