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Morning Line: Is a graduate tax fair?
The real problem is that far too many school leaves go to university. If the numbers were reduced and the plethora of virtually useless degrees were simply abandoned, then the cost of university education would fall dramatically.
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With the publication of A level results due on 19th August, the cost of higher education is very much on parents’ minds. The review of university funding, carried out by former BP boss Lord Browne, is due in the autumn and parents are right to be anxious about costs. He is expected to recommend a big increase in tuition fees for which the universities have been lobbying hard.
But is this worse than the proposals from Vince Cable, now apparently endorsed by David Willetts, the universities minister, who said on BBC 1’sAndrew Marr show yesterday that the government favoured a graduate tax levied on earnings after graduation?
Change of heart?
Willetts – who had previously been sceptical of a graduate tax – appeared to back the idea, saying it would be ‘by far the best option to go for in tough times’. He said graduates should make a higher contribution to the benefits of the university education they have received.
Many parents would back a system where those who could afford it paid the real cost of university education. But the graduate tax which Willetts now appears to be supporting would mean that some graduates would pay considerably more than others. Is this fair?
'Progressive' tax
Willetts said that ministers had a ‘preference’ for funding universities through a ‘graduate contribution’ in future. He added that the details were still to be decided but it would be ‘progressive’. ‘As people earn more, they pay more back,’ he said. Willetts claimed that graduates typically earned £100,000 more over a lifetime than non-graduates and should contribute to the cost of their education, with the better off paying most. But isn’t that why we all pay income tax – to fund education?
Lord Browne, due to report on tuition fees in the autumn, was expected to simply recommend an increase in the cost of tuition. He may now have to review how a graduate tax might work including the number of years over which the graduate tax would be spread and how the cash would be directed back to the universities. Those who opposed a graduate tax, including many universities, were concerned that the tax would simply be swallowed up into the Treasury coffers.
Deterrence
At a time when a good plumber or carpenter can earn as much, or more, as any graduate, Cable’s proposal for a graduate tax, even if as suggested the duration of the tax is capped, can only deter would-be undergraduates from pursuing a university degree. And how would the graduate tax be collected if many, as seems likely, decided to work abroad once they had graduated? Moreover, given the high level of graduate unemployment, would a graduate tax generate sufficient money to cover the costs of higher education anyway?
A study by the University and College Union, just released, found that many graduates would end up paying back ‘considerably more’ than they do under the current scheme. At the moment fees are a flat £3,290 a year and graduates start repaying their tuition fee loans once their income rises above £15,000 at a rate of 9% of income. UCU calculated that a graduate starting to earn £25,000 in 2010 would take 12 years to pay back a tuition fee loan of over £9,000 or almost £11,000 when interest rates are taken into account.
But UCU also calculated that if a student earning the same salary had to face a graduate tax of 5% over 25 years, for example, their total cost would rise to £31,250. This would mean that social workers, whose average pay over their whole career is £30,040, would face a tax bill of £37,550 over 25 years. Secondary school teachers with an average salary of £36,837 would pay £46,046 while nurses with an average salary of £29,497 would have to find a total of £36,871 and doctors whose average salary is £84,451 would pay £105,564. This is way in excess of the actual cost of tuition fees.
Wealth, not merit
Graduates already leave university with average debts of £20,000. There is no doubt that faced with these huge extra graduate tax bills – on top of the normal income tax which everyone pays - thousands of school leavers would be deterred from entering further education and professions like medicine, the law, accountancy and teaching would be likely to become the preserve of the affluent middle classes once again.
The real problem is that far too many school leaves go to university and study degrees which are of little or no benefit to them in finding a job and are of little or no benefit to society where there is a shortage of science and engineering based workers. If the numbers were reduced and the plethora of virtually useless degrees were simply abandoned, then the cost of university education would fall dramatically removing the necessity for a graduate tax and reducing the cost of the current student loans system.
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17 comments so far. Why not have your say?
robert montague
Aug 09, 2010 at 12:23
I agree. Its absurd that over 40% of the population "must" go to university especially given a significant minority do worthless degrees and end up doing the same jobs whether they went to university or not.
report thisDavid B
Aug 09, 2010 at 12:49
We have a progressive tax system, the more you earn the more you pay. If graduates earn more they pay more without adding a punitive "graduate tax" into the picture. Most graduates pay for their tuition fees many, many times over through their working life and this new proposal is just another chance to squeeze a bit more from the middle classes based on the flimsiest of apparent logic. It would be better if the Government applied its efforts to getting more graduates into work and contributing to the economy - currently thousands are unable to get jobs, suitable or otherwise.
report thisGerald Cadogan
Aug 09, 2010 at 13:02
Amen to David B - you are spot on - anyone earning any money at all in a salaried job is paying tax at a phenomenal rate currently - 50% (including the 'hidden' NI) when they get to a decent salary (which most only do after 20+ years or earning) - to add additional taxation to this is incredible - the govt needs to get real, abandon the useless courses and stop all this pressurising of people to go to University when its totally unnecessary. We don't need 40%+ of the population with degrees - we do need better education lower down the scale though.
report thisL MACKAY
Aug 09, 2010 at 13:12
NOT going to university would be more beneficial for many young people. A shorter period of vocational training and training on the job being a far better option for both employees and employers.
