I was dosing in the last hour of work today, musing of my Friday newspaper that was discussing the graduate tax that now appears to have been shelved. It has got a lot of bad press, as just about anything that is labeled “tax” or “charge” by the government. As a Lib Dem voter at the last election I have been disappointed that Government has turned towards higher education in this way, but on reflection I suppose that we have to raise some revenues and cut costs somewhere.

I have read many people saying that the graduate tax would penalise students and potentially put off potential HE students. I don’t agree with this at all. My understanding of the tax is that the level of repayment would be linked to the level of income that a graduate would be earning. If this is the case, why is would it put off students in the long run? It is well known reality that the workplace is becoming a tougher and tougher environment to break into and a degree is practically a prerequisite to most jobs. Therefore, whilst it may be unpopular the majority of individuals will recognise that the benefits of a degree still outweigh the cost of the progressive tax on their incomes.

Turning to the idea of the progressive system (where higher earners pay more) again seems reasonable. It is already the case that high earners pay more income tax, so the idea is nothing new. Under this system, there are a number of benefits:

  1. By allowing graduates in lower paying jobs to contribute less to the tax, those with degrees in lower earning but highly valued jobs such as nursing or teaching will not be pushed towards higher earning jobs in the private sector. I’m not sure to what extent this is true, but I imagine that for both vocational professions such as these there is an element of attraction beyond the salary and minimising their graduate tax would help keep them there where society can gain the greatest benefit. There are many highly qualified individuals work do excellent work for less money than they could earn elsewhere and that is good for us as a society. For this reason, I think it makes sense that the state caters for a greater proportion of their costs since the work they provide post degree is important and necessary. Clearly this argument has limitations (surgeon salaries anyone?) but even surgeons are providing a highly skilled service and reaching that level within the medical profession would occur long after they finish paying graduate tax.
  2. We know that the university system is in a bad way. I don’t like the idea of paying for education, but I think that is a concept that given the new economic outlook we need to get used to. If we need to give universities more financial support then I guess a graduate tax isn’t a terrible way of doing it (at least partially). It is certainly fairer than say raising everybody’s tax, where non university-goers would pay too. University graduates on average earn up to twice that of non graduates across their working lives, so in the long run paying a bit back seems reasonable, especially if you are earning a five or six figure sum in a top law firm. After all, you wouldn’t have the job without that degree. But at the same time, lets be realistic, how many graduates get jobs that well paid?
  3. I think the tax will put some individuals going to university, but I think this is a good thing. I’m no elitist but I think that currently there is an over subscription to higher education. Many go to do degrees that do little to increase their prospects and leave them with debt and wondering what the last three years were all about. I am all for social equality and narrowing the gaps between the top and bottom, but it is a simple fact that some people aren’t cut out for university. The opportunity cost of doing a worthless degree versus learning a trade for the same amount of time is a no brainer to me. I think the emphasis on encouraging greater subscription to HE is good, but it has gone too far. Maybe this graduate tax will make people consider the options properly (though this isn’t easy). I think a better careers system in colleges and secondary schools could help with this problem.

There’s plenty of arguments against what I have said, but these are only my thoughts. It’s clearly a difficult situation, with no easy solution. But if we are to continue to have quality HE provided (on the whole) then more will need to be done to support them financially. Compared to the USA, our HE system is a bargain. A year at MIT (Ok, it is a top university) without a scholarship is around $75,000 and that is subsidised. Sure the US has a warped view of public provision (just look at their health care) but still, it makes the UK seem a whole lot fairer.

Below an interview with Vince Cable of the idea of the tax: (sorry that it is ITV News)