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6 “Big Myths” about Graduate Tax

Monday 2 August 2010 Campaigns Archive

Since Vince Cable’s announcement on Graduate Tax, a whole host of distortions have been released designed to scare off those who want to see a more progressive system. Below we reproduce our six favourite graduate tax lies.

1. Most graduates would pay much more than they do now

This is nonsense. In the NUS proposal, earners in the lowest quintile would overall pay less than £500, those in the next quintile about half than now, and those in the middle quintile roughly the same as now, it’s only those who really benefit that would pay more.

A graduate tax has also been described as “the student loan you never pay off”. This is also nonsense- in the NUS model there’s a 25 year limit and an overall maximum amount to ensure fairness.

2. The money would go to the state

People would be right to worry about the money going to the Treasury, but that doesn’t mean the only other option is fees going to individual universities.

In the NUS model, money collected would flow into a trust controlled by the higher education sector, which is legally independent of government and accountable to Parliament.

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.

3. Don’t we already have a form of graduate tax?

It’s true that the current system of fees and loans is paid back by graduates through the tax system, but “rebranding” the flawed system won’t fool anyone.

The problems of a market in prices and prestige would remain- and as Vince says, “it can’t be fair 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”.

4. It would starve universities of the money they need now because the returns come in down the line

Vince Cable described this problem as “soluble”. He’s right. In our model the Higher Education trust would be empowered to issue bonds on the market, or to other investors, set against future revenues.

It would also 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.

5. This is a huge threat to university autonomy who should receive the fees or contributions from their own graduates

We prize academic freedom and autonomy in the UK, but to conflate these concepts with the student contribution system is dangerous and disingenuous.

NUS wants to see a system where research is properly funded and excellence recognised, but that won’t be delivered through a market in prestige where the rich institutions get richer and vice versa.

6. A pure market in fees will make Universities more efficient and drive down prices

There is no evidence from any other country that a market in Higher Education would work this way- and in fact most other countries’ evidence points to the opposite. The average annual tuition fee at a private university in the US currently stands at $26,273. That's just tuition- before we add in books, living expenses etc.

There is also no evidence at all that the “market” improves quality or that there is any link between the quality of teaching and the price paid. For a detailed look at the role of the “market” in HE, see here.

Click here to find out what a real Graduate Tax would look like