Graduate tax: The only way forward?

By Dan Young

As results day looms for GCSE and A-Level students, so does the time in their lives where they must choose between studying for a degree or not. If they decide go down down the degree route, the next decision begins – probably the most important one of all – how do they fund it? This is a hot topic at the moment. Should students pay at all? If so how much and in what way?

The current system of tuition fees sees students pay a set amount each year through either a tuition loan paid at 9% per year once you earn over £15000 (until it is repaid) for a maximum of 25 years. This system has been effective but also has its disadvantages and so is now under review. The question now is whether to scrap it or raise the amount paid. In 08/09 the fee was £2835 (7.5% increase on the previous year), in 09/10 it rose to £3225 (13.8% increase) and in 10/11 it will be £3290 (2% increase).

Lord Browne is fronting the campaign within the coalition to raise the fee and Ed Miliband is under the impression this will see the fee rise to around £7000 – more than double what it is now. According to the Sutton Trust, 80% of current A-Level students would pursue a degree. That figure drops to 45% when the figure is raised to £7000. More alarmingly, when the students with unemployed parents were asked if they would go to university if the fee was £7000, only 33% said they would consider it, let alone take it up. This information clearly shows students from low-income backgrounds will be deprived of the opportunities afforded to those from wealthier backgrounds if this proposal goes through.

The other idea gaining support at the moment is the graduate tax. Vince Cable has been pushing the idea of a 5% tax when a student starts earning £15000 for a maximum of 25 years. On the face of it, this idea does seem valid and Ed Miliband has also come out in support of the idea, but would limit it to only 20 years and, instead of a 5% rate of taxation, would limit it to between 0.25% and 2%. Surprisingly, even the NUS have supported Vince Cable’s proposals. This is surprising because, if implemented, teachers, nurses and the low paid will be the greatest to suffer. For example;

• Teachers would pay £17271 more than they currently do, which is half of their average annual salary of £36837
• Nurses and social workers would pay an extra £7824 and £8528 of an average annual salary of £29494 and £30040 respectively
• Doctors would pay an extra £77118, nearly a full year’s average annual salary of £84451

Those in the most valuable and essential careers for our society will suffer under this graduation tax. So, is there another option? An option fairer to all that will aid realisation of potential, regardless of background, and still ensure the education system is well funded? What if we rewarded people who took those essential jobs by removing the fee? If you are studying medicine at university, you could still have a tuition fee loan but at the end of your course there could be multiple options available to you, such as:

1. You apply for a job and pay for your fees as usual
2. The NHS could offer you a job which will, in turn, pay off your tuition fee loan instantly, but the agreement will include you being contracted to work for the NHS for a set period of time before you can work privately or move and work abroad. This would work for all public sector jobs from teaching to the army and would not only be limited to course specific degrees. You might study a subject such as art but then train as an art teacher so you would also be entitled to your fees being waived.

The benefits for the individual are that they will not have to worry about money being a factor in their pursuit of further education. To society the benefits are even greater, as you will see the top minds that may have been put off teaching or the civil service willing to work in the public sector. This will prevent a brain drain and ensure industries such as mechanical engineering (RAF etc) and pharmaceuticals improve at a faster rate than before.

This is what the Labour Party should consider as a true alternative to either an increase in the tuition fees currently paid or the introduction of a graduate tax, if they do not want to see key workers or low income families suffering in the pursuit of a degree.