Labour to replace tuition fees with a graduate tax?

Britain’s Labour Opposition believes the current system of charging higher education students tuition fees is unfair and unsustainable. If it wins the general elections in May, Labour could opt instead for a graduate tax.

In an interview with The Sunday Times, Opposition higher education spokesman Liam Byrne said the present system was unsustainable: “University funding is falling off a cliff.

“We want to bring the cost down, but this has to be funded. The right long-term shift is to a graduate tax.”

With seven million student votes up for grabs, Labour feels that tuition fees are an area of weakness for their opponents that they can exploit.

Backdrop

When the Coalition government voted to allow tuition fees to triple from 2012, it proved politically toxic for Deputy Prime Minister Nick Clegg, and the junior party in the coalition, the Liberal Democrats, which he leads. Before the 2010 election Clegg had publicly signed a pledge not to increase tuition fees.

Although the decision to allow tuition fees to rise was accompanied by increased measures to ensure the greatest burden fell on those who could afford it – the government claims the poorest 30% of graduates pay less overall than under the old system – criticism has focused on the issue of students leaving university with £40,000 (US$61,000) of debt.

This change of policy led to weeks of student protests that saw Liberal Democrat MPs’ offices and university buildings occupied – and violence erupt at Conservative Party headquarters.

The decision is widely seen as a key factor in the dramatic melting away of public support for the Liberal Democrats across the country in opinion polls.

Other options

Other options being considered by Labour include cutting fees by thousands of pounds. An announcement on the party policies on tuition fees is expected within a few weeks.

Previously, Labour leader Ed Miliband had pledged to cut tuition fees from £9,000 to £6,000 a year. But the party has considered going even further and cutting them by £4,000, it was reported in March.

However, Shadow Chancellor Ed Balls is opposed to cutting fees without finding an alternative way to pay for the cost of teaching, for fear of leaving a gaping hole in finances that would undermine Labour’s claims to offer a safe pair of hands on the economy, a key election issue.

Former Conservative minister for universities and science, David Willetts, has warned that simply cutting fees to £6,000 would mean cutting the universities' teaching budget by a third.

“If it is replaced with a big increase in the teaching grant then you either have a black hole in the public finances or you have to pay for it with a new tax increase,” he told Times Higher Education.

The irony is that the system created under this government may not be very different in its impact on students than a graduate tax, in that students do not have to pay anything until they get a job and even then the amount they pay depends on how much income they earn.

The government has raised the income threshold for graduates repaying fee loans by more than a third and established a progressive pay-back system in which graduates earning the most pay back most.

The threshold at which graduates begin to repay loans for fees is raised each year in line with earnings.

This week, Clegg said: “What we have introduced is a graduate tax and I really wish we had called it a graduate tax at the time.”

Last month, he said that under the current system – of increased fees and better measures on access to university – applications for university places had continued to rise: "We have got more people applying to go to university than ever before."