Cable manoeuvring on the road to nowhere

Ian Walker

Alex Barker's objections are killed stone dead by his first commenter: instead of the tax being centrally controlled, make it a private contract between the university and student.

This then creates a market for university degrees; and as private contracts, the problem of extraterritoriality goes away as well.

Frankly, any objection to a graduate tax in any form should die the minute you open the jobs pages of the broadsheets and see the words "graduate calibre." A degree gives you an advantage in the jobs market, and it's only fair for you to pay for it.

Commentator

That is extremely questionable and in any case it is nonsense to suggest that a person's success in life is attributable solely to their degree. What people manage to earn is likely to depened on a variety of post-university factors, especially if they have a non-vocational degree. Why should a person have to hand over a percentage of their income in perpetuity because of an essentially arbitrary link with a university? If you want high earners to pay more income tax, be honest and say so.

Chuck Unsworth

@ Ian Walker

That's based on the notion that all graduates (without exception) will be seeking employment - and indeed will continue to be employed for their entire working lives.

Is this so?

Ed P

Triple taxation? Graduates already pay back student loans (once earning over £15000pa) and higher rate tax too (because they have better paid jobs because they went to university). Cable is being foolish (or maybe clever, if it's a softening-up exercise before the real intentions are revealed).

Naomi Muse

That really won't work.

If there were a stable and static UK population then it could work, assuming that the other 'givens' are correct.

There is no stable and static UK population, so many graduates will leave and work abroad so that they are no longer subject to the 'graduate tax'.

The assumptions don't stack up either.

It is not just a degree that gives the uplift in potential income, but the choice of degree and that well-know but oft denied factor, your parental expectations of income.

If your parents earn £20,000 pa each then it is likely your aspiration is similar. If your parents are either in top academia, top civil service or top FTSE companies then your aspirations will be up there too.

These things are not therefore reasonable assumptions.

It sounds like a back of an envelope job to me.

Neil Wilson

The graduate already pays for it. If the degree is worthwhile, they will get a better paid job on which they will pay a higher tax (in absolute terms certainly, and with our progressive tax system in percentage terms as well).

So the state already gets a decent return out of an investment in students.

However it is a slippery road. Those that get GCSEs at school have better employment prospects, so why not tax them a higher percentage than those who get none at all. And what about those that can read and write?

Intellectually it just doesn't stack up. Either you socialise education costs because it helps increase the basic skill stock in society, or you don't bother and let the market take its toll.

If a degree is worth investing in, then the state could easily fund it. It has infinite financial capacity in Sterling without need to borrow anything. So the time differential between expenditure and recovery via the tax system is irrelevant.

What you are actually seeing is the state saying, in tongues, that degrees are no longer the path to riches they once were. You almost need one to flip burgers for a living.

And therefore they are no longer a good investment for state resources.

Victor Southern

I know that Cable is the BBC's great guru on finance and economics but most of his ideas are bafflingly poorly thought out.

Let us have fewer universities, fewer but better degrees and abolish tuition fees for targeted disciplines - those we need. If a youngster wants an "easy" degree then let them pay for it but please - only once.

luke

You're wrong about the ToR of the Browne review, they do include a grad tax option.

http://bit.ly/1WHqXQ

J H Holloway

Could I offer another view?

I spoke to an MA student at Imperial last December.

He was doing an MA because so many people have a BA, but his debts were over £20k. I suggested that because graduates marry graduates, he could be looking a household debts of £40k at the age of 30.

'Ah yes' he said. A friend of his had £800 outstanding on their student loan. They applied for a mortgage and was told that the £800 reduced their potential mortgage by £10,000.

If a graduate marries a graduate, we end up with the future middle classes massively weighed down with household debt.

Upfront loans will mean that the 40 percent of the population with degrees, will be the 40 percent who can't buy house before their mid-30s at best.

Unless, of course, mummy and daddy have subbed them through university.

If the Labour government really believed that a degree improved your lifetime earnings, it would have used a graduate tax.

But the truth is, it didn't believe that.

However the Loans solution has managed to profoundly affect the future of the country, dramatically worsening the quality of life for the best-educated?

Once again, Labour hands the advantage to the rich and tilts the playing field against the majority.

At least Cable's solution means that graduate partners will be able to get a mortgage.

Will Cooling

I'm amazed to hear you say that the Browne Review hasn't been looking into introducing a Graduate Tax given that its the NUS's key proposal and the Russell Group spent a lot of its submission rubbishing it. This is not a new idea but one that has been heavily discussed for some time.

George Laird

Dear All

Why do we have universities?

I would say it is because society recognises that education is fundamental to the development of the country.

The country funds universities for selfish reasons, we need vets, doctors, dentists, lawyers, engineers etc.

The Graduate tax is effectively double tax, as graduates pay higher taxes anyway due to higher earnings.

What Cable suggests sounds great, sounds popularist but it is wrong and lacks vision. Really he needs to take the difficult decisions and look more long term and in a different direction.

The poor wee boy playing Minister of the Crown!

Why should someone pay twice, is that fair?

I would say not and if everyone is in the same boat as the coalition suggests then fairness is important.

So, the question is how to make universities pay their way and remove some of the burden from the taxpayer.

I suspect that is the real debate in education which is steadfastly being ignored by university management and others.

Why?

Quite simply they may espouse academic ideals but they struggle to turn a profit and really don't know how to either.

