A collaborative blog for Current Affairs and Policy Debate

Tuition fees round-up, part 2

In Education, Events, Home Affairs, Ideology, Parliamentary Spotlight, Party politics on December 15, 2010 at 1:39 pm

David Weber

Part 2 of 2

These articles were written as one, but split into two parts because of length. Click here for part one.

The next thing I want to focus on is the practicalities of this issue. If one assumes that fiscal austerity made Higher Education cuts inevitable (which I do), how justifiable has the Coalition’s response been? Were they wrong, as Aaron Porter, President of the National Union of Students, contends, to rule out a graduate tax as a viable alternative? How thorough have they been on matters of detail in ensuring fairness?

The first issue to look at is a graduate tax, as this is the basis of most constructive disagreements over the policy, such as the NUS’. It is worth noting as we start that despite quite a lot of strong arguments against it, not all criticism of the graduate tax has been worthy. Quite a number of criticisms have had something of a weasel nature, criticising the worst possible form of the policy without addressing any of the stronger proposals on the table. It would be all very well if these were merely the typical emanations of those who do not know better, but when they crop up in the Browne report itself, it is indicative of a more serious ideological agenda.

Arguments such as: “poorer graduates would have to pay back more”; “it would take time for the money to accumulate”; and even “you could avoid the tax by moving abroad” are simply not credible in the manner they are flung about by most opponents. Arguing that poorer graduates would have to pay back more under a graduate tax is simply childish. It assumes that a government would levy the tax directly on top of the basic rate of income tax, which it would be under no obligation to do. As for the money taking time to accumulate, given that student loans are paid back as a deferred graduate tax, this will already hold true. No new money will come in from the new fees until roughly three years after they come in. It is true that the government loans money upfront to the student by which they pay fees immediately, but the government could just as easily loan money to the University and wait for greater future returns from a graduate tax to pay it off. There is little difference. As for moving abroad, although graduates do now have to make repayment arrangements with the Treasury on moving abroad, this will prove difficult and the Treasury allegedly receives little money from graduates living abroad. If that wasn’t enough, there are also political difficulties. No government of a democratic and liberal nature will want to be seen to use student debt to force graduates to stay within the country, therefore proving that a graduate is not paying their fair share will be very difficult.

That said, I think that there are strengths to the fees system. The first is that it relieves government of the political control it has of University funding, at least to a degree (no pun intended). Any system with a cap on fees is of course going to incur a certain amount of co-funding by government, to prevent public Universities from losing out to private ones (although private Universities currently number only two in Britain). The fees system means that Universities are therefore less often under the danger of political tinkering or sudden funding cuts than they would be if they were funded by taxation.

It can also be argued that government control of the system of funding is more likely to lead to inefficiencies and wasted money than student control. I am somewhat more sceptical of this view than I used to be, however, mainly through my own experience of university and the knowledge that students are, in general, poor consumers. We do not know what the experience of a course will be, in full, until at least a year in, by which point a lot of money is spent. We do not know a great deal about educational methods ourselves, and are not likely to be able to assess university quality in our current positions. Add into the equation the distorting effects of a fee cap, and it is likely that some Universities over-charge by quite a degree for their own courses, confident in the knowledge that the cap makes it unlikely that students will disregard higher quality courses for a cheaper alternative. And just to cement this argument, evidence from America, which has the highest University fees in the world, shows that it is unlikely that an uncapped system would keep prices down.

But there are other flaws with a graduate tax system. There would be no incentive for Universities to invest in the future of their graduates — unless the student paid their taxes directly to their University, which would incur its own problems: high paying degrees would immediately become the market winners, distorting it beyond any level that a market in fees would. Arts and certain humanities courses would only survive by being subsidised by ‘winners’, which would be the death warrant for specialised colleges such as conservatoires and arts colleges.

With a fees system, funding follows the student in a rational way, where higher paid graduates merely pay back their contributions quicker than the lower paid — in the long term, there is little difference between the two. Admittedly, the new system is more skewed, interest means that many will pay back more than what they were loaned, whereas many will have their loans written off partially unpaid. But by taking on all or part of the risk, the government can tame this problem. And passing on a little of the risk to Universities would mean that they had a small incentive to offer high quality courses, without spelling the death warrant for Arts and Humanities.

So is the bill that has just passed in the Commons a perfect solution? By no means. The main criticisms I have, in fact, are a matter of far smaller detail than I have yet discussed, and therefore represent not so much an ideological difference of opinion (unlike many critics) than a practical one. I find myself uneasy about the impact of passing on the higher fees all at once. What private good on the market will suddenly increase in price by 200%? Indeed, if it is fiscally possible, the government would be well advised to accept a proposed amendment in the House of Lords, which would stagger the increases.

I am also concerned by the introduction of interest. Despite the fact that I can see good intentions behind this decision — a growing rate of interest will mean that the higher paid the graduate, the more they pay off — and an upfront penalty for early repayment will prevent the very richest from escaping their fair share. But interest is a clumsy way to ensure fairness, and already the possibility of stricter Muslims refusing the loans has arisen. Though I by no means believe the government should be accommodating of every religious value, this is a clear case where it should accommodate.

The fact that the government is fighting a losing battle in communicating the universalism of this system — the fact that everyone will be able to afford university — is also depressing. Here I am not just critical of the government, which only has so much influence with the public, but also the NUS, the media, and the countless people who believe that their own free University education was the only affordable way to go. No doubt such people would be perfectly happy to pay higher taxes to afford that opportunity to today’s generation of students.

In conclusion, then, there are a number of unpleasant factors behind the recent vote to reform university funding, and increase tuition fees. Not only that, but on some points the policy is wrong, and potentially damaging. Despite this, it remains for the most part a necessary, if unpleasant, reform.

Part one

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