Deja vu

[nmg]

So, Vince Cable is proposing a graduate tax. Haven't we been here before?

It's been a while since I posted about HE funding (posts passim), but it's worth repeating some of the highlights:

• Back in 1997, the Dearing Report recommended that because "those with higher education qualifications are the main beneficiaries [of higher education], through improved employment prospects and pay", "graduates in work should make a greater contribution to the costs of higher education in future". The report goes on to recommend an income contingent scheme along the lines of the Australian Higher Education Contribution Scheme.
• Richard Gombrich's article from 2000 is still worth reading, and an indication of what HE is likely to suffer in the lifetime of this government.
• Roy Hattersley was generally right in 2002, and he's still generally right now.
• The then Education Secretary Charles Clarke heavily hinted at a graduate tax back in 2003. It didn't happen. Instead, we got top-up fees by a vote of 316:311.
• A graduate tax will not be hypothecated, therefore Universities UK will not support it.
• A graduate tax will take over forty years to reach steady state (being the period between graduation and retirement), but HE will continue to require support from other sources during this period. Ignore this at your peril.
• David Willetts is wrong. Before he starts calling for us to "give more value to students and taxpayers", he should be aware that per-capita tertiary funding fell by 50% over the twenty years to 2000. During the same period, staff:student ratios fell from 1:9 to 1:17 (or 1:23 if research funding is excluded). The increase in funding under the last government did not substantially correct this. How much more value does he think there is to give?

I could say more, but not without repeating things that I've said over the past decade.

Comments

[andrewducker]

I have no problem with the repayment of student loans happening through the tax system - that would seem like an elegant way of managing repayment.

But I don't think that taxing people more because they are better educated makes any sense. If they make more money because of their degree then they will be paying more tax anyway.

[rdmaughan.livejournal.com]

So as someone who works i the system how do you think it should be paid for?

[feorag.livejournal.com]

If graduates really earn more, then they pay more tax anyway. I would expect to find they dominate those paying tax at the higher 40% rate. QED.

[rdmaughan.livejournal.com]

You don't directly answer the question. I read it as fund out of general taxation but I could be wrong so please correct me if I am misreading.

1) The country is currently broke so there is not enough money to fund everything that way.

2) I generally hear this reasoning from people who would benefit from it. Are you by any chance either a graduate or a student? As a higher rate paying non graduate I don't see the current approach to tertiary education funding as good value for the limited money we have available.

[feorag.livejournal.com]

I am a graduate, but was a mature student who was looking for a way to spend a few years not on the dole in a time and place of ludicrous unemployment. I have never earned enough to pay back the student loan, which my spouse did anyway to get the buggers off my back. The reason I am not a big earner is because the student loan system discourages working if you are a graduate in the same way that a graduate tax would (but more so). Had a got a grant, I'd probably feel obliged to work full time and pay tax, but I didn't and I don't. Note I have also not claimed benefits since going to university, either.

As it is, education already pays for itself in the long term. The trick is to make sure you don't make "going abroad" (like 90% of UK design graduates) or "dropping out of the rat race" attractive options for graduates. Which a graduate tax does.

Also, do we really want to tax nurses extra? They're graduates these days, you know.

[cabd.livejournal.com]

The country isn't broke, its just spending more money than its getting in at present. That problem isn't in any way solved by a graduate tax that'll not make a penny for four years anyway and which will take a generation to really increase the funding for universities, if it ever does anyway. This is not a solution to the cost of higher education in the current era of spending restraint.

We have a strategic need for good graduates in many subject areas, especially science and engineering; thats why no country, anywhere in the world, has successfully implemented a stable graduate tax program. How would I pay for it? Through general taxation, which is exactly how it'll be paid for through the period of recession we're in and the aftermath under these proposals anyway.

It wasn't long ago that the Lib Dems were pledging a penny on income tax as a starting point for education. Cables statement doesn't so much show that they've sold out because, after all, one would expect to get something in return for being a sell out. Its more a demonstration of complete moral and intellectual bankruptcy from a tired, pathetic political party keen to be seen to be more frugal, more mean, more nasty even than their Tory masters.

[nmg.livejournal.com]

...and I thought that I was bitter about the Lib Dems!