Many view university as a 3 year party of heavy drinking, sex, drugs and freedom. And many institutions allude to this in their advertising. E.g. I remember once on the front cover of the University of Sunderland's prospectus was adorned with images of pints of larger!
Perhaps if a new tax is to be levied young people will consider their options more carefully. Oh yes, and the tax must be applied to drop out too.
report thisGraham Willows
Aug 09, 2010 at 13:46
Nurture the talent.
Free University Course.
1st. Class Hons. galore.
Keen brains into the workplace.
Pushings companies to better products and profits --- bigger salaries -- more for the TAX MAN and HMG.
Problem solved ----- "SImples " to pinch a word.
Come on George be proactive.
report thisedward bennett
Aug 09, 2010 at 14:23
Please define a virtually useless degree. This is of extreme importance for those about to undertake a degree course.
report thisgeorge212
Aug 09, 2010 at 14:34
This is ludicrous! If this had been in force when I was due to graduate, I would have taken my finals, finished my coursework, and then quit just before graduating, but after my results had come out. Asked by an employer whether I had a degree, my answer would have been "yes, but I deliberately quit before being handed the certificate to avoid being charged huge multiples of the cost of my education; here are my exam transcripts".
And you couldn't legislate against this, because it would be hugely unfair on the drop-outs who didn't perform well and dropped out at around the same time. If the government decided to make graduation mandatory after exam results, then I (and many others) would simply have waited for the results and then vandalised something or sent abusive letters to the vice chancellor. What university is going to bestow a degree upon a student who deliberately flouts its rules?
And what about the poor sods who get a poor education and drop out, only to drag themselves up the career ladder without a degree, and end up paying through the nose for an education they didn't receive?
report thisVas
Aug 09, 2010 at 14:38
When you look at carefully, having a degree only helps when you entering the job market. Ie, during your first or second job after graduation. Any subsequent jobs in someone's career is based on previous job experience rather than the degree. Taxing for a degree course over 20 - 25 yrs doesn't make sense.
report thisDavid Gunton
Aug 09, 2010 at 14:55
A well educated population is iessential to the the continued well-being of the country. However, that should not be confused with a necessity for a university education. The university degree has been grossly devalued by the conversion of colleges and polytechnics into universities as well as by the plethora of degrees that are obtained with very little evidence of any work done. The appallingly low standard of knowledge exhibited by so many holders of degrees has further devalued degrees in the perception of employers. It will take longer to rebuild faith in university education than it has taken to destroy it, but we must do it. We should start by allowing young people to leave school at 14 to enter into employment, preferably old style apprenticeships, or at least properly structured learning employment. Those who feel no desire to pursue academia should be released to find out what the real world is really all about. Then we should make really easy for people of all ages to return to education, full time, part time, evening time - whatever fits for them. The teaching should be rigorous and high standards demanded. It should be common knowledge that if you passed an exam, you must have learned a lot, been deeply questioned upon that learning and got most of the answers right. Those who really wish to acquire knowledge to achieve an end will pursue that knowledge until they achieve that end. Witness the number of London Taxi drivers who have pursued absorbing 'The Knowledge' in order to obtain their licences - and that is not for a very highly paid job. Universities should offer a much higher and more demanding level of education if they are to recover their reputation.
report thisKeith Wilby
Aug 09, 2010 at 16:22
You have summed up my thoughts exactly. We need fewer people going to university not more. We need more apprenticeships in skilled, hands on, jobs. We need to understand where the jobs are going to be for graduates of each type of degree. We need more scientists but their funding, especially for research is being cutback heavily, to help fund degrees in subjects where there are few jobs in prospect. This leads to out of work graduates with huge debts.
We need a system that rewards people who give up 3 or 4 years of their careers/ life to better themselves and use their education to further our society --- not penalise them because we have badly thought through the demand/supply equation but managed to keep yougsters off the dole queue for an extra 3 years.
report thisJeremy Bosk
Aug 09, 2010 at 16:56
27 Consider the lilies how they grow: they toil not, they spin not; and yet I say unto you, that Solomon in all his glory was not arrayed like one of these.
28 If then God so clothe the grass, which is to day in the field, and to morrow is cast into the oven; how much more [will he clothe] you, O ye of little faith?
