Saturday, 11 December 2010

"Well, what would you do?" Vince Cable's question on Tuition Fees

There has indeed been much heart-wrung anguish among us Liberal Democrats on the issue of student tuition fees and plenty of opportunity for opponents to join in giving us a kicking. Hard for us, fun for them but I don’t hear many alternatives being put forward by either friend or foe.
Instead of flailing out in anger against party colleagues who support the rise in fees, truly I understand and salute the bravery of those being seen to be able to take a hard decision in the face of terrible abuse and opposition. I could not share that decision though.
It is still the policy of the Liberal Democrat party to abolish student tuition fees, not that many will believe that now. Now is it not my intention to keep this particular wound open but we need a mechanism to bring this about and what follows is my outline suggestion.

The current argument is that students should pay because they are the ones that benefit from the education. My point is that they are not the only ones. The businesses that hire graduates also benefit from their abilities and (tend to) pay graduates extra in recognition of this.
What if instead of taxing the graduates, the employers are taxed, say, one percent of the gross amount paid to their graduate employees?

This levy would be payable against all graduate employees and not just new graduates, therefore taking away the argument that those before are taking up the ladder behind them.

Because it is levied on all graduate employees, it doesn't matter where the person graduated from. So foreign graduates working in the UK would be contributing to our university system.

The levy would have to be a percentile of earnings because if it was a fixed amount, a librarian would end up paying the same as a hedge-fund manager.

Some would say that this is a hidden graduate tax and in a way it is as over time business would doubtless reduce graduate pay to cover the charge of the levy. But it is very rare that people emigrate for the sake of one percent and owing to the fact that the levy would not appear on pay slips, most people would know that it is there but it would not be strongly emotive about it.

Arguments against would be increased costs on business but over time pay would be adjusted to reflect this cost - as discussed above.

Another case would be those students who already are repaying their student tuition fees. Obviously upon introduction the repayments on student tuition would be frozen and probably the outstanding debt cancelled.

Because it is a percentile levy, some will undoubtedly end up paying more for their tuition than others owing to the predicted depression in wages. These will be the highest paid though so there is an element of wealth redistribution in the policy.

Some jobs would have to be exempt and these would be jobs which are not usually performed by graduates but in which individuals are employed. For instance, factory workers in non-graduate posts, catering and some agricultural work. This is perhaps the trickiest element as it provides loopholes for employers but it is necessary because not all graduates do end up in high-flying careers and they should be able to compete on an equal basis for non-graduate jobs.

The self-employed would have to pay the levy as there would be otherwise a loophole which would allow employers to contract work to the self-employed who are in reality employees in all but name.

So, to my mind a fair system that delivers on our promise of no student tuition fees and guarantees finance for a top-draw tertiary education and research system.

I would welcome discussion on this issue and have published the kernel of this argument on the relevent page of Lib Dem Act - just press on the title for the link.


David said...

Interesting idea. I have always preferred that the cost should come out of general taxation and cannot understand why all politicians are so terrified of increasing income tax, which is so low at present. At a meeting last night in Yeovil, someone suggested that employers would increase salaries to attract the best graduates and help pay off their debts. Your idea is fairer and better and doesn't rely on doubtful market pressure.

Francis Sedgemore said...

An interesting idea, Martin, but I don't think it's workable, partly for reasons you yourself highlight. The definition of graduate-level jobs, and the imposition of a levy on self-employed workers, are but two serious objections to a employer-paid tax.

Personally, I do not have a settled opinion on the matter, but accept that the current situation cannot continue. For that reason I'm happy to listen respectfully to John Browne, Vince Cable and others who argue for a freer market in higher education, but at the same time I cannot help thinking that a much wider debate is necessary. Even if the end result is a major contraction in academic-oriented undergraduate programmes.

Education for intellectual self-improvement is a very good thing, but you do not need to attend university full-time for three years from the tender age of 18 in order to grow into a rounded, cultured, educated person.

If we are to cover the cost of higher education from generation taxation, then government will necessarily have a major say in what kind of courses are covered. In practical terms that means a bias in favour of vocational training. This could be a good thing, and seems to work well enough in Denmark, for example, but it does require public debate and consensus.

Martin Veart said...

It is usually the case that minimum qualifications are specified for a given post.

One effect of this policy may well to make those with apprenticeships more attractive to employers so thereby avoiding the levy.

The self-employed graduate would have to pay. I don't see a way around it. But of course, the amount of payback would be determined by the wage paid from the business to the self-employed person.

Dr Clackson said...

Why limit charges to university degree courses? Surely all training of any sort leads to an improvement in earning prospects (or so it is devoutly to be wished).

Francis Sedgemore said...

Martin - it would be a trivial exercise for employers to circumvent a graduate levy by manipulating job definitions and person specifications. And it would take an army of bureaucrats to prevent such abuse by employers.

As for the self-employed, you are talking only of quasi-self-employment. What about freelance agents proper - those with multiple clients, who happen to be graduates whose work effectively requires a university degree?