One university used a slogan that their business school has been opened longer than the Bank of England.

This was shortly followed by 250 people being dumped on the scrapheap.

I think I would rather work for the Bank of England but they won't accept me.

The tax burden caused by universities needs to be addressed, this means redesign of degrees, less downtime and turn around of the student population quicker, one aspect of change.

The public should be paying for students to be educated not research projects, that should be separated in the education budget.

That way the public will know where the money goes!

Universities should come under a University
Office of Budgetary Responsibility which investigates the entire sector, apart from the funding Council.

Answerable only to the Cameron mob OFBR.

Then there is the issue of greed within the university sector, why are the public paying for seceond raters but that is perhaps for another time.

One thing at a time.

Yours sincerely

George Laird
The Campaign for Human Rights at Glasgow University

Ian Walker

Chuck Unsworth: No, it's based on the assumption that enough graduates will go in to work to allow a university to fund its research.

All graduate tax proposals have a lower limit, which in the "free contract" system could be set by each university as it saw fit. If we're going to apply it through the central tax system, then a 1% levy on the top rate of tax would probably be more than enough - ie graduates pay 41%.

Nick

30 Grand of debt? Peanuts. There's the government debt to pay off too. 4 trillion if you believe the dodgy figures. 5 trillion plus is more likely and that doesn't involve bailing out all those people who haven't saved and now want their 13K a year tax free of benefits in retirement.

OBJ.

Can I have a big mac and fries, and here is you graduate tax bill

Noa Zrk

George Laird
The Campaign for Human Rights at Glasgow University

When oh when, George will Glasgow be free?

Martin

'Ah yes' he said. A friend of his had £800 outstanding on their student loan. They applied for a mortgage and was told that the £800 reduced their potential mortgage by £10,000.

Then their mortgage advisor is a moron. At my bank all credit commitments reduce the amount you can borrow. But is the monthly payment that counts. You would need a commitment of £200 a month to reduce the amount you can borrow by £10,000.

Also if your credit commitment has less than 12 months to go then it does not count. Either they are not telling you the truth or someone did not key the application correctly.

Streeter

I am unsure how it would work in practise. However, if you are correct that universities would become "financially dependent on their students’ future earnings" surely this represents a better alignment of incentives? Perhaps then universities would stop offering the kind of "useless" degree programmes which have been mentioned on these pages and others, in favour of courses which would be of most (financial) benefit to students in the world of work? Less media studies, more Mathematics, natural sciences and quality business degrees?

Nevertheless, variable tuition fees, based on the quality of the institution and earning potential of the graduate, remains the best solution.

Greystead

Vince's idea is brilliant, not because it is sensible, workable, or even Fair (the wonderful magic word trotted out by LibDems whenever they want to show people that they are caring and that anyone who disagrees with them is grasping and evil. No, it's brilliant because it is so easy to get around. If you only pay this tax by having a degree, then all one has to do is go to university, study and then fail finals. Hey presto! University education and no debt. I can just see them now, all those CVs stating BA 2.1 (failed)

NickW

There is a certain type of socialist who despises the University graduate.

Cable is appealing to the left wing of the Liberal party by pandering to this thoroughly unpleasant facet of socialist dogma.
If Cameron has any sense he will "allow" the coalition to have its arm twisted into implementing the tax, so that he can campaign in the next election for a Conservative Government to abolish it.
This idea stinks of prejudice and is a reminder of Cable's socialist past in Glasgow.

Rivere

The biggest problem to this is simple. The real talent among are graduates will go elsewhere. There is only one real solution to the university problem and it is nearly politically impossible. Cut the number of students by at least 30%. I say this as a recent graduate who is luckily enough to have a job. However, at the same time I don't think it is luck considering all the talentless candidates I met along the way to securing good employment. There is a distinct difference between saying everyone has the right for higher education and saying everyone should therefore be there. The former does not make the later necessary.

George Laird

Dear All

It is nice to know I have been missed of late.

Noa Zrk says:

“When oh when, George will Glasgow be free?”

I feel all misty eyed this Friday.

Tories missing George Laird, how very socialist of them!

It must be an offshot of the coalition's brotherly love that is currently doing the rounds.

Yours sincerely

George Laird
The Campaign for Human Rights at Glasgow University

David Bouvier

There is some truly bizarre thinking behind the graduate tax. Students are some kind of immobile passive natural resource like oil it seems.

Many economists argue that credentials like this work primarily as a signal of worker quality rather than an intrinsic source of value for employers.

If you want to recreate in the universities public-private split in healthcare this is the right way. If you can demonstrate future income potential and have sufficient access to capital you would choose to finance your course yourself and avoid the tax.

It would take spiteful and possibly unEuropean measures to prevent people paying their own way entirely as an overseas student would. Indeed establishing residence briefly in Calais during your gap year might make it impossible to prevent.

As the very least it would create huge opportunities for the very best to go to private institutions here or universitites abroad. I suspect many of the Russell group would decide a progressive move to independence from the government in undergraduate funding was preferable.

I wonder how the Scottish situation would work out - the unfairness over fees is tough enough. There are parts of Scotland I could buy a second home for for less than the graduate tax would cost a high earner. They would have to start border check points and internal passports for an arbitrage like that.

Its illiberal and bonkers. Bit like Vince.

The idea offensively illiberal and truly "little Englander" in outlook. Not to mention entirely unthoughtout in so far as the unintended consequences would