Matthew 12:27
I translate for the literal minded: those who work hard at vocational subjects will do well but those who study English literature or the history of Byzantium add to the beauty of the world.
Man does not live by bread alone.
Matthew 4:4
report thisJonathan
Aug 09, 2010 at 17:07
A levels need to be made harder so that Universities can use them to tell how good a student is, currenty too many students all get three or four A's. This may be because students are getting brighter or A levels are getting easier, it doesn't matter which so I wouldn't want to get in a debate about which is true. But 'A' levels need to be made as difficult as neccessary to be able to discern which are the better students instead of Universities being overloaded with people getting three or more A grades.
report thisRob Morrison
Aug 09, 2010 at 18:51
The first question the Minister should be asking, is; are the universities providing value for money!? Are their costs justified...........I suspect not, other than the 'red brick' universities.
I do not support a Graduate tax. As previously said by David B , the taxation system already accounts for earning capacity.
Also, if Scottish and Welsh uni's wish to provide tuition without charges, then central tax redistribution must be reviewed. Let Scottish & Welsh tax payers pay for their unaffordable idyology!!
We need to get real about how taxes are spent.
report thisThoughtfull
Aug 09, 2010 at 22:18
Options on paying for further education:-
1) Paid for totally out of tax. The only way that the expenditure can be limited and some form of quality maintained to to set high entry standards with subject chosen to suite national need -- smacks a little of politica, but then everything provided by the majority for the few does.
2) Paid for out of tax with no restriction on entry or outcome. This is ridiculous. Who pays to teach, who feeds who and for why?
3) Paid for by student or parents totally before start of course. This requires richish parents or backing for a good loan. Advantages would include a swing towards courses with known skill demands and on the part of those whose cash was a bit tight, hard dedicated work. This would of however make it easier to claim that wealth = education and this alone could lower standards?
4) Paid for after the event by student. I think that any charge after the event is a discouragement to complete.
To my way of thinking (1) is behond doubt the preferable. The only question to be resolved is who decides which course and what quality. Surely it is not behond the wit of a council of people shown to have brought value to this country , to resolve what we are likely to tend toward within a few years ahead? If it is behond such a Council's wit, then we surely have passed the point of no return and would the last one please turn out the light-----
report thisTed Waters
Aug 10, 2010 at 12:07
When I graduated in the mid '60s about 2.5% of population went to University. The State could then afford to pay tuition fees and a maintenance grant so even my middle class parents (Teacher & Savings bank manager) had to pay little towards my support.
Having more than 20% population going to University is probably overkill and most of the 80% are unlikely to gain much benefit from a true University education. These should be offered high quality vocational training instead, as in Germany.
In the '60s it was was exceptional to gain sufficient A-Level passes to get to University, now it is routine to get 3 grade A passes. As far as I'm aware there's no evidence that teenagers are more intelligent, nor that the education process is much more effective, than 50 years ago,
Of course little will change; there are now so many more educationalists than 20 years ago who seem to have great influence. Some are more concerned about preserving jobs than excellence. I know of one University department he that decided to not lower the pass mark for first year exams when it was pointed out that 2 or 3 lecturing posts would be lost as a result of the resultant smaller numbers.
report thisJames O'Donnell
Aug 10, 2010 at 21:45
In my day and in my area, less than 5% of 11 year olds got scholarships to Grammar Schools and of these only about 20% went on to University. This was,of course, too low a percentage but there were Polytechnics, Commercial Colleges and Teacher Training Colleges in abundance. Many Polytechnics gave degrees which were highly valued by employers because they had a practical, vocational content as well as underlying theory. There were also Higher National Certificates and Higher National diplomas on offer. These were also highly prized.
Academic studies for those who can benefit and technical qualifications and/or apprenticeships for those of a more practical bent is surely the way forward.
'Fringe Universities' should revert to being Polytechnics.
This is not necessarily a cheaper solution but I am convinced that it would give students more useful qualifications and ultimately better careers as well as being of greater benefit to the economy.
That being the case, greater productivity might allow us to revert to free education at every level. I support the view that graduates should not have to pay twice.
However, we might consider that many State trained teachers, doctors and nurses, are working in the private sector. Should their employers not compensate the state for their training? After all, the general public are not benefiting from their services.
report thisAlcatel
Aug 26, 2010 at 13:06
Did the PM, Vince Cable,any MP or Lord Brown pay for his education? They had it all FREE. So in a recession these same guys are trying to penalize for studying at University.
In order for the Universities to earn extra money the has decided to churn out degrees which may not help in the job.
UK workforce in 20 years time will be poor, uneducated and living on benefits as the current situation bites.
I am against the Graduate Tax because they will be paying higher tax based on their earnings in future anyway.
This policy is shortsighted and will take UK at the bottom of the education league in in the world.
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