Going once; Going twice; Honours degree sold to the man in the hat

In an effort to redress the imbalance in student funding created by the Government in recent years, the NUS have proposed a system of graduate taxation. The scheme was one of many detailed in ‘Funding Our Future’, a policy statement produced by them and described as:

"a hypothecated tax ... levied on graduates and which is used to fund post-16 education. This would subsidise both maintenance and part of tuition fees. Maintenance may continue through the existing grant system. Alternatively, a student could pay a proportion of tuition and maintenance up front and hence not be liable for Graduate Tax"

However the tax faired well in a assessment based upon whether the schemes would widen access of higher education, alleviate student hardship, fund further education students, fund part-time students and enhance quality of educational objectives.

Graduates who are able would pay a percentage on Income Tax or National Insurance, related to income, throughout their working lives. Graduates would, therefore, pay higher rates of Income Tax or National Insurance than non graduates. Graduates would only start paying once they had earned a certain amount. It could be repaid by a flat rate, for example 1p in the pound of income tax paid, irrespective of tax banding, or a proportional rate dependant on income.

The cost to students would only arise after graduation, in Income Tax or National Insurance accruing indefinitely throughout the graduates working life. However, as the actual amount repaid would be based on income, students could not know in advance how much they would end up repaying, the eventual cost to students depending upon a number of factors (for example, their future income, tax bands under incoming governments and the length of their working lives).

The advantages of this system are fairly obvious; reducing the disincentive to enter higher education (with repayment dependant on future earnings not current economic situation), and clearly applying fairly and equally to every student. It would also provide additional funds for expansion. As a calculable figure this would allow funding councils and institutions to plan more effectively for future expansion.

The disadvantages of such a scheme are equally obvious. Students would not know how much they might end-up repaying, and there is no control over repayments because they are taken at source. More importantly, because graduates pay over their working lives some will actually end up repaying far more than the cost of their higher education. Furthermore, the suggestion that the well-off might be able to opt out by paying their maintenance and tuition up front raises the question of whether the scheme should be made compulsory.

The NUS and the Labour party have voiced their approval of the scheme and David Blunkett, the Shadow Minister for Education, revealed that Labour would seek private sponsorship for a Ł2.4 billion -per-year loan system. He has however admitted that students are likely to pay a higher rate of interest on loans for living costs under a Labour government as they will repay over twenty years through National Insurance contributions.

It seems a fair and just system (assuming that the days when a free education was expected, not just prayed for, are long gone). It acts as an incentive to work at your degree and only taxes those that have made use of the system. There will always be the argument that it will discourage people from going to the more expensive universities (like IC), but in this market led age it might even persuade universities to price themselves aggressively. Market competition has lowered the cost of crossing the Channel or making phone calls, so maybe we can see cut price degrees in the future.

Maintain the status quo

Keep the present systems of grants and loans

Use of the Tax system

A general increase of Income Tax could be used to fund adequate student support , and increased funding for higher and further education. Either taxation levels or tax bands could be altered, or spending priorities changed.

A Maintenance Income Contingent Loan

A loan system towards maintenance, whereby repayment is based on a level of earnings. Students borrow a loan to pay for maintenance. This would differ from the present system of student loans as it would be flexible and repayments would be related to future income. Repayment of the debt generated by the loan could then be collected through the present National Insurance or Income Tax systems. (As with the present Loans system, it is assumed that the repayment interest rate will not reflect the full market rate).

A Fee Income Contingent Loan

Roughly the same as the Maintenance Loan but based upon the premise that, in addition, students would repay a proportion of their tuition fees.

Top Up Fees

I’m not even going to mention these despicable creatures.

Vouchers

Much the same as the new nursery vouchers. Each individual is allocated a number of post-16 education vouchers throughout their lifetime.

Employers Levy

Employers would pay an additional increment on their National Insurance contributions - so employing a student would directly cost them more, thus suggesting the possibility that employers would actually favour experienced (ie. older) non-graduates, rather than fresh, shiny faced, college leavers.