Some voices would like to see a mere ‘rebranding’ of the existing fee/loan regime; others want more developed structures including much more use of the private sector in providing student finance.
A truly progressive graduate contribution must meet, in our view, five tests. No system that lacks any of these five features can properly claim to be progressive, and may well represent a more basic reform of, or simply a new representation of, the current system.
As the body that first introduced the notion of a ‘progressive graduate contribution’ into the debate alongside a clear and fully costed proposal for how it could be put into practice, we thought it would be worthwhile to issue a statement defining the key characteristics of such as system.
The ‘five tests’:
1. End the market in course or university prices- it puts students off
There should be no ‘sticker price’ variation between institutions or courses, and direct price variation should be actively barred within the system. This ensures that students choose courses for the right reasons and ensures equality of opportunity at the point of use.
2. Ensure that graduates on low pay don’t pay; and set a maximum for high earners
There should be a lower threshold of earnings below which no payments are collected, balanced by an overall, single maximum amount that any person can pay in total. This ensures fair and proportionate treatment for both low and high earning graduates.
3. Only charge students a percentage of their earnings for a fixed period, it’s progressive
Payment should be made at a fixed percentage of earnings above a threshold for a fixed period. This ensures simplicity for users and also ensures that graduates with sustained high earnings pay the most overall, while those with sustained low earnings pay very little.
4. Don’t given the money to the state, ringfence it in a trust
Money collected should flow into a trust or other body that is controlled by the higher education sector, which is legally independent of government and accountable to Parliament.
The trust or other body should itself determine the rules for distributing its funds to institutions. This ensures hypothecation of resources to the higher education sector at a high level and ensures that overall control and shared responsibility lies within the sector.
5. Issue bonds to ensure that universities get the cash they need now
The trust or other body should be empowered to issue bonds on the market, or to other investors, set against future revenues.
It should be empowered to operate an ‘opt-out’ scheme whereby the graduate contribution is waived where a student agrees to pay the ‘maximum’ amount to the trust in advance.
These devices allow the money from graduate contributions to be ‘brought forward’, mitigating the risk of a gap in resources for institutions.
To find out the six myths of Graduate Tax, click here.