Cable argues for ‘fairer’ graduate tax

Vince Cable, the head of the Department for Business, Innovation and Skills, outlined plans to replace university fees with a graduate tax in a speech earlier this month. The government has since backtracked, saying a tax is one option being explored, but that no changes will take place until after the Browne Review of university funding delivers its report this autumn.

The speech also warned that universities were facing continued cuts to state funding. “No one should be under any illusion that there will be any other than deep cuts in government spending on universities”, said Cable. The rest of the speech laid out his proposals for maintaining British universities’ competitiveness on the global stage, one of which was the suggestion of replacing fees with a graduate tax.

Cable argued: “It surely can’t be right that a teacher or care worker or research scientist is expected to pay the same graduate contribution as a top commercial lawyer or surgeon or City analyst whose graduate premium is so much bigger.”

The language used in the speech was deliberately vague, making no promises about actually implementing any plans. Cable said: “I am interested in looking at the feasibility of changing the system of financing student tuition so that the repayment mechanism is variable graduate contributions tied to earnings” – what has been widely termed a graduate tax by the media and NUS. Removing tuition fees was a key part of the Liberal Democrat election manifesto, but the plan is likely to cause divisions within the coalition government, with the Tories being opposed to a graduate tax.

Since the speech, Cable’s department reiterated the government’s position that it will wait for the Browne Review before making changes. Furthermore, a Conservative source told the BBC that a graduate tax was unlikely, as, under that system, funds would go to the Treasury, not individual universities, and thus universities’ reliance on state funding would increase, not decrease.

Indications that the government was looking at a graduate tax were met with cautious optimism by student groups. NUS President Aaron Porter said in a statement: “Vince Cable’s support for the principle of a graduate tax is to be welcomed as is his recognition that those who earn most after university should contribute more back as and when they do so.”

However, Porter warned that “further detail of this plan is crucial to ensure that the system truly is a progressive alternative and not simply tuition fees by another name. Students and their families are not fools and will not be conned by rebranding exercises or marketing drives.”

Sami Wannell, the outgoing Warwick SU Welfare Officer, said: “Vince Cable’s proposals actually may end up charging a lot of students substantially more than they currently do, and while we broadly agree (in terms of policy), any scheme proposed by the new government should be judged on whether or not they decrease the overall cost of getting a university education, not on what they’re called.”

He added: “We’d never have a ‘user pays’ health service so I don’t see why we should accept it for education.”

University leaders, however, were less impressed with plans for a graduate tax. Warwick’s Vice-Chancellor, Nigel Thrift, told the Guardian: “Graduates benefit significantly from their university education and so should make a greater contribution to the costs of their degrees, but I cannot see how a pure graduate tax would be a better or a fairer system. The current system is very similar to a graduate tax, with no upfront payment and graduates only paying back a small fraction of their income when it reaches £15,000.” He went on to outline potential risks with a graduate tax, including the problem of collecting taxes from EU students or British graduates living abroad. VC Thrift and Chancellor Richard Lambert have both spoken out previously against a graduate tax, arguing instead for an increase in tuition fees for those able to afford them.

Other cost-saving proposals outlined in Cable’s speech include suggestions that private companies could teach courses on behalf of universities, that degrees could be shortened by a year, and the number of private universities could be increased so that HE institutions would compete in an open market in education.

Peter Dunn, Warwick University’s Head of Communications, said Warwick had no plans to use private sector companies for teaching its courses, and that introducing two-year degrees was also not on the agenda, apart from its existing 2+2 degrees, in which students spend two years at a local college in preparation for university before spending two years at Warwick. On the subject of increasing the number of private universities, Dunn said, “there is obviously room in the marketplace for all these forms of HE teaching”.

The NUS, however, argued that cutting spending on education was the wrong approach. “It is quite wrong to suggest a fairer higher education funding system requires either short-sighted cuts to student places or self-defeating cuts to university funding. At a time when other countries like the United States and France are investing in their students and universities, such moves would be both unfair and wrong-headed”, said Porter.