(unsurprisingly, I completely agree)

[steer.livejournal.com]

Well, except that given the iniquitous UK tax system, they probably in fact end up paying the same proportion of tax overall as a low wage earner (since we have a number of regressive taxes such as VAT and council tax).

But I agree with you in principle.

[feorag.livejournal.com]

Self-employment is the key to tax-avoidance ;-)

But also, the high-earning graduate, even if self-employed and so paying less in income tax, is likely to be spending that additional cash on shinies, beer, etc. Which is taxed.

Heck, the amount of alcohol duty paid by your average undergraduate probably goes a long way towards the cost of their education! Especially archæologists.

[nmg.livejournal.com]

A hypothecated graduate tax, ideally introduced at the time of the Robbins Report.

[rdmaughan.livejournal.com]

As I understand it hypothecated effectively means ring fenced; so a graduate tax which always goes to fund higher education and does not get diverted to plug the chancellor's current pet project? Sounds fair provided the rate is such that it brings in the moneny without being an unreasonable burden.

Unfortunately I cannot assist you with the time travel aspect of your solution.

[steer.livejournal.com]

he should be aware that per-capita tertiary funding fell by 50% over the twenty years to 2000.

The capita in question is the student capita not the general populace capita right? (We get less per student but on average the universities get more money is my understanding -- but that "more money" being hugely misleading given the massive increase in students to teach).

[nmg.livejournal.com]

Per-student-capita funding declined by 50% from 1980-2000, yes. I believe that both per-capita funding and funding as a proportion of GDP also declined over the same period, but I don't have the figures to hand.

Look at the figures from UCU here: http://www.ucu.org.uk/media/html/losingvitalinvestment1.html

Also, look at http://dx.doi.org/10.1111/1468-0297.00102

[steer.livejournal.com]

funding as a proportion of GDP

Ah... it's all about choosing your metric eh. Start in a recession and then compare with GDP.

Student numbers more than doubled between 1980 and 2000

http://www.statistics.gov.uk/STATBASE/xsdataset.asp?More=Y&vlnk=189&All=Y&B2.x=42&B2.y=11

827,000 in 1980 to 1,939,000 in 1998.

So if your "declined by 50%" is right then the actual amount of funding rose -- although not by very much at all. Indeed almost criminal to expect the system to cope with a tiny increase in funding and a doubling in the number of students. Surprised US system spends so high a proportion of GDP on HE (From UCU pages). That's a worrying message -- if proportion of GDP is your metric then make mum and dad pay it. That would be awful.

[ahnlak.livejournal.com]

Well now that would seem to be the problem - not that Universities are underfunded, but that NL screwed the pooch with this insane push to get everyone to go into higher education.

[unwholesome-fen.livejournal.com]

Also wouldn't a graduate tax provide a strong incentive to graduates to move to other countries?

[nmg.livejournal.com]

An incentive, yes. A strong incentive, maybe.

[lionsphil.livejournal.com]

...and for others not to gain HE qualifications in the first place?

I mean, it's tax. You tax things you want to discourage. Raising public funds is a happy side-effect of this process.

[andrewducker]

You've just inspired a poll - mind if I cite you as the inspiration?

[lionsphil.livejournal.com]

Sure.

[gnommi.livejournal.com]

If Southampton is representative of most universities, it won't raise any money anyway, as 99% of new graduates will be flying home imminently... /snark

[nmg.livejournal.com]

Wel,, they've already paid a handsome fee for the privilege, so we're not too bothered about tax revenues from them.

[gnommi.livejournal.com]

who gets that money though? the university? the government? all a bit hazy on where overseas fees actually go...

[purplecthulhu.livejournal.com]

The University, who then use it to subsidise the home/EU students who don't bring in enough money to pay for a lot of the courses, especially those in science and engineering that are strong economic drivers.

[steer.livejournal.com]

Absolutely confirm this -- overseas students are a complete godsend to the university system. I've taught on courses which would absolutely be uneconomic to run without the high proportion of overseas students wanting the benefits of a British university education (and I think we do provide a good education for that money).

God knows what will happen if this cap on non eu immigration cuts those numbers down further reducing university income.